Two separate surveys of businesspeople indicate that uncertainty ahead of Labour’s first Budget since 2010 next Month is impacting the UK economy. S&P Global, a data company, said that the UK private sector growth in September slowed down for the second month running. This affected the manufacturing and services industries.
Some companies report that their clients are taking a wait-and-see attitude to investment decisions before the autumn budget. This is affecting investment plans at a time when the chancellor Rachel Reeves wants to encourage investment by businesses to boost economic growth. These figures indicate that Labour’s focus on its poor legacy from the previous Conservative government and the need for an aggressive budget on 30th October weighed on the immediate outlook of many businesses.
According to the S&P survey, the budget is “by far” the biggest concern for UK private sector companies. Export orders were “relatively low” and overseas sales increased only marginally in September. According to the survey, “Some service providers reported higher demand from US customers but manufacturers often suggested that weak EU sales weighed on exports.”
The Confederation of British Industry’s (CBI) separate survey of manufacturers found that the export order books for the three-month period ending September were the weakest they had been since December 2020, during the first year of Covid-19 and just before Britain signed the Brexit trade deal.
The CBI’s industrial trends report described September’s total and export orders as being “uniformly depressing”. A net balance of 44% of manufacturers reported their export order books to be below normal in September, compared to a reading -22% last month.
Ben Jones, CBI’s lead economist, stated: “The survey shows that the recovery in the UK economy over the first half 2024 is fragile. There are uneven improvements across sectors and businesses are becoming more cautious as they prepare for the budget next month.”
The S&P survey showed that despite the concerns about tax increases in the budget, and a slowing economy, activity was improving across all sectors of the manufacturing and services industries. Companies also said they expected new orders to increase over the coming year.
The flash UK PMI composite index fell to 52.9 from 53.8 in August. A number above 50 indicates that growth is occurring. After companies reduced their price increases this month, inflation is expected to moderate. Private sector companies’ average prices rose at their slowest pace since February 2021.
Chris Williamson is the chief business analyst at S&P Global Market Intelligence. He said that a slight slowdown in output growth in manufacturing and services should not be viewed as being too alarming, because the survey data still supports the Bank of England forecast of the economy growing by a rate of 0.3% or more in the third quarter.
Business optimism is also on the rise, although concerns over the impact of [the budget] are causing some nerves to jangle, particularly in the manufacturing industry. According to reports, investment plans have been put on hold pending clarification of the new government’s taxation policies.
This month, the UK economy outperformed that of the Eurozone. The pound has reached a new two-year high versus the euro. The pound rose by half a cent to €1,1967. This is its highest level since August 20, 2022.
The eurozone’s economy has been impacted by a downturn in Germany where business activity dropped at the fastest rate in seven months. The HCOB Flash Eurozone PMI Index has dropped to 48.9 in September. This is an eight-month-low and shows stagnation.
Hamburg Commercial Bank has predicted that Germany’s GDP will decline by 0.2% during the quarter of July-September. This would be a recession for Germany, whose GDP dropped by 0.1% between April and June.
Post Disclaimer
The following content has been published by Stockmark.IT. All information utilised in the creation of this communication has been gathered from publicly available sources that we consider reliable. Nevertheless, we cannot guarantee the accuracy or completeness of this communication.
This communication is intended solely for informational purposes and should not be construed as an offer, recommendation, solicitation, inducement, or invitation by or on behalf of the Company or any affiliates to engage in any investment activities. The opinions and views expressed by the authors are their own and do not necessarily reflect those of the Company, its affiliates, or any other third party.
The services and products mentioned in this communication may not be suitable for all recipients, by continuing to read this website and its content you agree to the terms of this disclaimer.