For some weeks now, all eyes in Westminster – and most in the City – have been on the EU referendum. Talk has focused almost exclusively on what may happen when the British people make their historic choice to Remain or Leave on 23 June.
Yet for many businesses, particularly those beyond the City, Britain’s future relationship with the European Union is just one issue among many.
While there are many confident firms out there, the overall picture suggests that for many others prospects are either static or receding – and have been for some time.
The BCC’s Quarterly Economic Survey has been a reliable bellwether for the UK economy, often pointing out business trends before they are captured in the official statistics.
Our latest data, published today, captures the view from over 8,500 firms during the first quarter – and suggests that companies increasingly believe the UK economy is softening.
In both the dominant services sector, and in export-rich manufacturing, our confidence indicators have been giving up ground since 2014 – long before the EU referendum date was announced. Business confidence in both turnover growth and profitability growth has been, and remains, at a low ebb.
Of course, some of the reasons for this less confident outlook arise from global developments. Volatile asset and commodity markets have an impact on UK firms, as do slowdowns in China and in many emerging markets. The strong dollar is a challenge, driving up costs for many firms, and while there are signs of life in the Eurozone, growth there remains weak.
Yet not all of Britain’s growth challenges can be explained away either by global trends or our relationship with the EU. Some of the big, long-standing structural problems in the British economy are home-grown – and have been shuffled to the bottom of the deck.
Companies continue to face significant capacity constraints, driven in part by serious recruitment difficulties. This is not a new phenomenon, but it’s worsening. At a time when our survey shows that two-thirds of services firms and nearly three-quarters of manufacturing firms can’t get the people they need, the decades-old deficiencies in our education and training system should be under the spotlight.
Our data also demonstrates that a two-tier growth trend is becoming further entrenched – with services remaining far stronger than manufacturing. The ongoing uncertainty about the future of UK steel production demonstrates the long-standing lack of consensus around how to encourage investment in, and modernisation of, strategic industries here in the UK. Yet we hear little talk of a concerted plan for the future, beyond an outdated spat between ideologues of left and right.
Infrastructure upgrades, another decision that is wholly within our own hands, are also not proceeding fast enough. We’ve heard nothing about aviation capacity since the New Year, and the slow progress of many other key projects creates further cause for concern. We need to improve our physical and digital infrastructure, so that we can support stronger business investment and export performance.
My point here is that many of the risks facing the UK economy today stem from longstanding, well-known, and home grown structural issues. Not every problem can be dismissed with reference to global uncertainty, or reduced to an argument about whether Britain should be in or out of the EU.
For hundreds of thousands of businesses across the UK, the overall health and performance of the economy is of paramount importance – and it is getting short shrift in Westminster.
Many firms are far more worried about succession planning, unpredictable infrastructure, and chronically low productivity than they are about the EU referendum. Whatever result we awaken to on June 24, these problems will remain.
So it’s up to our national leaders to demonstrate that they are paying careful attention to concerns from the real economy – and that they have clear ideas to shore up business confidence and avoid further downward drift.