Britain’s rapid recovery will be hampered in 2014 unless the government acts to encourage corporate lending, a leading business group warns on Tuesday.
The British Chambers of Commerce said growth this year will remain steady, but restrictions on lending to small and medium-sized businesses will restrict the pace of expansion, reports The Guardian.
The warning came as figures showed that the services sector maintained its year-long surge in output during December. The Markit/CIPS purchasing managers index (PMI) was a little weaker than the previous month and the pace of growth was slowest since June. But this still outstripped the eurozone average and especially France, which suffered a second successive month of falling services output – and at an accelerating rate.
According to the BCC, five key measures of manufacturing were at an all-time high, allaying fears towards the end of last year that the growth spurt in manufacturing was temporary. Domestic orders, employment, employment expectations, turnover confidence and profitability confidence were all performing well alongside export sales and export orders.
John Longworth, director general of the BCC, said it was “pleasing that the spurt in manufacturing has proven not to be a fluke, which demonstrates the dynamism of our small, high-value, manufacturing sector”.
But he cautioned against complacency after the survey found that restrictions on cashflow and a lack of access to credit was restricting investment in new plant and machinery.
Suren Thiru, a UK economist at the BCC, said: “When we speak to members they say the big issue is the lack of access to finance and the detrimental impact investment will have on cashflows. It is clear there are still significant issues around bank lending,” he said.
The Markit/CIPS PMI headline business activity index registered a level of 58.8, down from 60 in November, for the UK, compared with a eurozone average of 52.1. The eurozone has benefited from recoveries in Spain and Ireland while France has struggled, down to a six-month low of 47.8 from 48.5. A figure above 50 shows expansion.
Markit said the UK’s growth was driven by a jump in new business, which has risen continuously throughout 2013. It said the average growth rate in the final quarter of the year was the best in the survey history, despite December registering the weakest increase in new work for three months.
Chris Williamson, Markit’s chief economist, said: “Service providers ended 2013 in a buoyant mood. Although growth of business activity slowed, it has come down from super-strong levels and the pace of expansion remains elevated. If the buoyancy of the surveys in the fourth quarter is borne out by the official data, the economy will have grown by 1.9% over the course of 2013, which would be the best we’ve seen since 2007.”
Computing and IT, transport and communication, financial services, and business-to-business services showed the strongest growth. The car industry also maintained its strong performance, in contrast with the ailing French car business, which has only recently steadied after a long period of cuts to production and job layoffs.