The British Chambers of Commerce (BBC) on Wednesday called for “swift, substantial and immediate” government action after its closely watched survey suggested that the UK economy contracted at the sharpest pace on record in the second quarter.
Sales in the manufacturing and services sectors fell by the largest extent in the survey’s 31-year history, according to the survey.
“Our latest survey highlights the extraordinary contraction in UK economic activity in the second quarter as the coronavirus closed large parts of the economy,” said Suren Thiru, the BCC’s head of economics.
The majority of the indicators in both sectors fell to historic lows in the survey, which collected responses from 7,700 firms across the UK, far exceeding those seen during the financial crisis.
“The services sector suffered particularly badly, with consumer-facing firms most acutely exposed to economic headwinds from the pandemic. The manufacturing sector had a dismal three months, with collapsing demand and major disruption to supply chains weighing on the sector,” said Thiru.
Cashflow levels reported by firms fell to their lowest level, with two thirds of respondents reporting a worsening cashflow situation.
Firms are also downbeat about the future, with several of the survey’s forward-looking indicators suggesting that investment levels and turnover will remain depressed in the coming months.
The collapse in these indicators could mean that, in the absence of deliberate government action, the prospect of a swift and sustained recovery “may prove too optimistic,” according to Thiru.
BCC director general Adam Marshall called for a “clearer, bolder roadmap to recovery” from the UK government, warning that the UK “cannot meander its way back to success in this era of uncertainty.”
“The only way to rekindle business and consumer confidence is to demonstrate an absolute and unshakeable focus on boosting the economy over the coming months,” he said.
The BCC is calling for “substantial” reductions in employer national insurance contributions, rate reliefs, and extensions to loan and grant schemes.
It also called for policy initiatives designed to stimulate demand, such as “restart vouchers” for households or a temporary VAT cut, among other measures.
The BCC’s warning comes after Bank of England chief economist Andy Haldane said on Tuesday that “early” evidence indicated that the UK economy was set for a rapid V-shaped recovery.
Haldane said that several unofficial economic indicators, such as data on credit card transactions, Google searches, and measures of footfall on the high street, suggested that the UK recovery had come “sooner and faster” than any forecasters had predicted.