Business pares back as sales decline

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Businesses have pared back investment plans as sales and orders deteriorate, according to a survey suggesting companies have become increasingly cautious as the economic recovery falters.

The British Chambers of Commerce, which surveyed 6,700 businesses, called the results “disappointing and worrying”. The vast majority of the BCC’s respondents were small and medium-sized businesses; the government is working on plans to help such companies access credit in the hope this will spur more investment and employment.

David Kern, chief economist at the BCC, said of the survey: “We wouldn’t want these figures to be interpreted as foreshadowing an inevitable recession, but I think we are in for a hard slog for a fairly long period.” Last week, the Bank of England decided to pump another £75bn into the economy in reaction to slowing growth at home and abroad.

Between July and September, domestic sales stagnated and orders started to fall. Export sales and orders continued to rise but more slowly than in the previous three months. The balance of businesses planning to invest in equipment declined in both sectors.

In both the manufacturing and service sectors, more companies said their cash flow had worsened over the period than said it had improved. Small companies have reported deteriorating cash flows for some time, but in the past three months the cash flows at large companies also worsened.

The survey comes on the same day as two others – one on the retail sector, one on the housing market – that paint a similar picture of stagnation.

The British Retail Consortium reported that the value of sales on the high street rose 2.5 per cent in September compared with the same month a year ago. However, the survey does not strip out the effect of annual inflation, which is running at 4.5%. The unusually hot weather at the end of the month lifted food sales but depressed clothing sales, since shops had already shifted to their autumn and winter ranges.