Fighting for survival but growing positive signs

The British Chambers of Commerce’s Quarterly Economic Survey (QES) – the UK’s largest independent survey of business sentiment and a leading indicator of UK GDP growth – found that business conditions remained historically poor in the first quarter of 2021as the third lockdown severely limited activity.

However, the bellwether survey of 6,103 firms, who employ almost a million people across the UK, revealed that business confidencehas been boosted in the first three months of 2021 amid the strong vaccine roll-out and the government’s roadmap providing some ability for companies to forward plan.

Key findings:

1. All the key indicators for immediate business conditions remained in negative territory and well below pre-pandemic levels in Q1

2. 83% of hospitality and catering firms reported decreased domestic sales in Q1

3. 55% of businesses expect turnover to grow over the next 12 months, back to pre-pandemic levels

Business activity

Overall, indicators of immediate business conditions remained troubling in Q1, withsome deterioration from Q4 2020and all key indicators still well below pre-Covid 19 levels. 

40% of firms reported a decrease in domestic sales in Q1,32% reported no change, and 28% reported an increase.

Business to consumer (B2C) firms saw the largest falls in domestic sales in the quarter.83% of hospitality and catering firms reported decreases in Q1, higher compared to 79% in Q4, but lower thanin Q2 2020 (94%).

Sectors with more scope to continue their operations through the pandemic, including shifting to remote working, saw some improvement, albeit not close to pre-pandemic levels. 35% of both Professional Services and Marketing & Media firms reported increased sales in Q1, up from 29% and 28% respectively in Q4 2020. With those reporting decreased sales standing at 29% and 33% respectively in Q1, significantly down from 35% and 44% in the last quarter.

In the services sector generally, the balance of firms reporting increased domestic sales increased to -18% in Q1 2021, up from -24% in Q4 2020.

In the manufacturing sector, the balance of firms reporting increased domestic sales increased to -6% in Q1 2021, up from -9% in Q4 2020.

Cash flow 

Cash flow continued to deteriorate for 41% of firms in Q1. 20% of firms reported an improvement in cash flow, 39% reported no change. Levels are broadly unchanged from Q4, which itself showed little improvement from Q3 following the historic lows in Q2 2020.

Cash flow indicators continue to worsen most severely for hotels & catering firms.8 in 10 (81%) of these firms reported a decrease in cashflow in Q1, up from 77% the previous quarter, with only 7% reporting an increase.

In the services sector,the balance of firms reporting improved cashflow increased to -26% from -28% in Q4. Despite continuous improvement from the lowest levels on record, this balance is still at a level comparable to the 2008-09 recession.

In the manufacturing sector, the balance of firms reporting improved cashflow decreased to -17% from -15% in Q3.

More available on: