Many UK firms will face a fight for survival in coming months, and recovery could be “dramatically uneven”, British Chambers of Commerce is warning.
The business organisation highlights the challenges ahead in its latest quarterly economic survey published today.
This shows business conditions remained “historically poor” in the first quarter as the third lockdown “severely limited activity”, with British Chambers also citing the impact of post-Brexit disruption.
However, the survey signalled a boost to business confidence in the opening three months of 2021 amid the vaccine roll-out and provision of roadmaps for reopening of those parts of the economy which have been closed.
Consumer-facing services firms have been hit particularly hard by lockdown, British Chambers noted. In contrast, business and professional services firms fared relatively well.
All the key indicators for immediate business conditions remained in negative territory and “well below pre-pandemic levels”, British Chambers emphasised.
Around 83 per cent of hospitality and catering firms experienced reduced domestic sales in the first quarter, according to the survey.
However, overall, 55% of businesses expect turnover to increase during the next 12 months.
Suren Thiru, head of economics at British Chambers, said: “Our latest survey indicates a particularly difficult first quarter of the year for the UK economy, as a third lockdown and post-Brexit border disruption weighed heavily on key indicators of activity.
“We are currently witnessing a two-speed services sector. Consumer-focused services companies, where activity is most limited by lockdown controls, [have been] suffering an especially damaging quarter. In contrast, business and professional services firms, where adapting to operate under restrictions is more straightforward, fared markedly better. Manufacturers had a challenging three months, with delays to supply chains caused by the ongoing disruption to post-Brexit trade weighing on the sector.
He added: “The marked improvement in business confidence suggests that the expected first-quarter contraction in output will be the nadir for the UK economy in 2021. However, the economic scarring from Covid may mean that the recovery is dramatically uneven across different sectors, locations and cohorts of people.”
Hannah Essex, British Chambers’ co-executive director, said: “Businesses are beginning to see optimism emerge from the lowest point of the crisis. However, much remains to be done to ensure that optimism is borne out into prosperity, and many businesses still face a fight for survival in the coming months.
“The damage wrought to trading conditions by repeated lockdowns and issues at the border will not be repaired by renewed confidence alone. The Government must recognise the compounded impact that the combination of the pandemic and Brexit-related issues [has] had on firms up and down the country.”