UK companies face hard slogas orders decline

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

The British Chambers of Commerce (BCC), which surveyed 6,700 businesses, called the results "disappointing and worrying". The 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 that 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."

The Bank of England decided last week to pump another £75 billion (Dh434.81 billion) into the economy in reaction to slowing growth at home and abroad.

Domestic sales stagnated between July and September and orders started to fall, the survey suggested. Export sales and orders continued to rise, but much 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 cashflow had worsened over the period than said it had improved.

Small companies have reported deteriorating cashflows for some time, but in the past three months 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 per cent.

Hot weather

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. Stephen Robertson, the BRC director-general, said underlying conditions remained weak and added: "There's no guarantee next month's figure will be better."

Shoppers are cutting back on discretionary spending as inflation erodes their wages. Several retailers have issued profit warnings and Tesco, the supermarket chain, reported its worst underlying sales performance for 20 years.

— Financial Times