Economic downturn deepens at alarming pace

By Laura Miller and Ian Dunt

The economic downturn is deepening at an alarming pace, according to new findings published today.

A survey by the British Chambers of Commerce (BCC) – which measured activity across almost 6,000 businesses employing over 680,000 people – compiled results that are “the worst on record for both manufacturing and services”, pointing to a “frightening deterioration in the UK economic situation”.

Every region in the UK reported “disturbing” drops in sales and orders for both the service and manufacturing industries.

Plummeting business at home has not been eased by the UK export market. All export balances have shown a marked fall, indicating that big dips in the value of sterling have failed to benefit UK exports.

Less activity requires less staff. National recruitment levels in manufacturing are at their lowest levels since 1994, the report revealed, and fewer people were recruited into the service sector in the last three months of 2008 than since 1993, prompting a description of the current labour market as “dire”.

Businesses do not expect the situation to get better any time soon. The BCC found an “alarming collapse in confidence” in turnover and profititability, with company chiefs fearing economic recovery will not be quick.

Commenting on the survey, and on the news of job cuts at JCB, shadow chief secretary to the Treasury, Philip Hammond, said: “This shocking news underlines the true scale of Gordon Brown’s recession and the extent of the challenge that faces the next government in rebuilding Britain’s economy.

“It is now imperative that the government acts to implement the Conservatives’ proposed national loans guarantee scheme. Unless we get credit flowing again, more businesses will fail and more jobs will be lost”.

The survey’s authors also call for “a further fiscal stimulus and quantitative monetary easing”, to supplement the cut in interest rates it successfully predicted would be necessary early in 2009.

Quantitative monetary easing, essentially a modern means of printing money, has been described by many experts as a “high-risk strategy” riddled with economic, practical and political problems, but it has not been ruled out by the Bank of England.

In a separate development, figures released by the Office for National Statistics (ONS) today showed the UK’s trade deficit was at a record low.

The UK’s goods deficit was widened to £8.3 billion, compared with the deficit of £7.6 billion in October.

The Conservatives said the news was a wake-up call to the country.

“The fact that this is the worst statistic on record gives serious cause for alarm,” said shadow business secretary Alan Duncan.

“Along with the collapsed pound, this deficit shows the reality of the Britain’s plight.”

Both parties have been furiouslyt campaigning on economic issues since parliament returned on Monday, with the Tories launching an anti-debt campoaign and Labour focusing on social mobility.