Boris Johnson’s closing speech to the Tory conference had little to please business.
He talked again rammed home the message that we need a high skills, high wage economy.
And business had to invest to play their part in what he said was a broken model.
That vision is undoubtedly supported by much of business but what I think what they now need is clear ,open dialogue with government support to achieve that goal.
The picture that Boris painted was far from the reality that most business faces today of recruitment and serious supply shortages.
This was a speech that could well have been one of his Daily Telegraph columns with lots of Boris humour and rhetoric.
We had Build Back Burger and Build Back Beaver as part of his overall Levelling Up mantra.
But did we get any firmer detail on those Levelling Up policies and plans?
What we did get was a glowing resume of the magnificent work of the NHS during Covid and our vaccine success.
We got patriotism too with mention of the England football team and our tennis champion, Emma Raducanu.
Business will now be waiting in trepidation for the Chancellor’s spending review later this month.
They will hope that more government support will be forthcoming but will not hold their breath.
This was Boris at his campaigning best but it was certainly not going to win him many friends in business.
Tony Danker, CBI Director-General, has also responded to Burs Johnson’s conference speech. He said:
“The Prime Minister has set out a compelling vision for our economy. High wages, high skills, high investment and high growth.
“But the PM has only stated his ambition on wages. This needs to be backed up by action on skills, on investment and on productivity.
“Ambition on wages without action on investment and productivity is ultimately just a pathway for higher prices
“It’s a fragile moment for our economy. So, let’s work in partnership to overcome the short-term challenges and fulfil our long-term potential. It’s time to get around the table, roll up our sleeves and get things done. It’s time to be united.”
According to the British Chambers of Commerce Quarterly Economic Survey Q3, the economy is under strain. The survey of more than 5,700 firms showed that some indicators, such as domestic sales and orders improved in Q3. However, it also revealed stagnation in the proportion of firms reporting improved cashflow and increased investment.Worryingly, firms’ expectations of price increases and fears about inflation are hitting record levels.
47% of respondents overall reported increased domestic sales in Q3(compared to 44% in Q2), while 16% reported a decrease (20% in Q2).
In the services sector, the balance of firms reporting increased domestic sales increased to +31% in Q3, the highest since Q4 2015 and up from +20% in Q2. The balance of services firms reporting increased domestic orders rose to +27in Q3, the highest since Q3 2015 and up from +17% in Q2.
In the manufacturing sector, the balance of firms reporting increased domestic sales was +28% in Q3, unchanged from Q2. The balance of manufacturers reporting increased domestic orders eased slightly to +22 in Q3, from +25% in Q2
Firms in the hospitality sector were most likely to have seen increased domestic sales as restrictions eased, with nearly 2 in 3 (63%) reporting as much. This was followed by transport/distribution, and marketing/media, both on 50%.
27% of firms overall reported an increase in investment in Q3 (unchanged fromQ2), far lower than the percentage of firms who reported a rise in domestic sales (47%). The failure to see any positive upward movement in investment isanother troubling warning sign for longer term recovery.
Meanwhile, 13% of firms reported a decrease in investment in Q3, and a further 59% said they had seen no change.
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said: “Our latest data indicates a disappointingly modest uptick in economic activity in the third quarter as the boost from the end of restrictions was increasingly stymied by supply and staff shortages and rising cost pressures.
“The key services sector recorded the strongest improvements as consumer-focused firms, including hotels and hospitality, received the biggest boost from the easing of social distancing restrictions. Manufacturers saw more limited gains as increasingly severe supply chain disruption stifled their ability to fulfil orders and meet customer demand.
“The results point to an underwhelming three months for business investment as the damage done to firms’ cash flow by the pandemic and growing concerns over a more burdensome tax regime squeezed investment intentions.
“Acute supply shortages and rising raw material costs drove an historic surge in inflationary pressures in the third quarter. However, with little evidence in our figures that higher inflation is stoking a broad-based escalation in pay settlements, the MPC should have enough leeway to keep interest rates steady over the medium term.
“Though the UK economy remains on track for moderate growth in the third quarter, with staff and supply shortages increasingly having a suffocating effect on economic activity and price pressures intensifying, a spell of stagflation maybe inevitable.”