The UK economy grew at a muted rate in the third quarter of 2017 despite progress in the manufacturing sector, the British Chambers of Commerce says.
The number of manufacturers reporting improved domestic sales and orders rose in the quarter to its highest level since early 2015, the BCC said.
Export sales and orders in the sector also improved.
But in services, domestic sales and orders remained static, as did the sector’s employment expectations.
The BCC said its survey also showed the prevalence of recruitment difficulties facing UK businesses, which worsened further during the quarter.
Almost three-quarters of manufacturers reported difficulties hiring staff, and in services, the percentage rose to its highest since early 2016.
BCC director general Dr Adam Marshall said: “The uninspiring results we see in our third-quarter findings reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on business growth prospects.
“The chancellor’s autumn Budget is a critical opportunity to demonstrate that the government stands ready to incentivise investment and support growth here at home.
“While much of Westminster and Whitehall is distracted by Brexit, business needs action now on the home front. The solutions to some of the biggest issues currently facing our firms – including high up-front costs, a lack of incentive to invest, and a need for better infrastructure – are entirely within the power of the UK government to deliver.”
The BCC also said that in the current economic climate, it seemed “extraordinary” that the Bank of England was considering raising interest rates.
“We’d caution against an earlier than required tightening in monetary policy, which could hit both business and consumer confidence and weaken overall UK growth,” said BCC head of economics Suren Thiru.
“While interest rates need to rise at some point, it should be done slowly and timed to not harm the UK’s growth prospects.”
Buoyancy in the UK manufacturing sector is not universal at the moment, one company said.
Andrew Varga, managing director of Seetru, a Bristol-based manufacturer of safety valves for industry, told the BBC’s Today programme his firm was “slightly more pessimistic” than the BCC.
“We see some startling results. Despite the buoyant European economy, we see an accelerating reduction in order pull from Europe. Clearly uncertainty is having a really significant effect on customers’ choices of which country they buy from, and they’re not buying from the UK any more.”
He added that the UK market was “depressed”.
“Like-for-like sales are clearly down – down about 10%,” he said. “This is all due to [Brexit] uncertainty at the moment.”
Clare Flynn Levy, founder and chief executive of financial behavioural analytics software firm Essentia Analytics, told the BBC that for her company “life’s a bit more optimistic”.
“But I’m not surprised to hear that the services sector is static, because there is a massive energy suck toward people decisions and mobility decisions that are caused by Brexit, and the uncertainty is just causing energy that would otherwise be devoted to selling and delivering services to clients to be pulled into scenario planning… so people are sort of frozen,” she said.