UK business body cautious on outlook for exports and investment

UK companies still face problems in areas such as export and investment, even as the country looks set for another quarter of steady growth, according to a survey.

All of the main indicators in the British Chambers of Commerce's quarterly survey of 7,500 companies weakened in the first quarter, with respondents expecting slower growth to follow.

John Longworth, director-general of the BCC, said the findings were not a cause for alarm, but "a salutary reminder that the UK still faces obstacles on the path to sustainable, long-term growth".

David Kern, chief economist at the BCC, said the results were "satisfactory overall by historic standards" and still pointed to solid growth in 2015, but added "the UK recovery remains unbalanced . . . while a healthy consumer sector is vital for the economy's wellbeing, much greater efforts are needed to increase the contributions of exports and capital investment to Britain's growth".

The survey reports falling investment intentions from manufacturing and service companies. Domestic inflationary concerns remain muted, however, with the balance of manufacturing companies reporting pressure to raise prices falling by 10 points to the lowest level since the second quarter of 2012.

A separate report on credit conditions from the Bank of England on Wednesday showed that while capital investment had been a source of increased demand from large companies in the first quarter, lenders expected this to lessen over the next three months.

The demand for mortgages decreased "significantly" according to lenders, but demand for unsecured lending such as personal loans or credit cards dipped only slightly.

While lenders said they expected mortgage demand to increase over the next three months, that has been their position for the last three quarters and in each period demand has fallen.

Ian Stewart, chief economist at Deloitte, said that falling consumer demand for mortgages had created an "unusual two-tier consumer economy".

"On the one hand, housing activity has been crimped by tighter mortgage regulation and concerns about affordability. Meanwhile, falling unemployment and a recovery in consumer spending power has boosted consumer spirits and is helping drive a recovery in consumer spending," he said.

The pace of house price increases has been falling on all major indicators, with some monthly data starting to show falling prices.

Simon Wells, chief UK economist at HSBC, said the data suggested the slowdown was "very much driven by demand" rather than a lack of credit. This he suspected was due to "potential housebuyers becoming more cautious in the face of higher house prices".

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