LONDON (dpa-AFX) - The U.K. is showing signs of 'two-tier' growth in the second quarter, as the service sector continued its steady progress ahead of the weaker growth of manufacturing, the results of the quarterly economic survey released by the British Chambers of Commerce (BCC) showed Tuesday.
The survey provided further evidence that the service sector results remain broadly positive in the second quarter, while all the key manufacturing balances fell. The BCC's survey showed that most balances in the service sector are now higher than the average 2007 pre-recession levels, while that for the manufacturing sector are now lower.
'Overall, they indicate that we will see continued growth in the economy, thanks mainly to the strength of the services sector. But the difference in results also raises the prospect of the UK experiencing two-tier growth - with modest expansion in services and markedly slower growth in manufacturing and goods,' said John Longworth, Director General of BCC.
Longworth also said the slowdown in the manufacturing sector may be partly due to the strength of sterling against the euro and the dollar. He also listed out the three structural issues faced by the manufacturers that is a surprise and a concern for the slowdown.
The BCC underlined chronic under investment, under investment in infrastructure and insufficient focus on helping businesses succeed in new markets overseas as key structural problems faced by manufacturing firms. Longworth expects the Chancellor's Budget, the forthcoming spending review and the remainder of this Parliament to address these issues.
In the service sector, the domestic sales balance fell to +31 percent from +34 percent and the export sales balance fell by two points to +19 percent.
However, the service sector balances for employment, investment, confidence and cash-flow increased slightly in the second quarter, signaling stronger growth.
In the manufacturing sector, the domestic sales balance fell to +20 percent from +30 percent, and the export sales balance declined to +14 percent from +19 percent.
The manufacturing sector balances for employment, investment, and confidence fell in the second quarter, signaling lower growth.
Copyright RTT News/dpa-AFX