U.K. Bounceback Hopes Weakened as Firms See Record Sales Slump

Hopes of a swift recovery for the U.K. economy could be dashed, according to a survey that revealed the parlous state of Britains businesses.

Measures of sales, orders and cashflow in the nation‘s dominant services sector have plunged by the most in the 31-year history of the British Chambers of Commerce’s quarterly survey. Demand for goods from manufacturers also dropped in the three months through June, with sentiment in the industry sliding to the weakest level since the financial crisis.

The findings add weight to concerns the economy will struggle to rebound quickly from the pandemic. Two-thirds of firms reported a worsening cash position, which could hamper activity and staff retention, the BCC said.

The majority of the 7,706 companies also said they expect turnover to worsen over the next year, with the proportion planning to invest in machinery or staff training slumping. The poll was conducted between May 18 and June 12.

“With lockdown restrictions steadily easing, the second quarter is likely to prove to be the low point for the U.K. economy,” said Suren Thiru, head of economics at the BCC. “However, the collapse in forward looking indicators of activity suggests that unless action is taken, the prospect of a swift and sustained recovery may prove too optimistic.”

The second quarter probably saw the worst of the economic damage from Covid-19, which may have plunged the U.K. into the deepest slump in three centuries. Bank of England Chief Economist Andy Haldane, however, said while the downturn is severe, its not as bad as as policy makers previously expected and the recovery may be stronger.