Nearly half of UK firms report Q3 sales decrease

Business conditions remain weak in the third quarter of 2020, despite “much of the economy” reopening, according to the latest Quarterly Economic Survey from the British Chamber of Commerce (BCC). 

Its survey of 6,410 firms found that while key indicators have improved from the “historic lows” in Q2, they remain “significantly lower” than before the pandemic struck. 

Business to consumer firms, including hospitality, fared worst, according to the BCC.

While the third quarter had improved against the “unprecedented” percentage of firms reporting decreases in domestic and export sales in Q2, the majority of firms continued to report decreases or no change in sales in the period.

Some 46% of firms reported decreases in domestic sales, down from 73% in Q2, though 27% of firms reported an increase in domestic sales. 

A further 27% reported no change, while 47% of firms reported decreases in export sales, down from 72% in Q2, though “still substantially worse” than Q1, where only 21% of firms reported a decrease.

Business to consumer firms reported the weakest performance, with 66% of respondents in hospitality and catering reporting decreases in sales and bookings in the last three months, compared with 46% overall.

In addition, cash flow “continued to deteriorate” for almost half of firms. In Q3, 21% of firms reported an improvement in cash flow, 34% reported no change and 45% reported a deterioration. In Q2, 11% of firms reported an improvement, 25% no change, and 64% a deterioration.

According to the BCC, the “rise in coronavirus cases from 7 September, the subsequent introduction of new national restrictions and tightening local restrictions paint a concerning picture for business conditions in Q4”.

Suren Thiru, head of economics at the BCC, said: “Our latest survey indicates that underlying economic conditions remained exceptionally weak in the third quarter. While the declines in indicators of activity slowed as the UK economy gradually reopened, they remain well short of pre-pandemic levels with little sign of a swift ‘V’-shaped recovery.

“The manufacturing sector recorded the strongest improvements in the quarter, while consumer-focused services firms, where social distancing restricts activity, saw more limited gains. The persistent weakness in cash flow is concerning as it leaves firms more vulnerable to external shocks, including further restrictions.”

He added: “While the government’s Winter Economy Plan may provide a short-term boost, with restrictions tightening and the economic scarring already caused by the pandemic starting to crystallise, the resulting gains in economic output are likely to fade over the coming months.”