The quantity of exports sales and orders attained by the British service sector reached a record high during the first quarter of 2014, according to the British Chambers of Commerce.
During the same period, Britainís manufacturing sector grew at a steady rate, the BBCís first quarter survey has revealed, as the UK continues to live up to its reputation as one of the ëfastest growing economiesí in the world.
And the news has increased worker pressure on the countryís employers to raise their wages, as the economy continues to boom and a link between GDP and standards of living is sought to be established again.
However, BBC chief economist David Kern has warned that the countryís recent economic upturn might be a short term occurrence, as the growth in GDP continues to be driven primarily by consumer spending at a time when personal debt levels remain ìtoo highî.
He argued that whilst economic growth was rapidly occurring, that nevertheless ìchallenges persistedî if the country endeavours to achieve a sustainable and long term recovery; particularly with the current complexion of the UK business finance system which the BBC described as being ëbrokení and posing significant ëlong term risksí if left unaddressed.
ëSignificant structural changes neededí
“UK growth is still reliant on consumer spending, driven by a resurgent housing market and a declining savings ratio,” he said.
Kern identified that existing levels of household personal debt ìneeded to fallî and called for policymakers to make ìsignificant structural changes to our economyî in order to uphold current levels of growth being enjoyed in the UK.
He also highlighted the stark reality that the UKís current account deficit at present is the ìlargest in the G7î group of major industrialised countries and argued that if this actuality is left unaddressed that serious ìlong term risksî would arise.
“Investment and exports must play a larger contribution to our economic future, or else there is a risk that our recovery could stall,” he said.
Kernís sentiments were reiterated by John Longworth, director general at the BCC, who said: “Only by repairing our broken business finance system will viable, growing firms gain access to the capital that will allow them to invest in their staff and machinery, and enter new markets.”
Nevertheless, the BBCís most recent statistical report displayed a clear rise in services export orders since 2012, Mr Longworth identified, highlighting the huge potential for the both the countryís economy and people if the necessary
structural changes are made to its finance system at present.
And this notion has been reinforced by separate data indicating that export sales and orders in industries like accountancy and computing have soared to ìan all time highî, the BCC argued.
“Certainly, all the indicators are stellar,” Mr Longworth told the BBC. “Things are really looking up on exports.”
Nevertheless, the UK must “continue to increase the amount of export support we have”, he added.
The news comes just a day after Chancellor of the Exchequer George Osborne unveiled plans to bolster the British exporting industry by investing in a 6 million programme that will see small and medium sized businesses given greater access to trade advisers.
Mr Osborne also identified that he would seek to raise business lending levels in Britain by giving the countryís banks access to cheap finance through the UK Export Finance scheme.
Under the initiative, banks are able to borrow money off the Bank of England at low borrowing costs so that they can then pass on the funding to businesses at lower risk. The Chancellor has argued that the scheme will help to encourage lenders to distribute more money to businesses that need it by minimising their cause for apprehension through cheap access to finance.
Wage pressure grows
The news that the countryís economy is expanding rapidly and export and manufacturing levels are soaring has significantly raised the pressure on national employers to pay their workers higher salaries, the BBC highlighted.
Mr Longworth identified that workers within the service industry, including consumer, retail and professional services, have all begun to request larger payment settlements, and called for employers to oblige as an organic way of tackling the ongoing ëcost of living crisisí which has seen worker wages ësqueezedí to the limit each month due to inflation outstripping the growth in average incomes for over 4 years.
“There is a certain amount of pressure in the service sector, our biggest sector, on wages,” Mr Longworth said. “This could be the fix for the cost-living crisis. If wages start to increase this year, people will feel better off.”
A study performed by Recruitment and Employment Confederation (REC) revealed that starting incomes rose during March as demand to find highly skilled employees begun to creep up.
“Starting salaries and hourly pay rates are up as employers battle to entice the talent they need,” REC policy director Tom Hadley said.
“Worsening candidate shortages mean that the number of people available to fill both temporary and permanent jobs is falling at the sharpest rate in nearly a decade,” he added.