Despite progress in the manufacturing sector, the UK economy grew at a muted rate in the third quarter of 2017, says the British Chambers of Commerce (BCC).
It says the number of manufacturers reporting improved domestic sales and orders rose in the quarter to their highest level since early 2015.
Export sales and orders in the sector also improved, said the BCC.
But in services, domestic sales and orders remained static, as did the sector’s employment expectations.
The BCC says its survey also shows the prevalence of recruitment difficulties facing UK businesses, which worsened further during the quarter, it says.
Almost three-quarters of manufacturers reported difficulties hiring staff, and in services, the percentage rose to its highest level since early 2016.
Dr Adam Marshall, director general of the British Chambers of Commerce, said: “The uninspiring results we see in our third-quarter findings reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on business growth prospects.
“The chancellor’s autumn Budget is a critical opportunity to demonstrate that the government stands ready to incentivise investment and support growth here at home.
“While much of Westminster and Whitehall is distracted by Brexit, business needs action now on the home front. The solutions to some of the biggest issues currently facing our firms – including high up-front costs, a lack of incentive to invest, and a need for better infrastructure – are entirely within the power of the UK government to deliver.”
The BCC also said that in the current economic climate, it seemed “extraordinary” that the Bank of England was considering raising interest rates, and said it was “vital” the MPC provided monetary stability.
“We’d caution against an earlier than required tightening in monetary policy, which could hit both business and consumer confidence and weaken overall UK growth,” said BCC head of economics Suren Thiru.
“While interest rates need to rise at some point, it should be done slowly and timed to not harm the UK’s growth prospects.”