The Greater Manchester economy is still ‘volatile’ as global uncertainty and rising costs continue to worry businesses, a new study has shown.
Greater Manchester Chamber of Commerce’s Quarterly Economic Survey (QES) for Q2 showed businesses fearing the impact of increases in Employer National Insurance contributions and the impact of Donald Trump’s tariffs. The service sector was outperforming manufacturing – but overall firms said growth was being driven by public spending rather than business investment.
The Chamber’s own GM Index, which uses QES data to measure economic performance, was down 2.5 points to 16. In Q1, the index had fallen nine points to 18.5.
Subrahmaniam Krishnan-Harihara, the Chamber’s deputy director of research, said: “While this is not as dramatic a reduction as last quarter it reflects the volatility and uncertainty that have characterised the Ƶ economy for some time. We have seen bursts of growth followed by drops in production. There are persistent inflationary pressures meaning businesses will have to put prices up or reduce their margins.”
Mr Krishnan-Harihara said the manufacturing sector had seen several quarters of volatility as two quarters of growth had been followed by sharp reductions in performance in Manchester and the wider North West, He said confidence in turnover growth in manufacturing had also fallen – “which could lead to further price rises”.
In services, the QES showed the business-to-business and business-to-consumer sectors were performing well, but that hospitality was still struggling.
Mr Krishnan-Harihara said: “In construction there has been a degree of reduction but there is a strong pipeline, and it will bounce back with a national target of building 1.5 million homes, which is 75,000 in Greater Manchester alone. This would mean 15,000 houses a year being built in Manchester, when the figure is usually 6,000 a year, so there needs to be a significant increase in housebuilding.
“The growth in the service sector is being fuelled by an increase in public spending in areas such as health and social care rather than business investment, which is a cause for concern. The growth in construction is coming through the building of schools, hospitals and colleges, therefore public spending is fuelling that as well. The rise in defence spending should mean that public spending will continue to fuel growth.”
Companies trading internationally have faced months of uncertainty over the impacts of US tariffs, leaving them unable to plan. Mr Krishnan-Harihara said many ships laden with goods from China had been on their way to the USA with importers not knowing whether the products would be hit by tariffs on arrival.
That, he said, had resulted in an increase in manufacturing activity towards the end of Q1 followed by a sharp drop “suggesting businesses had been rushing to get their goods out before the tariffs came into force”.
He added: “We now have a little bit of stability following the Ƶ’s negotiation with the US over tariffs. The manufacturing sector most affected by tariffs was automotive whereas food manufacturing did improve.”
Nationally, QES research showed the rise in employer NICs had hit recruitment, with the number of workers falling from 30.5m to 30.1m over the last year. The number of vacancies also fell but some jobs were still not being filled, which Mr Krishnan-Harihara said showed the “skills mismatch” was continuing to be a “significant” problem in the Ƶ.
He said the Ƶ economy was expected to grow by 1 to 1.2% this year – and while he highlighted the infrastructure announcements in the Comprehensive Spending Review, he warned they could lead to higher taxes.
