The region’s export performance has plunged to its lowest level in a decade, according to figures which business leaders have described as “deeply troubling”.
The North East England Chamber of Commerce Quarterly Economic Survey, which represents the views of its members on trading conditions and forecasts for the future, found that export sales have fallen into negative territory, led by a significant decline in the service sector.
Problems were also seen in the manufacturing sector, with export orders and cash flow both showing negative indicators.
Concerns surrounding Brexit continued to be the most widely mentioned barrier to business success, with firms taking part in the survey highlighting uncertainties resulting in reduced business confidence and concerns surrounding future economic conditions, uncertainties over tariffs and the potential impact on exports as well as Brexit related delays to investment.
The survey also showed that the proportion of businesses operating at full capacity was just 29.2%, below the 32.6% recorded this time last year and the 37.1% recorded in the previous quarter.
Chamber president Lesley Moody said: “One big story emerges from this quarter’s results, namely the deterioration in firms’ export performance. For a region that prides itself on its export performance, this is deeply troubling.
“Clearly the uncertainty around Brexit is having an impact on our businesses and our economy. This quarter sees scores for export orders over the next three months fall to their lowest level since the middle of 2009; while cashflow continues to be a major challenge for many firms.
“With the October 31 Brexit deadline looming, these results only serve to underline the need for a Brexit outcome which preserves our trading relationship with our biggest single overseas market and which brings such a damaging period of uncertainty to an end.”
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On a more positive note, more businesses attempted to recruit permanent staff this quarter – 49.8% – up on Q3 last year 47%, and the 42% recorded in Q2.
However, the proportion of members facing price pressures from raw materials was up from 23.7% last quarter to 31.5%, although these figures were down on last year’s Q3 figure of 50.8%.
Meanwhile, competition in pricing, from online, local and from foreign firms was a concern, as were staff related issues including difficulty recruiting suitably skilled staff.
Within manufacturing, exchange rates were a concern for 68.8% of businesses compared to just 31.6% of service businesses.
The QES is produced in association with Durham University Business School and is carried out by ERS ltd on behalf of the Chamber.