East Midlands Chamber’s Quarterly Economic Survey for the first quarter of 2023 closed on March 9, receiving 347 responses. Chris Hobson, the chamber’s director of policy and insight, summarises the key findings – with indicators finally beginning to point in the right direction:
“Following an uncertain end to the year, the results from our Q1 Quarterly Economic Survey demonstrate how businesses have begun 2023 by displaying signs of growth and an increasing confidence for the year ahead.
Sales are steadily growing, cashflow is improving and price pressures continue their gradual drop-off.
The relative certainty in the policy environment, at least compared to the constant flip-flopping that came before, is now leading to a significant upturn in business confidence and, therefore, investment intentions, which are crucial if we are to steer the economy back on track and achieve consistent growth.
While the region’s unemployment rate has been at historically low levels in recent times, our research had shown a decline in employers recruiting – mainly due to an extremely tight labour market driven by escalating numbers of economically inactive people since the dawn of the pandemic combined with longstanding skills shortages.
So it’s pleasing to see a positive swing as more businesses seek to recruit, generating jobs and prosperity in their local areas.
Digging deeper into the data, there was a small growth in quarter-on-quarter domestic sales.
In advanced orders, there was a jump from 23% of businesses witnessing an increase at the end of 2022 to 31% in this quarter, a pattern that was mirrored for overseas markets.
With regards to labour, 26% increased their workforce in the quarter, with 35% anticipating an increase over the coming three months. Some 59% attempted to recruit over the past quarter – up from 55% at the end of 2022 but still below the level of 12 months ago.
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Encouragingly, of those trying to recruit, there was a drop in people reporting difficulties in finding the right staff – down to 73% from the eight in 10 businesses reporting struggles in the last survey.
In other indicators, cashflow performance also improved from the previous quarter, although there are still significantly more businesses reporting a decline in cashflow (35%) as opposed to an increase (22%).
The sentiment-type indicators were all positive quarter-on-quarter, although some remain marginal. While 18% were planning to increase their investment in machinery and equipment, 17% anticipated a decrease; 23% were intending to up their investment in training, compared to 8% decreasing this.
Price pressures continue their gradual drop-off, with 54% anticipating an increase in their prices, down from 58% the previous quarter and 60% the quarter before that. Of those factors driving this pressure, labour costs were the outright largest factor, followed by utilities, with raw materials dropping back and fuel further behind.
For overall confidence, there was a sharp growth in expectations for turnover – 56% expect this to increase, up from 48% last quarter – and profitability, with 38% expecting an increase, up from 34%.
For both areas, there was a corresponding drop in those expecting to see a decline.
While all this paints a far healthier picture than at the end of 2022, caution is required as many of these indicators are still down from where we were a year ago.
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We are moving slowly in the right direction but Government support is still required to “get the basics right” by knocking down the everyday barriers to doing business, and then backing our firms to grow the economy by focusing on the ‘four Is’ – investment, innovation, infrastructure and international trade – all of which is laid out in our Business Manifesto for Growth."
To read the full QES report, visit www.emc-dnl.co.uk/services/have-your-say/qes-reports.