Confidence dips as post-Brexit economy slows
AS the first Quarterly Economic Survey since the UK voted to leave the European Union in the June 23 Referendum, these results are more observed than most.
Home sales and orders have fallen in the last three months with their balance figures dropping 39 points and 27 points respectively. The number of firms reporting an increase in home sales fell by 22% while the firms reporting an increase in home orders was 16% down on the previous quarter.
The export figures also disappointed, with the number of firms reporting an increase in sales in the last quarter falling by half, with 13% more firms reporting a constant level of sales.
Export orders held their ground in the last quarter, with 66% of firms, the same number as last quarter, reporting a consistent order book, although there was a 6% fall in the number of businesses seeing a rise in orders, with the balance figure dropping 13 points overall.
Cashflow in the last three months also dropped sharply, with the balance figure falling 26 points to –18.
Fewer companies were planning to invest in plant and machinery, with the balance figure dropping 19 points to –12, although the number of firms expecting their investment in new kit to remain constant only fell slightly, from 54% last time to 45% this quarter.
Companies planning to increase their training levels also fell back, dropping 9 points to 14, although 8% more firms expected their training levels to remain constant, however the balance figure dropped 14 points.
Looking ahead to the next 12 months turnover and profit expectations receded. The number of firms expecting their turnover to remain the same fell by almost half to 18 points, the lowest level seen since Quarter 3 of 2014, but those expecting turnover to increase fell by only 2%, however, the overall balance figure was down 16 points.
Similarly, the balance figure for profit expectations for the next 12 months also fell 24 points, reflecting a sharp drop in the number of firms expecting to see their profits improve, with 8% of respondents expecting their profitability to worsen in the next year.
Businesses working at full capacity were down by 23% with 77% reporting that they were working below their full capacity, an increase on the last quarter, but comparable to the first quarter of this year.
Many businesses are expecting their prices to increase in the next three months, double the number last quarter, possibly reflecting the drop in Sterling and the higher prices that will have to paid for imported goods.
The cost of raw materials was the biggest pressure on prices in the last quarter, rising to its highest level since Quarter 3 of 2014, although the low interest rates meant that only 9% of firms were concerned about finance and 23% were worried about pay settlements.
Perhaps unsurprisingly, exchange rates was the biggest external concern for firms, with 53% worried about currency costs, and tax fears also rose sharply to 25%, the highest level for a couple of years.
On the flip side,, fears over business rates, inflation and competition all fell slightly.
Commenting on the Quarter Three report, Dr Ian Kelly, the Chamber’s Chief Executive, said: “This quarter’s figures have shown that growth has slowed significantly over the past three months.
“The drop in domestic sales and orders demonstrates that some firms are taking stock of the current situation, although the exports sector has faired slightly better due to the drop in Sterling.
“It is encouraging to see that the recruitment sector is still performing steadily with some firms in our region continuing to recruit staff, while other businesses are ready with their training plans, although investment in new equipment is reducing slightly.
“With the Government having now confirmed that the official process to leave the EU will begin early next year, businesses are taking a closer look at their exposure to the potential risks and this may be reflected in the latest quarter’s figures.
“We urge the Government to use the Autumn Statement to support the Northern Powerhouse agenda with some key infrastructure projects which will help boost business confidence and create and secure more jobs.
“Rail commitments on electrification, a direct south bank service to London, improved Hull to Liverpool and Manchester Airport links and more ‘parkway’ station facilities at Howden, Goole and Selby would all boost confidence significantly in the local area”.
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