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QES Q2 2024 - Home orders and exports improve, but gloomy outlook for turnover and profit

THE construction industry is widely seen as a bellwether of the UK economy, and with a new Government and Chancellor determined to get Britain building again by overhauling the planning system and bringing back housing targets, perhaps the economy will grab onto the coat tails of the building industry to boost our economic fortunes.

Judging by the latest set of figures from the Chamber’s Quarter Two Economic Survey results, the fieldwork for which was conducted before the General Election on July 4th, the Humber economy could certainly do with a boost!

Despite a slight improvement in domestic and international business, firms retained a downbeat trading outlook for the coming months, with turnover and profit expectations both dropping significantly.

Only 27 per cent of firms thought their turnover would improve in the coming months, with 40 per cent expecting it to worsen, which saw the balance figure drop by 27 points to –13 this quarter.

The balance figure for Profit Expectations tumbled by a similar figure, dropping 23 points to –37, that sector’s lowest figure since Quarter 4 of 2022.

Four per cent more firms reported that they were working at fully capacity this quarter, while fewer firms thought they would have to increase their prices, down nine points on the last quarter’s results, to a balance figure of 50.

Cashflow improved slightly in the previous three months up by two points to –17, but still firmly in negative territory.

There was slightly better news with Home Sales and Home Orders, with both sectors showing an improvement on the first quarter of the year.

The balance figure for Home Sales was up 8 points to –28, while for Home Orders it improved by four points to –38.

The export sector did better in Quarter Two also, with Export Sales showing an increase of 12 points on the balance figure with seven per cent more firms reporting an increase in sales, while Export Orders didn’t fare quite so well with the balance figure dropping by three points to –34, which is only marginally down on the Quarter 1 figure.

Employment improved slightly, the balance figure rising from zero in Q1 to 22 this time around, and there was good news for future employment too, with the balance figure rising by five points to 14.

The number of firms trying to fill full time positions was down by 27 points, to 64, but the number of permanent vacancies was up by 21 points to 57. Temporary jobs vacancies were also up by 11 points to 29, while part-time positions were also up slightly, with a two point increase to 29.

Yet, despite the largely better figures, more firms were reporting recruitment difficulties, up on the previous quarter from 77 to 86 per cent.

The biggest external concerns for firms in Quarter 2 were again business rates, competition and tax, while interest rates, while also up, were less of an issue this time round.

Concerns over raw material costs and pay settlements were down this quarter, but finance costs were still a worry.

The Chamber’s External Affairs Director, David Hooper, said: “While we have seen some improvement in some sectors like domestic sales and orders and exports, businesses in the Humber are still clearly cautious about the future.

“Turnover and profit expectations for the coming months are well down, which is also reflected in the investment plans for the future with things like new machinery, plant or training.

“While inflation has come down which has eased concerns over raw materials and finance  costs,  businesses are concerned about business rates and tax - perhaps a reflection on the uncertainty of a potential change of Government in the run-up to the General Election.

“Employment plans were another bright spot for firms looking ahead, but much will depend on how the new Government’s policies shape up and whether they instil much-needed confidence and stability into directors’ thinking.”

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