Hull and Humber Chamber of Commerce

HOPES that the Bank of England’s Monetary Policy Committee would make a further cut to interest rates in June and offer some relief to businesses came to nothing as inflation and world events spooked the markets.

At a recent Chamber Council meeting, the Bank’s Agent for Yorkshire and the Humber told members the future direction of travel was difficult to predict with any accuracy due to the potential effect of external factors, like the on-off US tariffs, or the crisis in the Middle East which affects oil prices.

However Humber firms are showing little confidence in the current market, with cashflow taking a hit in the last three months with firms making a corresponding cut in investment and training, although there does seem to be a little more positivity about the prospects for the next 12 months, even if firms are not looking to recruit.

The Quarter 2 results reflect a cautious mood of shoring up of businesses and cutting costs to weather the current storm of higher wage and National Insurance costs, with hopes of better trading conditions in the next year or so if things begin to improve.

Home Sales and Orders both showed slight improvements in the last quarter, with Home Sales up by 12 points to a balance figure of –25, while home orders showed a much smaller increase of just 2 points.

Export Sales improved by 1 point, although the balance figure remained firmly in negative territory at -37, while Export Orders improved slightly by one point to –1.

Employment figures for the last three months fell by 27 points further into negative territory, but the outlook for the next three months didn’t show quite as big a drop.

Only 50 per cent of firms said they had tried to recruit staff in the last three months, with a fairly event split between temporary and permanent jobs, with this quarter’s results showing a rise by 13 points in permanent jobs and a drop by 24 points in temporary positions.

Management jobs proved the most difficult to fill in Quarter 2 with unskilled or semi-skilled being the least challenging.

Firms reported a drop in cashflow in the last three months with the balance figure dropping by 18 points to –33.

A tighter market was reflected in firms’ investment plans, with 22% fewer firms saying they were looking to invest in new plant or machinery, and 4% fewer firms planning to invest in training of their employees.

Only 33 per cent of firms said they were working to full capacity in this quarter, but the outlook for the next 12 months does seem to be bring a little more optimism, with turnover expectations increasing by 11 points and profit expectations rising by 14 points to –25.

There was a marked drop in the number of firms who are planning to increase their prices in the next three months.

The biggest pressures on prices in the next three months were raw materials and other overheads.

Competition was the biggest external concern this quarter, closely followed by inflation and tax, which both increased.

Chamber Chief Executive, Dr Ian Kelly, commented: “Our survey results for the second quarter of 2025 show that businesses have been hunkering down to weather the storm of cost increases which came in the form of National Insurance tax hikes and the rise in the minimum wage rate.

“There is though, a slight air of optimism, in that the outlook for the next 12 months seems to be a bit rosier, with profit expectations increasing, turnover on the up and with fewer firms planning to increase their prices, but fears around competition persist.

“Much will depend on how the economy fares in the coming months, whether there are any more geo-political shocks around the world, what inflation does, and whether or not the Bank of England decides to cut interest rates again—and ultimately what the Chancellor does in the next Budget after the welfare reforms which were supposed to save £5-billion were greatly watered down to get the Bill through the Commons in the face of a huge revolt from the Government’s own MPs.”

The Director General of the British Chambers of Commerce, Shevaun Haviland, said: “The rising cost of doing businesses means confidence levels remain at their lowest levels since 2022.

“However, it’s encouraging to see a drop in the number of firms planning to raise prices. Any signs of inflationary pressures easing is good news for business and the wider economy. But prices remain volatile.

“The Prime Minister acknowledged at the BCC’s Global Annual Conference recently that business has been asked to shoulder a huge tax burden. We now need the Government to rule out any further business taxes in this year’s Budget.

“Businesses have welcomed the series of long-term strategies from Government in recent weeks, all designed to drive forward economic growth. Our research shows businesses are stuck in a rut and more needs to be done at pace by ministers to turbocharge the economy and boost business confidence.

“Businesses are clear – they want their costs reduced, regulation reformed, and skills barriers removed. Action by policymakers now, will help businesses out of this confidence slump and give firms the tools to boost growth.”

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