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QES Q3 2023 - Inflation bites as Humber firms feel pressure, quarterly survey reveals

MOST of the key economic indicators took a tumble in Quarter 3 according to the latest Quarterly Economic Survey research conducted by the Hull & Humber Chamber of Commerce.

The fieldwork for the Quarter 3 survey was conducted before the Bank of England decided to hold interest rates in a split decision by the Monetary Policy Committee, with the Governor of the Bank, Andrew Bailey, who met Chamber business leaders in Hull last year, reported to have swung the decision with his casting vote.

The cautious tone struck by Humber businesses in Quarter 2, followed by a further interest rate rise, has had a visible impact on business confidence among Humber firms.

In the last three months, Home Sales dropped 24 points to a balance figure of –11, while Home Orders fared slightly better, dropping 16 points to a balance figure of –13

Export Sales also took a hit, dropping a further 29 points into negative territory to a balance figure of –60, while Export Orders fared slightly better, dropping four points to a balance figure of –58.

Employment in the last three months also dropped slightly, down five points to 11, while, compared to Quarter 2, Expected Employment in the next three months dropped by half to a balance figure of 17.

In the last three months, 59% of firms said they had tried to recruit staff, with most looking to fill full-time permanent positions, but businesses were also trying to recruit for part-time and temporary roles as well.

Of those firms trying to recruit staff, 84% highlighted that they experienced difficulties. Skilled manual roles proved to be the most difficult to recruit for, while management positions were slightly easier to fill this time, with 19% fewer firms reporting difficulties. Clerical and unskilled and semi-skilled jobs were all more difficult to fill in Q3.

Firms reported cashflow in the last three months was more challengine, with nine per cent more firms reporting concerns, taking the balance figure down to –16 from –7 last quarter.

However, Turnover expectations for the next 12 months was more positive, with 13 per cent more firms saying they expected to see an improvement, taking the balance figure up to 16 points.

Profit expectations also improved slightly, with the balance figure rising by three points but remaining in negative territory at –7.

Only 33 per cent of firms reported that they were working at full capacity this quarter.

In the next three months, prices were expected to rise, according to Humber business, with the biggest pressures on prices being finance costs and other overheads, while inflation, competition and tax were the biggest external concerns in this survey.

The Chamber’s External Affairs Director, David Hooper, said: “The more positive sentiment we saw in the first quarter of the year seems to have evaporated in Quarter 3 as the economic conditions bite into business confidence.

“The clear note of caution we saw in Quarter 2 has now translated into falling orders, tighter cashflow, rising prices and higher finance costs.

“Businesses in the Humber are increasingly concerned about inflation, finance and raw material costs which all put pressure on businesses facing fewer orders and increased competition, as highlighted by 43% of firms this quarter, compared to 28% of firms in the previous six months.

“The Bank of England told Humber business leaders at our recent Chamber Council meeting that it hoped inflation had now peaked as the Bank paused the successive increases in the interest rates we’ve seen in recent months.

“Businesses around the Humber will be hoping that continues to be the case as inflation gradually recedes, but getting to the Government’s 2% target means there is still a long way to go and possibly more pain to come.”

 Click here to download the full report.

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