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QES Q4 2023 - Businesses are still facing economic headwinds as inflation takes tumble

WITH the Bank of England interest rate having been held at 5.25% three times by the Monetary Policy Committee, some lenders stole a march on the Bank by cutting their own lending rates.

Halifax led the charge in early January, lopping up to one percentage point off some of its deals, with HSBC quickly following suit in cutting its rates to customers.

However, the economic outlook in the Humber wasn’t quite as rosy as the latest set of figures from the Quarter 4 research conducted by the Hull & Humber Chamber of Commerce for its Quarterly Economic Survey showed a drop in most sectors.

The fieldwork for the survey which was conducted in November revealed a sizeable drop in Home Sales and Home Orders, with the balance figure for Home Sales dropping 15 points to –26, while Home Orders took an even bigger hit, dropping 24 points to –37.

Exports recovered slightly, with Home Orders climbing 10 points but remaining well in negative territory with a balance figure of –50. Export Orders only improved by two percentage points, climbing to –56 from –58 in Quarter 3.

With Christmas on the horizon, the traditional boom was slow to materialise with the employment figures showing little sign of a festive boost, with the number of firms expecting to recruit new staff down by 10 points to 7. Employment in the last three months was also down by 14 points to a balance figure of –3.

The number of firms reporting pressure on prices was also on the rise in Quarter 3, with 13 percent more firms saying they were expecting to see their prices rise in the coming months.

The key pressure on prices was pay settlements, up 13 points to 74, and raw material costs, which rose by eight points to 50. Finance wasn’t far behind with seven per cent more firms saying they were concerned about finance costs, and Other Overheads accounted for a further two per cent rise.

The biggest external concern reported this quarter was competition, as businesses kept as fine an edge as possible on their products and services, with eight per cent more firms saying they expected an increase in activity from their rivals.

Interest rates and Exchange rates were also causing greater concern, with the former up two points and the latter up five points.

With the interest rates being held and a larger than expected drop in inflation those pressures dropped back slightly, as did concerns over tax and business rates.

Turnover and Profit expectations were also in the doldrums, with the Quarter 4 figure dropping 10 points to a balance figure of 6, while Profit expectations dropped a further four points into negative territory at –11.

Cashflow in the past three months also fell, with the balance figure dropping eight points to –24.

The Chamber’s External Affairs Director, David Hooper, said: “The last quarter of the year left businesses with much to think about for 2024 as most sectors took a fall as confidence failed to return, despite inflation appearing to level out and begin to drop.

“Business confidence was low among Humber businesses, with many expecting turnover and profit to fall in the early part of the New Year.

“Only 30 per cent of firms said they were working at full capacity, with many expecting to see their prices increase in response to higher raw material costs and pay claims by staff, with the drop in inflation still to feed into the local economy.

“Recruitment was also down, as was training and investment, so businesses are still very much consolidating or treading water to see what a New Year and potential change of Government will bring in 2024.”

Click here to download the full report.

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