QES: Stagnating Economy As Businesses Struggle to Return to Pre-Recession Turnover Levels
The latest Quarterly Economic Survey (QES) from the Leeds, York and North Yorkshire Chamber of Commerce shows a 'subdued' economy, with business confidence falling and manufacturing-export growth stumbling as a result of global challenges.
The survey, which is conducted in partnership with Leeds University Business School, also shows that a significant number of businesses are struggling to overcome the challenges of the recession, as 43% report that their current turnover is either slightly lower or significantly lower than it was at the start of the recession in the second quarter of 2008. This is compared to 19% of businesses who say that their turnover is at the same level as Q2 2008 and 38% at either slightly or significantly higher levels. The survey also reveals that businesses with lower turnover than Q2 2008 are the least confident about their future turnover and profitability.
Although there are some pockets of growth in the economy, with around a third of businesses reporting an increase in their UK sales and orders, overall demand remains weak and has hit business confidence with turnover expectations falling in both the service and manufacturing sector by 8% and 25% on the previous quarter.
Growth in manufacturing exports appears to be slowing as the sector's overseas sales fell by 18% on the previous quarter. However, 50% still report an increase in international sales showing that there are still opportunities for exporting businesses. Exporting appears to have offered some protection from the economic downturn, with two-third of businesses that sell overseas saying their current turnover is at or above 2008 levels, compared to 53% of non-exporters
Mark Goldstone, head of business representation and policy at the Chamber, says:
"This quarter's survey paints a sombre picture of the local economy and business performance. There appears to be a tribe of 'lost businesses' for whom the recession is not yet over as they struggle to return to their pre-recession turnover levels. There is evidence of some demand within certain markets and a number of businesses are experiencing increased sales; however, on the whole the economy remains broadly stagnant due to a toxic combination of weak demand and rising inflation.
"Businesses crave stability in order to plan and invest; however, the turbulence in the global markets means that businesses can't really be sure what the future has in store and as a result confidence is on the decline. Whilst the Chamber supports the Government's plans to reduce the deficit, we also need ministers to provide a valid explanation of where the growth is going to come from. International markets do still present opportunities for exporting businesses; however, the slowdown in overseas growth suggests that it might not be the economic panacea that we all hoped for and policy makers need to look at ways to boost demand in the domestic market. The Chamber is confident that ambitious and pro-active businesses will drive the recovery; however, I suspect that we won't see any real growth in the UK economy for the rest of this year and some businesses are going to have to be prepared to take risks and diversify their current offering in order to grow."
Professor Andrew Robinson of Leeds University Business School, says:
"'The latest findings on the state of the regional economy point to increasingly subdued economic conditions. A significant proportion of firms are operating at or below their 2008 level of sales and are increasingly being squeezed by increasing costs and stagnant demand.
"The survey points to a certain amount of retrenchment by local firms with many of them adopting a 'wait and see' strategy until the economic picture becomes clearer. Of particular concern is the noticeable fall in business confidence compared to previous periods with many firms expressing concerns about inflation and competition. There is also evidence that export led growth is stalling as manufacturing firms experience flatter overseas sales.
"The picture is not all negative, as some firms in export markets are bucking this trend and have seen increased sales and orders. Overall, though, there seems to have been a marked downward trend in the experiences and expectations of many firms over the last quarter."