Concerns about the strength of the economy are rising among East Midlands businesses – despite the boost that came as big businesses opened following lockdown.
Worker shortages, notably in the HGV sector and warehousing, plus price pressures along with the new health and social care tax that increases the burden for employers and employees, threaten to dampen the recovery according to the latest East Midlands Chamber business survey.
Its latest quarterly survey of companies suggests managers have seen improvements in most areas including sales, cashflow, employment and investment intentions.
But firms also reported issues with price pressures and access to the right skills to fill job vacancies.
More than 400 businesses across Derbyshire, Leicestershire and Nottinghamshire took part in the survey, which showed:
- Around a third of businesses had seen a rise in UK sales and advanced orders
- Overseas business activity lagged behind domestic activity, but remained positive, although anticipated sales going forward had dropped
- A quarter of businesses grew staff numbers in the quarter and more than a third expect to grow over the next three months
- After five quarters of negative cashflow for most firms, things were now on the up, with around a quarter hoping to invest in training, machinery and equipment
- More than half of business managers were confident turnover will improve over the coming quarter, while a third believe profitability will increase
- However, almost half said they were concerned about future price increases
- Around two in every three managers that had been looking for new staff said they had faced problems finding the right people
East Midlands Chamber director of policy and external affairs Chris Hobson said: “The top-level results show a mixed picture that hides a number of variables at play in the East Midlands economy.
“Cashflow continues to improve for more businesses than not, training investment intentions are positive and overall confidence in future turnover continues its upward trajectory.
“As the economy continues its reopening after a successful vaccine rollout, the pent-up demand that characterised much of the summer remains a positive factor.
“But there are also a few areas of concern. Price pressures continue to come from increased raw material costs, pay settlements and, increasingly, energy costs.
“This has knock-on effects, with investment in machinery and equipment growth – an important ingredient in fuelling a recovery – falling back slightly on the previous quarter.
“Performance in overseas markets remains volatile and, while turnover confidence has grown from Q2, confidence in increased profitability has fallen back, a result of squeezed margins.
“Recruitment is also a growing problem, with over seven in 10 struggling to fill vacancies across all skills levels.
“There’s still much that we don’t yet fully understand.
“There are many factors at play in shaping current challenges for businesses – the impact of policy responses to the pandemic on the recovery, changes in individual approaches to work expectations, structural changes to supply chain operations and immigration rules as a result of Brexit, and global shortages as the whole world looks to bounce back, to name but a few.
“The balance of influence of these different factors, some which are temporary and others that may be longer term, is still being unpicked.
“As we learn more over the coming months, we’ll have a better idea of whether they are flies in the ointment or something more fundamental.
“There is also trepidation ahead of the 27 October Autumn Statement, where we’ll find out more about how Government plans to tackle supporting the economy over the next period and the balance between tax and spend.”
