Fri, February 17th, 2017
Business confidence up as we move into 2017
So far this year, we have seen Donald Trump elected President of the United States, Britain begin to prepare our exit from Europe and a startling slowdown in China’s economy continues to raise concerns – and it’s only February!
We can say with some certainty that 2017 looks, well, uncertain.
Despite this though, business confidence is up – that is according to the results of the latest Quarterly Economic Survey.
The Quarterly Economic Survey is the longest running, largest and most reliable business confidence indicator in the UK.
Overall results show a confident outlook for both the manufacturing and services industries going forward, with +43% of manufacturers and +35% of services confident of growth in turnover, up significantly on quarter three.
Locally, the survey reveals a marked increase in domestic demand for the services sector, who exceeded the national average in domestic sales.
It isn’t all rosy of course, the financial market is set to be rocked for some time yet and there has been a distinct decline in export sales for both industries on Q2 and Q3 this year, which you might say is to be expected.
But all in all, just a little way into 2017 businesses appear confident, resilient and continuing to trade through the muddy months ahead.
We launch the next Quarterly Economic Survey on Monday, 20th February. We hope you will take part.
Overall results for 2016 show modest growth within the Manufacturing sector and a minor dip within the Services sector, although as of the start of 2017 both sectors are seemingly back towards a state of growth.
The dip across both sectors within 2016 was to be expected, as one of the key agendas within the media pre-Brexit was that a vote to leave on June 23rd would have large effects on the levels of uncertainty within the economic environment, thus creating a ripple effect on domestic and international sales. This effect is evident when QES domestic sales are compared to national GDP growth within the UK post-Brexit.
Nationally the Service Sector in 2016 when comparing the final key balances to the final key balances of 2015 the services sector dipped by over half in domestic sales falling from a final balance in 2015 of +32% down to +15% at the end of 2016.
This was also matched in export sales which dipped from +15% in 2015 to a final figure of +8% for the final 2 quarters of 2016. This figure is the lowest recorded since 2011; contrary to this the outlook is still promising for the service sector, as trends suggest that despite a short sharp downturn in the immediate aftermath of the Brexit vote, the sector has shrugged off the referendum result and is in a steady state of growth for the moment.
When comparing the key balances within manufacturing, the rates increased from the end of 2015’s results; domestic sales had a marginal improvement overall from +13% at the end of 2015, up to +15% at the end of 2016. These improved rates could suggest that the short term effects of Brexit were expected to have an impact on the manufacturing sector which led to a faster recovery rate.
However, the manufacturing sector was actually in a state of declining growth throughout 2015, therefore 2016’s results could be a sign that the decline has reached a point of stagnation.
Manufacturing export sales have also had a positive year, finishing at a low +1% in the final quarter of 2015 rising up to +16% in quarter 4 of 2016. This may not be a sign of things to come, as these constant increases will be dependent on future export and import regulations around trading within the European Economic Area post Brexit.
Locally it is a mixed picture with the economy performing well against the national average and in general where decline has occurred it has been at a lower rate than nationally.
The region’s services employment growth balance broadly reflected the national trend of dropping by 7 points (+16%, down from +23% at the end of 2015) but manufacturing employment growth bucked the national trend by increasing the balance by 33 points (+542 increased from +19% at the end of 2015), this was compared to a national average increase of 3 points (+23% increased from +20% at the end of 2015), possibly reflecting the large level of investment into the future of manufacturing within Merseyside. `
Employment expectations in manufacturing locally continue to outperform the national average as in 2015. A forecast of +20% over the next 3 months represents a decrease of 7 points from in 2015 but the signs are still positive. In the Service sector employment expectations for the next 3 months has halved from +30% in 2015 to 15%. Although manufacturing continues to outperform the national level the service sector has dropped below the national average.
Regionally we saw a 13 point drop in the investment of plant and machinery compared to 2015 which was significantly more than the national figure however the overall level of investment finished at +24% which was still greater than the national level of +19%. Locally the service sector continued to invest in training at a greater level than the national average although down slightly on the 2015 figure of +25% compared to +24% in 2016.
Intentions to increase prices rose in both major sectors, firstly within manufacturing by double from +16% in 2015 up to +32% at the end of 2016. In services the percent rose by only 2% up to +22% from +20% at the end of 2015. Although both major sectors represented a significant rise they were both well below the national average of (+52%, up from +19% in 2015) for manufacturing and +30% (up nine points from +21% at the end of 2015) for the service sector, a clear prediction by businesses of the potential effects of Brexit on their markets.
We are now seeking your responses to this quarter’s Economic Survey which can be completed here.