Government must act to provide stability for businesses

Fri, July 21st, 2017

Our latest Quarterly Economic Survey for the Liverpool city region

Today we publish our latest Quarterly Economic Survey for the Liverpool city region and, amid the uncertainty created by Brexit and skills shortages, we are urging the Government to create more stability to all our local businesses.

Our city region assessment for April, May and June is published alongside the national QES published by the British Chambers of Commerce.

The QES is Britain's largest and most authoritative private business survey, measuring economic performance and sentiment since 1990.

Across the UK

The national picture shows the services sector, a key driver of UK economic growth, saw indicators of domestic activity, employment and investment continue to weaken slightly in the second quarter.

Consumer-facing industries such as retail outlets and hotels reported weaker growth rates compared to B2B businesses in the quarter.

The survey shows export sales and orders in the manufacturing sector remain solid and well above historical averages.

While export activity increased marginally in the services sector, it remains below historic levels.

The balance of firms expecting prices to rise has decreased across both sectors, but remains close to the historically high levels seen in the wake of the EU referendum.

The percentage of manufacturers reporting raw materials as the key driver of increased prices remains near record highs.

City region data

Across the Liverpool city region, businesses demonstrated a relatively positive transactional performance in the second quarter for sales and orders across both manufacturing and service-based industries.

However, the positivity was offset by ongoing concerns around the trade prospects in the coming 12 months as well as workforce and financial management challenges amid current trading circumstances.

The balance of firms reporting an increase in domestic sales and orders within the services sector grew substantially during the quarter, up to +33% for sales and +31% for orders (up +14% and +18% from the previous quarter).

While manufacturing domestic sales and orders reported nominal growth, overseas sales jumped to +53% (up 36%), representing the third highest percentage balance in the past 10 years and the best quarterly return since the fourth quarter of 2014.

Overseas order increases were reported by a balance of +42% (up 15%) of manufacturing companies.

Lower investment

Worryingly for the prospects of business growth, respondents in the quarter demonstrated little enthusiasm to invest in equipment or training over the forthcoming period.

Equipment investment intentions in both services and manufacturing business responses dropped 10% from the previous quarter, whilst a drop of 27% manufacturing firms reported an intention to invest in training.

Exchange rates were the most common cause for concern from participating businesses this quarter, with a balance of +65% firms in the manufacturing sector stating that they were reasonably concerned by the impact of altering exchange rates - an increase of 40% on the previous quarter responses.

Prospects uncertain

These survey responses demonstrate that whilst local businesses are maintaining a degree of success and growth, the underlying uncertainty of Brexit, inflation and skills shortages are inhibiting business prospects over the coming months.

There is no doubt that the UK's political and economic instability caused by a multitude of factors is an impediment to longer-term confidence.

Substantial structural issues permeate the UK economy - a dependency upon consumer spending and a skills system that inhibits organisational wealth creation and innovation.

The UK government must act quickly to ensure stability and certainty for businesses, particularly through swift action to enable the economic pinch points to be mitigated.

Our local government structures, including the Combined Authority, local authorities and local enterprise partnership have a responsibility to maximise the opportunities engendered by devolution.

They need to ensure that an objective to make Liverpool city region the best place in the UK to start or locate a business is at the forefront of local economic strategy.

You can see the Liverpool City Region QES summary for Q2 here.

A summary of the national picture is available here.

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