QES QS Sees Economy Gathering Pace

The latest quarterly economic survey from Liverpool Chamber of Commerce suggests that the recovery is gathering pace - particularly in the manufacturing sector.

The latest quarter is the first since Q2 of 2008 where there are more businesses in both the manufacturing and service sectors reporting an improvement in sales than a reduction. However the improvement is more marked among manufacturing businesses - particularly those with overseas sales where the number of business reporting growing sales is more than double the number whose overseas sales have reduced.

There is also evidence of a bounce in manufacturing recruitment with a third of the businesses surveyed reporting an increase in their workforce and only 8% expecting to reduce headcount in the next quarter compared to 24% expecting growth in staffing over the same period. This is a significant turnaround on the first quarter of 2010 when 14% of business were planning to cut staff and only 12% were expecting growth.

RS Clare, Liverpool-based producer of oils and lubricants, has maintained strong growth since 2006 and is now focusing on developing exports to China, based on the expansion of the Chinese rail network. Chairman, Ian Meadows, commented: "Exports globally have helped us to achieve excellent profitability. Exports have doubled in the last two years and now account for nearly half our sales."

While RS Clare enjoy healthy cashflow, it remains a major problem for many - 38% of manufacturing businesses report worsening cashflow which suggests that they are struggling to provide the working capital required for growth.

There is also some evidence of pressure on prices beginning to build up, for example, 77% of manufacturing businesses are under pressure from rising raw material prices. However with 81% of manufacturers and 72% of service businesses reporting that they are operating below capacity it is likely that they will continue to have to absorb much of the price pressure for some time to come.

Brian McCann of Vanguard Corporate Finance and Chair of the Chamber's Finance Committee commented " The majority of indicators do point towards the recovery gaining hold - particularly in the manufacturing sector. Some of this recovery will be driven by a rebuilding of stock in most sectors which could still come to an end once more normal levels are reached. For this reason we will be watching carefully for confirmation that the recovery continues over the remainder of this year. However, these are encouraging results.

The pressure on cash remains intense for many businesses and it is vital that initiatives such as the Enterprise Finance Guarantee and the proposed Regional Growth Fund get cash into the system - and particularly to SMEs very quickly now."

Liverpool Chamber Chief Executive, Jack Stopforth said: "The figures have been improving since their low point in the first quarter of 2009. However we are very concerned that the nascent recovery could be damaged by the blows which have been dealt in recent weeks in terms of business support and spending cuts."