Confidence returns for East Midlands businesses as stage two of lockdown reopening roadmap begins – Finance-Base
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Confidence returns for East Midlands businesses as stage two of lockdown reopening roadmap begins

Confidence among the region’s businesses reaches its highest since prior to the last general election because the partial reopening of the economy begins, based on new data compiled by East Midlands Chamber.

The latest Quarterly Economic Survey (QES) for Q1 2021 showed a net 53% of businesses expect their turnover to enhance over the coming year, having a third (net 35%) anticipating a boost in profits.

It was the most comprehensive QES yet – with responses from the record 540 businesses in Derbyshire, Leicestershire and Nottinghamshire between 15 February and eight March – and is published today (12 April) as stage two of the Government’s roadmap out of lockdown commences using the reopening of hospitality, non-essential retail and personal care businesses.

Chris Hobson, director of policy and external affairs at the Chamber, said: “The survey data suggests businesses are ready to grow and offer the wider economic recovery the country now needs.

“Sentiment among businesses is as strong as it has been since summer 2021, based on the successful vaccine rollout programme, a guide for reopening the economy along with a broadly positive response to the spring budget.

“As stage two of the roadmap begins today, this research highlights that businesses are ready to make use of the opportunities this will bring once we edge towards a fully open and functioning economy, anchored by an anticipated pent-up consumer demand.”

East Midlands businesses prepared to invest again

Investment intentions are also on the up, with a net 7% and 15%, respectively, planning increased purchase of people and equipment as they look to repoint their business to achieve a post-pandemic world.

Recruitment expectations are also strong – 30% expect their workforce to develop, with the majority of these posts full time and permanent, with only half the normal commission (7%) expecting reductions in workforce within the next quarter.

Despite these positive signs, cashflow – which worsened for almost all firms in each quarter of 2021 – remains a problem for a significant number of businesses, having a net 14% reporting this to become down once again in Q1.

Brexit impact gone through by East Midlands overseas traders

And while UK activity is recovering well, overseas activity is constantly on the trail behind. A third (33%) saw overseas sales worsen over the quarter – only 24% reported an improvement – with four in 10 witnessing a drop in EU activity.

“Although this was partly offset by stronger performance in other markets – particularly in North America and Asia – the EU continues to be East Midlands’ most significant trading partner,” said Chris.

“So the extent to which businesses are able to continue moving up the learning curve for the new way of trading – or perhaps in fact whether some of the troubles are structural and irreversible – is going to be of great importance to future prospects.”

How the economy handles price pressures will also be significant, he believes.

Four in 10 businesses expect the prices to increase over the coming months, rising to six in 10 when looking solely at manufacturers – largely driven with a growth in raw material prices, that have been reported by 85% of manufacturers.

Chris added: “Others are still seeing increased costs associated with the continued friction experienced following the end of the UK’s transition period with the EU.

“To what extent these pressures can be incorporated into refined business models, versus just how much is passed on to customers, will be of great interest to those involved in setting monetary policy.”

East Midlands Chamber survey offers reason for optimism

The Chamber models the survey data across a variety of key performance indicators, including sales and orders, recruitment, cashflow, investment intentions and confidence, to produce a quarterly State of the Economy Index, which enables it to compare local business performance quarter-by-quarter.

In Q2 2021, the score fell to -411, its lowest level on record and the very first time it had fallen into negative territory. After returning to positive territory in Q3 2021, it's now reached a score of +150, its highest level since before the pandemic.

Although individual experiences will be mixed, particularly in the worst-affected sectors, Chris said the survey results provided “much cause for optimism.”

He added: “Over the past Twelve months, many businesses have looked at their operating models, markets, processes and products, and have sought to position themselves to succeed as restrictions are lifted.

“New ways of working initially forced upon businesses through the pandemic have brought forward some opportunities for efficiencies and greater possibilities to collaborate.

“The ultimate success of this activity will be put the test over the coming months as the economy reopens. This set of results suggests that businesses are up for the challenge.”

To read the full QES Q1 2021 report, click here.

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