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Businesses maintain strong start to year

Posted onPosted on 6th Jul
Businesses maintain strong start to year

The pace of economic growth in the East Midlands levelled out in the second quarter of 2015, according to the results of a new survey.

The East Midlands Chamber (Derbyshire, Nottinghamshire, Leicestershire) has released the results of its Quarterly Economic Survey (QES), for Q2 2015, which found that business growth remained robust between March and June, following a strong start to the year.

The Chamber tracks business performance across a range of key economic indicators – including sales and orders, staffing levels, price expectations, investment intentions and business confidence – to produce a quarterly ‘State of the Economy Index’.

After falling in two consecutive quarters at the end of 2014, the index increased from a year-ending 377 to 386 in Q1, bolstered by firms’ strengthening confidence in their profits and turnover in 2015. It fell back by three points, to 383, in Q2, suggesting that businesses are maintaining performance levels despite the uncertainties of May’s General Election, the UK’s relationship with the EU and the continued turbulence across the Eurozone as epitomised by the crisis in Greece.

In terms of activity, 49% of firms reported an increase in UK sales in Q2, which was broadly in line with the previous quarter, while 13% reported a decrease in domestic sales. Manufacturing and engineering firms were slightly weaker, with 40% seeing an increase against 10% reporting a decrease.

However, in contrast to UK data, there was a marked strengthening in quarter-on-quarter performance in overseas markets, with 40% reporting sales growth (up from 29% in Q1) and only 11% reporting a decrease (down from 20% in Q1).

The pace of workforce growth also showed no signs of letting up in Q2, with 35% of firms reporting an increase in employee numbers, against 10% reporting a decrease. Looking ahead, 35% plan to recruit in Q3.

Q2 saw a drop in overall confidence back to levels similar to Q4 2014, with 71% anticipating an increase in turnover (down from 76% in Q1) and 61% predicting an increase in profits (down from 64%). However, there was no real change in the number of firms expecting turnover or profitability to worsen, with the shift being towards more businesses anticipating no change on current levels.

Chris Hobson, the Chamber’s Director of Policy and External Affairs, said: “The QES gives us the best, most current insight into business experience and sentiment across Derbyshire, Nottinghamshire and Leicestershire and it is encouraging to see that businesses located here have continued to maintain the momentum the economy has built up over the past 12 months.

“As the national economy has strengthened, a key Government narrative has been the importance of growth characterised by balance and sustainability.

While for the country as a whole the service sector has played a key role in securing growth, on its own it doesn’t address the need for balance or, indeed, generate confidence for longevity.

“However, in the East Midlands, in addition to a strong service sector, growth has been characterised by thriving manufacturing and engineering and construction sectors which are going from strength-to-strength, along with a transport and logistics sector that is helping to facilitate the movement of all the goods and people that this growth is generating.

“Following a strong start to the year – where the region bucked the national trend in terms of growth ahead of the General Election – Q2 saw a slight slowdown. However, looking at the wider picture, there are no major signs to suggest this slowdown may mark the beginning of a downward trend.

“All of the indicators over recent quarters have strengthened the Chamber’s message to Government: if, as a country, we are serious about developing a balanced and sustainable economy, then the Midlands – and particularly the East Midlands – the UK’s ‘Engine for Growth’, holds the key to doing that.”