Lincolnshire struggling to enter the recovery phase? - Lincolnshire Chamber of Commerce and Industry, UK

Results from the Quarter 4 2009 British Chambers of Commerce Economic Survey (QES), Lincolnshire Area, show that Lincolnshire is on the brink of leaving the recession, but is struggling to show any conclusive evidence of significant growth. Over 400 Lincolnshire businesses responded this quarter, and the results show that there have been improvements in a lot of areas. There has been a particular boost in the manufacturing sector, but progress is generally weaker than Q3.

Key points from the service sector in the Lincolnshire Q4 QES:

·         A decrease in both domestic and overseas sales and orders.

·         Workforces have remained constant, and are expected to remain constant over the next quarter with few attempts being made to recruit staff.

·         Cashflows have generally remained the same, but some businesses have noted an improvement.

·         Investment in training and equipment has remained the same.

·         Business confidence has increased, with around 40% of businesses asked saying that turnover and profitability will remain the same, and 30% feeling it will improve over the next 12 months.

·         Approximately 50% of the businesses are operating below full capacity than last quarter.

·         Prices are expected to rise over the next quarter, with pressures to do this stemming from raw material prices, finance costs and other overheads.

·         Business rates are more of a concern to servicing businesses than in last quarter.

·         Space for expansion and foreign investments have increased in importance to future growth in Lincolnshire this quarter.

Key points from the manufacturing sector in the Lincolnshire Q4 QES:

·           Domestic and overseas sales and orders have remained constant.

·           Workforces have remained constant, with some attempt to recruit staff and difficulties in finding un and semi-skilled staff.

·           Cashflows have remained the same.

·           Investment in both training and plant/machinery/equipment has remained constant.

·           Business confidence has generally increased, with businesses believing that turnover will remain the same, and profitability will improve over the next 12 months.

·           64% of businesses reported to be operating below full capacity.

·           Prices are expected to remain the same over the next quarter, but pressures to raise prices are still being felt from raw material prices and other overheads.

·           Interest rates, business rates, competition, legislation and red tape are of more concern this quarter to manufacturing businesses.

·           Increasing skills, clean workspaces, and foreign investments have increased in importance to future growth in Lincolnshire this quarter.

Nationally:

There are improvements in most key national balances, and the national Q4 results support the view that we are on the brink of leaving the recession, but with some critical balances still in negative territory, the UK economy is generally struggling to recover.

·         Domestic balances are disappointing. Manufacturing balance for home sales improved to the highest level since Q1 2008. The balance for manufacturers’ home orders rose to the equal highest level since Q1 2008.

·         Service balance for domestic orders rose to the equal highest level since Q1 2008.

·         Manufacturing export sales balance to the strongest result since Q2 2008. The export orders balance for the sector also improved to the strongest since Q2 2008. This welcome improvement must be nurtured in order to strengthen Britain’s position in world trade.

·         Service export sales balance rose to the highest since Q3 2008; the service export orders balance also rose to the best level since Q3 2008.

·         Manufacturing employment balance improved to the equal strongest level since Q1 2008. Manufacturing employment expectations also rose to the strongest since Q1 2008.

·         The service employment balance rose to the highest level since Q3 2008. Employment expectations fell by 1 point.

·         Manufacturing firms planning to increase investment in plant and machinery rose to the strongest result since Q2 2008. Manufacturers’ intentions to invest in training rose to the highest recorded since Q3 2008. Negative balances for investment in plant and machinery highlight the risks to Britain’s productive potential if sharp falls in business capital spending are not reversed.

·         Service firms planning to raise investment in plant and machinery improved to the strongest level since Q3 2008. Intentions to invest in training rose to the highest recorded result since Q2 2008.

·         Q4 confidence balances saw a mixed picture for manufacturing and positive signs for services, but are all still relatively weak compared with pre-recession levels.

·         Pressures to raise prices generally strengthened in Q4, but remain relatively weak.

·         Disturbing weaknesses are facing the service sector.

·         The urgent need to improve business access to bank finance is confirmed by the Q4 cashflow balances, which are barely positive for manufacturing and have moved deeper into negative territory for services – however Q4 cashflow balances remain weak by historical standards.

This quarter, we also asked businesses about the Royal Mail disruption and apprenticeships, and had the following results:

Services:

·           53% will remain with Royal Mail, with 28% switching to an alternative provider.

·           8% of businesses quantified the cumulative cost of this disruption to their business at over £10,000, with 38% saying there was no monetary cost.

·           45% of businesses said they’d take on a young employee or an apprentice if they were offered a starting bonus from the Government, and 35% said they would if there was an offer of top-up training. Only 12% said that better vocational qualifications would encourage them to take on a young employee or apprentice.

Manufacturing

·           51% will remain with Royal main, with 31% switching to an alternative provider.

·           9% of businesses quantified the cumulative cost of this disruption to their business at over £10,000, with 43% saying there was no monetary cost.

·           56% of businesses said they’d take on a young employee or an apprentice if they were offered a starting bonus from the Government, and 33% said they would if there was an offer of top-up training. Only 12% said that better vocational qualifications would encourage them to take on a young employee or apprentice.