Chamber Q4 survey reports lowest ever reported international sales and orders

Chamber Q4 survey reports lowest ever reported international sales and orders

The final Quarterly Economic Survey (QES) of 2020 show export sales and orders are at their lowest ever recorded, with overseas sales moving from -27 to -60 and orders moving from -43 to -57.

Export documentation statistics further back up this decline with reporting a significant drop in November, after the numbers had been higher in September and October.

Also reporting overall export documentation figures to show no comparison to previous years.

Running from 2nd to 23rd November, coinciding directly with the announcement of a second national lockdown, the survey shows Tier 3 restrictions in Lincolnshire and a second national lockdown have hit business activity levels hard, along with levels of planned investment, recruitment, and confidence.

In comparison to Quarter 3 where we saw an upturn across all indicators and some improvements after the first lockdown, Quarter 4 however paints a different picture seeing all indicators further deteriorate.

Given the negative territory across the board, we see confidence levels take a hit, with the service sectors reporting greater activity decline, however noting these current levels aren’t as bad as those reported in quarter 2.

Full briefing can be seen here.

Join our QES Q4 Briefing to hear more about these results, taking place on 12th January, 8am – 8.45am, register here.

Simon Beardsley, Chief Executive at Lincolnshire Chamber of Commerce, said: “The figures reported here do make for hard reading, particularly around continued uncertainty, import and export challenges bringing with it supply chain issues, however reflecting on what has happened this period, we must look at the opportunities.

“Following some independent research, we conducted, we found that job opportunities across the county, in both temp and permanent positions were on the rise for the new year with it also being higher than last year.”

Cllr Colin Davie, executive councillor for economy and place at the Lincolnshire County Council, said:

“The national lockdowns are clearly taking their toll at a local level and although difficult reading, these figures aren’t entirely surprising. I remain optimistic that with the latest support packages announced by the Chancellor and the opportunities presented by new global trade deals, Lincolnshire businesses can look to the future with more hope.”

“The figures reported here do make for hard reading, particularly around continued uncertainty."

On a national scale, British Chambers of Commerce’s QES  found that business conditions remained weak in the fourth quarter as the second lockdown squeezed activity.

The bellwether survey of 6,203 firms, who employ nearly a million people across the UK, revealed that there was no fundamental improvement in the key indicators in Q4 and they remain well below pre-crisis levels. 95% of respondents were SMEs.

Key findings:

– Following the sharpest decline in the history of the QES in Q2 2020, all the key indicators in Q4 remained substantially worse than pre-pandemic levels

– 79% of hotels and catering firms reported a decrease in domestic sales in Q4, worsening from 66% in Q3

– Cash flow, a key indicator of business health, continued to deteriorate for 43% of firms overall. For hotels and catering firms, 77% report a decrease.

Business conditions

Overall, indicators remained weak in Q4, with only moderate improvement compared to Q3 and still well below the pre-Covid 19 trend.

– Nearly half of firms (43%) reported decreases in domestic sales, broadly unchanged from 46% in Q3

– 26% of firms reported an increase in domestic sales. 30% reported no change

– 45% of firms reported a decrease in domestic orders, while 33% report no change, and 22% report an increase

– 38% of firms reported decreases in export sales, down slightly from 45% in Q3 but still substantially worse than pre-pandemic levels, where only around 20% of firms reported a decrease

– Nearly a quarter (22%) of firms reported increases in export sales, up from 16% in Q3

 

Business to consumer (B2C) firms saw the largest falls in domestic sales in the quarter. Over three quarters (79%) of respondents in the hospitality and catering sectors reported decreases, compared to 66% in Q3 and is moving back toward Q2 levels (94%), underlining the impact that lockdowns and forced closures have had on demand.

However, the survey revealed that sectors which have continued their operations through the pandemic, and/or shifted their operating models to remote working, also have a higher proportion of firms reporting decreased sales. For instance, 53% of transport and distribution firms, and 44% of marketing/media firms reported decreases in sales, well above pre-pandemic levels of 29% and 23% reporting decreases in Q1 2020, respectively.

In the manufacturing sector, the balance of firms reporting increased domestic sales increased to -9% in Q4 2020, up from -15% in Q3 2020. The balance of firms reporting increased export sales increased to -8% from -26% in Q3

In the services sector generally, the balance of firms reporting increased domestic sales increased to -24% in Q4 2020, up from -25% in Q3. The balance of firms reporting increased export sales increased to -22% in Q4 from -31% in Q3

As a percentage balance, the manufacturing sector is seeing a faster rate of improvement in domestic and export sales, though both sectors’ indicators remain in ‘negative territory’, meaning that more firms have reported a decrease in sales than an increase.

Cash flow 

Cash flow, a key indicator of business health, continued to deteriorate for more than four-in-ten firms. In Q4, 21% of firms reported an improvement in cash flow, 36% reported no change and 43% reported a deterioration. Levels are broadly unchanged from Q3 which saw some improvement on historic lows in Q2.

In line with indicators from Q2 and Q3, micro firms were more likely to report worsening cash flow, with 51% of these firms reporting a deterioration, compared to 27% reporting a decrease in Q1 2020.

In the services sector the balance of firms reporting improved cashflow increased to -28% from -30% in Q3. After the lowest levels on record in Q2 and Q3, this balance is still lower than any other since Q4 2008.

In the manufacturing sector, the balance of firms reporting improved cashflow increased to -15% from -18% in Q3.

Investment and confidence

Over a third of firms (35%) continue to report decreased investment in plant, machinery and equipment, highlighting longer-term concerns for the economy as many businesses pause investment plans or revise them down.

This is unchanged from Q3 and follows Q2, which had the largest proportion of firms revising down investment in the history of the QES dataset.

Nearly half (48%) expected no change in plant, machinery and equipment investment, up slightly from 46% in Q3. Just 17% of firms plan to invest, unchanged from Q3 and remaining historically low.

40% of firms said they expected their turnover to increase over the next 12 months, while a third (34%) still expected it to decrease. Nearly a quarter (25%) expected that it would stay the same.

In the services sector, the balance of firms looking to increase investment in training remains at -17% in Q4, unchanged on Q3. The balance of firms confident that turnover will improve over the next year decreased slightly to -3% from in +1% in Q3.

In the manufacturing sector, the balance of firms looking to increase investment in training increased to -10% in Q4 from -19% in Q3. The balance of firms confident that turnover will improve over the next year increased to +12% in Q4 up from +7% in Q3.

Ongoing uncertainty

Despite seeing some improvements in some indicators in the previous quarter, business conditions remain close to the historic lows of Q2.

The survey fieldwork took place during the second lockdowns in England and Northern Ireland, and amid tougher restrictions in Scotland and Wales. Continued uncertainty around further lockdowns and restrictions, as well as the many unanswered questions on Brexit, have caused businesses considerable distress, with some saying they are worried about the long-term viability of their business.

Smaller firms and independent retailers report the most pessimistic sentiment, many stating that changes in restrictions, and the introduction of the second lockdown exacerbated cash-flow problems and left them with redundant stock. A wholesaler in Kent reported: ‘We were recovering well from the lockdown until this last month, which has been catastrophic as we had bought for Christmas sales, which were then halted, but the invoices still needed paying.’

Some businesses not forced to close by the lockdown and restrictions are also feeling the effects of the cash-flow crisis further up the supply chain, with marketing budgets slashed or diverted to Covid-related activity. One creative agency commented: ‘2020 has been a dire year for any marketing, creative agency. Clients have taken back budgets to cover Covid and PPE signage, other new clients had to close doors and reduce marketing spend. Only a few see the need to promote or market their business to consumers and attract new sales.’

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