Survey shows stalling economy

The Beating Heart of the Economy

The British Chambers of Commerce’s quarterly economic survey finds that the UK economy ended 2018 stuck in a weak holding pattern, with stagnating levels of growth and business confidence as a result of heightened Brexit uncertainty and other economic pressures.

Key findings:

  • Percentage of services firms reporting an increase in domestic sales and orders drops to two-year low
  • Recruitment difficulties in manufacturing joint highest on record, services sector recruitment difficulties hover near record-high
  • Price pressures rise further for businesses, particularly manufacturers

The results underline the impact that the current levels of uncertainty are having on a stalling economy as growth in domestic sales and orders reduced, recruitment difficulties stand near record highs and price pressures persist.  In services, the percentage of firms reporting an increase in domestic sales and orders weakened to its lowest in two years. Domestic activity among UK manufacturers also moderated.

The findings highlight the extent to which labour shortages have risen in the UK as four-fifths (81%) of manufacturers that tried to recruit report difficulties in finding the right staff – the joint highest level since the survey began in 1989. In services, the level (70%) hovers close to the record high recorded in the previous quarter (72%).

The survey results indicate an increase in price pressures facing firms. The percentage of manufacturers expecting to raise prices is at its highest in a year and is almost three times higher than its pre-EU referendum average. Cashflow continues to be a concern for both sectors, with the balance of firms reporting improved cash flow remaining weak.

Suren Thiru, Head of Economics at BCC, said:

“Domestic activity in services weakened for the second successive quarter, with consumer-facing firms particularly downbeat amid subdued household spending levels and tightening cash-flow. Manufacturing had an underwhelming three months, with significant cost pressures and moderating global demand weighing heavy.

“With results showing that price pressures from wage settlements remain relatively muted, there continues to be sufficient scope to keep interest rates on hold in 2019, particularly given the significant economic and political turbulence.”

Responding to the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said:

“Throughout much of 2018, UK businesses were subjected to a barrage of political noise and drama, so it’s no surprise to see muted domestic demand and investment. With little clarity on the trading conditions they’ll face in two months’ time, companies are understandably holding back on spending and making big decisions about their futures. Given the magnitude of the recruitment difficulties, business concerns about the government’s recent blueprint for future immigration rules must be taken seriously – and companies must be able to access skills at all levels without heavy costs or bureaucracy.”

Brexit declaration: BCC Reaction

Commenting on today’s (22 Nov) announcement that the UK government and EU Commission have agreed a Political Declaration, Dr Adam Marshall, Director General of the British Chambers of Commerce (BCC), said:

“While we welcome the fact that more flesh has been put on the bones of the proposed future UK-EU relationship, the reality is that the clarity and precision businesses need to plan for the long term can only be delivered when the details are hammered out and fully agreed. There are still big questions to answer – including whether businesses will be able to conduct trade between the UK and the EU without significant new barriers or costs.

“For business, this is just the end of the beginning of the Brexit process. Our trading firms will be paying close attention to what happens next, particularly as the proposals are debated in Parliament over the days ahead. Businesses remain deeply concerned about the potential for a political stand-off that leads to a messy and disorderly exit from the EU next March.

“We have raised a number of important questions with the Government on behalf of business communities across the UK, and their responses will inform our continuing assessment of the proposed agreement and its implications for business, investment and the wider economy – as captured in our practical Business Brexit Risk Register.”

Leeds takes centre stage in Channel 4 move

Of Channel 4’s decision to move its headquarters to the city, Leeds Chamber of Commerce President, Paula Dillon, a partner with law firm Womble Bond Dickinson, said:

Thrilled with broadcaster’s decision

“Channel 4’s decision emphasises the strength of the city and region, and the role of Leeds at the centre of the North and the heart of the UK. This decision is hugely significant and reinforces Leeds’s presence on the national stage.

“The importance of culture and diversity is increasingly becoming a major component in decision-making around investment, and Channel 4 was clear that access to a wide and culturally diverse talent pool was an essential part of its decision-making process. This presents fabulous opportunities to harness the creativity located in our region’s towns and cities. We already have a strong, regional track record in the creative arts but bringing the commissioning powers of Channel 4 along with the additional production companies which will want to locate within its orbit will present opportunities.

“The recent recognition at the International Downtown Association awards in the USA where Leeds International Festival picked up a major award shows how important culture and digital are in the economies of places and highlights the region’s strengths in these areas. In attracting and retaining high quality and diverse talent through a strong cultural and digital offering we will continue attracting world class jobs. This week’s decision shows we are on this journey.

“The project to woo Channel 4 to Leeds was a fantastic example of the collaboration which has been taking place in recent years. Not just amongst local authorities but between the public and private sector too. Congratulations to all those involved in securing this investment and all credit to Cllrs Judith Blake and Susan Hinchcliffe, Tom Riordan, Roger Marsh and all at the Leeds City Region LEP investment team.”

Budget – Detailed Reactions & Measures Outlined

For detailed information on various aspects of the 2018 Budget, see the links below.

  • Breakdown of measures announced, categorised into subjects – click here
  • British Chambers of Commerce comments on various measures – click here
  • Economic summary of key points and OBR forecast – click here

West & North Yorkshire Chamber of Commerce initial reaction is below.

“We know that a significant period of change lies ahead; that’s why the Chamber network this year, in its Budget submission, called for radical measures to enable business to meet the upcoming challenges facing the UK economy. Measures to boost investment, competitiveness and productivity are needed to embolden the UK economy ahead of and throughout the upcoming period surrounding Brexit.

“We welcome measures such as increasing the annual investment allowance, the package to stimulate high streets, including business rate relief, and encouraging SMEs to take on apprentices.  Conversely, economic growth forecasts remain disturbingly weak, so this is a concern.  It can also be argued that the statement lacked the bigger picture measures needed to drive the economy through Brexit, but some would say that’s an unreasonable criticism given the constraints in this area.

“Given our recent reports on local housing needs and employment land, we welcome the additional money for the Housing Infrastructure Fund, aswell as extending the cancellation of stamp duty for first-time buyers.  On the downside, increasing the National Minimum Wage by almost 5% puts pressure on many employers because of the need to maintain differentials within the workforce.  This is at a time when competition, price pressures and general constraints within the business community are quite testing.

“One policy decision we are still awaiting is on devolution.  There is reference in the red book to extending the Transforming Cities Fund but, until our region gets progress on a devolution settlement, we remain disadvantaged.  The Government needs to give our region the policy-making tools and powers it needs to fully contribute to the economy and decision-making.  We therefore look forward to a renewed Northern Powerhouse strategy next year.

“We will scrutinise the red book further to give a more detailed assessment to our members and the likely impact on the business community and economic growth prospects.”

Budget – Chamber Initial Reaction

“We know that a significant period of change lies ahead; that’s why the Chamber network this year, in its Budget submission, called for radical measures to enable business to meet the upcoming challenges facing the UK economy. Measures to boost investment, competitiveness and productivity are needed to embolden the UK economy ahead of and throughout the upcoming period surrounding Brexit.

“We welcome measures such as increasing the annual investment allowance, the package to stimulate high streets, including business rate relief, and encouraging SMEs to take on apprentices.  Conversely, economic growth forecasts remain disturbingly weak, so this is a concern.  It can also be argued that the statement lacked the bigger picture measures needed to drive the economy through Brexit, but some would say that’s an unreasonable criticism given the constraints in this area.

“Given our recent reports on local housing needs and employment land, we welcome the additional money for the Housing Infrastructure Fund, aswell as extending the cancellation of stamp duty for first-time buyers.  On the downside, increasing the National Minimum Wage by almost 5% puts pressure on many employers because of the need to maintain differentials within the workforce.  This is at a time when competition, price pressures and general constraints within the business community are quite testing.

“One policy decision we are still awaiting is on devolution.  There is reference in the red book to extending the Transforming Cities Fund but, until our region gets progress on a devolution settlement, we remain disadvantaged.  The Government needs to give our region the policy-making tools and powers it needs to fully contribute to the economy and decision-making.  We therefore look forward to a renewed Northern Powerhouse strategy next year.

“We will scrutinise the red book further to give a more detailed assessment to our members and the likely impact on the business community and economic growth prospects.”

Survey says Brexit affecting international trade

A survey by British Chambers of Commerce (BCC), in partnership with DHL Express UK, has today (18 Oct 2018) revealed that almost half – 49% – of businesses have uncertainty over Brexit front of mind when deciding whether to trade internationally, highlighting the economic cost of the persistent lack of political clarity. A similar number (48%) of firms are concerned by the related issue of exchange rate volatility, which can increase the cost of raw materials and potentially make UK exports less competitive. Exchange rate volatility is a much greater concern for manufacturers (61%) and B2C firms (64%) than B2B businesses (36%).

  • Half of businesses surveyed say that Brexit is making it difficult to decide whether to import or export, hampering British trade
  • Volatility of sterling is also causing concern
  • Chambers have long called for clarity for business on the practical questions over Brexit

As EU leaders gather in Brussels, 500 exporters, trade professionals and business leaders have gathered at the BCC International Trade Summit to discuss issues and trends at the forefront of international trade, and to give innovative firms the tools they need to enter new markets. The research also shows that while there are many concerns for businesses when deciding whether to trade internationally, those that do trade internationally are more likely to be innovative within their business – 65% of those that are internationally active have launched a new product or service in the last 12 months, compared to just 41% of firms who are UK-focused.

Government must do more to boost business confidence at the Autumn Budget and incentivise export and import growth. This, coupled with clear progress in negotiations, will encourage firms to take risks and break into new markets, boosting innovation and productivity in the UK economy.

Commenting on the results, Dr Adam Marshall, BCC Director General, said: “Firms have been dealing with uncertainty over the future relationship with the EU since the referendum two years ago. However, this survey shows that as we get closer to the crunch, the lack of precision is starting to have a material impact on their decision-making. While business faces uncertain times, our research shows that those trading internationally are more innovative and dynamic compared to those who just focus their attention on the UK market. It is vital that clear progress is made in negotiations – to give firms confidence and empower them to take risks and try to break into new markets, creating the Global Britain this government so often talks about.”

Shannon Diett, VP of Marketing, DHL Express UK, added: “The uncertainty expressed by British businesses taking part in this survey mirrors the increasing concern we are hearing from our customers, both of which further highlight the criticality now surrounding the Brexit negotiations. It is important to note however, that increasing the number of markets a business trades with helps to reduce risk and increase the opportunities for growth.”

‘Bradford Live’ scheme hits the right notes at property lunch

The man leading the scheme to bring Bradford’s former Odeon building back into use gave an update to the business community recently.

Lee Craven, who intends to make ‘Bradford Live’ again, addressed a Chamber of Commerce audience in the city, telling them about the planned uses for the site.  The £20 million scheme will be operated by events and venue specialist, the NEC group.  It is expected that the venue will be up-and-running in September 2020, with 225 events and an anticipated 270,000 visitors each year.

The ‘four venues in one’ project – officially titled ‘Bradford Live’ – will reinvigorate Bradford’s nightlife, aswell as broadening its corporate offer and enhancing the city’s profile and image.  The 4,000 maximum capacity venue will include a 400-capacity lounge, a ballroom to accommodate 800, and four other bars.

Opened in 1930 as the New Victoria and renamed the Gaumont 20 years later, it has been closed since 2000.  There were several declarations of interest in the site in the interim period – whether to demolish and rebuild or to retain and protect its original features – but it now seems the current scheme is moving forwards.  A planning application is to be submitted later this year and leading social entrepreneur Lord Andrew Mawson has been announced as patron to the scheme.

Allan Booth, Chair of Bradford Chamber Property Forum (right, in the above photo), said afterwards:

“This scheme and the whole demolition-versus-save-the-Odeon debate has created many news headlines and column inches over the last few years.  It’s taken a lot of time and patience from Lee and others to persevere with his aspiration to bring the building back to life and he is to be applauded for that.  There were many questions from the floor following his presentation to Chamber members – always a good sign of the level of interest in a topic. We look forward to hearing from and supporting the progress of ‘Bradford Live’ – it’s another piece in the Bradford city centre regeneration jigsaw.”

The event took place at the Great Victoria Hotel, and was hosted by Bradford Chamber Property Forum chairman, Allan Booth.  Allan is a Director with Saltaire-based architects Rance Booth Smith.

Lee’s presentation can be found here

 

Chamber Chair outlines aspirations

One of the region’s key business leaders has highlighted how more needs to be done to allow local and sub-regional economies to thrive more.

Gerald Jennings, the Chair of West & North Yorkshire Chamber of Commerce, spoke to business leaders at the organisation’s annual meeting in Leeds recently.  While highlighting the activities and services provided to businesses during the previous 12 months, he also set out the upcoming challenges and opportunities in years to come.  Central to those challenges is the skills agenda, said the former Land Securities boss.  Identifying the extent of the skills gap and its likely effect in the future was now key to the continued success of Bradford, Leeds, York and North Yorkshire, he said.

“Automation is going to change the face of the workplace – as many as a third of current roles in the labour market could disappear over the next 20 years. Let’s really understand what this change will mean for business and see it as an opportunity”, he said.

Following the theme of opportunity, Mr Jennings said that devolution and the Northern Powerhouse concept need to be delivered in order for West & North Yorkshire to fulfil its potential.

“We want to ensure that we play a full role in the economic future of the UK and in the social well-being of all”, said the business leader; but failure to secure a devolution deal in this part of the world was handicapping aspirations.  “We must secure a deal in order to catch up with other regions and create our own future.”  He hinted that “a West Yorkshire settlement could be an initial step towards leading to a larger devolved arrangement when the time is right.  We need to see an agreement with the right governance arrangements and a clear business voice at the table.”

Finally, Mr Jennings offered to lead a more “positive and dynamic” lobbying campaign on transport investment.  Acknowledging that the calls for improved connectivity within and beyond Yorkshire are sometimes perceived negatively elsewhere, the property specialist said that the case for investment, connectivity and social mobility need to be spun positively in order to gain influence.

The Chamber Board Chairman rounded up with some of the business support organisation’s success over the last 12 months, many of which can be found in the published annual report, here.

Green growth the key, says energy boss

Green growth is now front-and-centre of the energy sector, according to a senior director at one of the region’s biggest businesses.

Clare Harbord of Drax power Group told the annual meeting of West & North Yorkshire Chamber of Commerce that the business has embraced recent technological advances in order to turn around how it operates.  The energy producer is successfully converting from coal use to bio-mass, and is now on target to meet the 2025 deadline for coal-free energy production.  The changes make it the biggest decarbonisation project in Europe.

Clare, Executive Group Director, spoke to a lunch of Chamber members and guests following the approval of financial and other reports at the Queen’s Hotel, in Leeds.  She also fielded several questions, confirming the view that Drax is a good employer in the region, doing many great things.  Eleven per cent of Europe’s renewable energy is provided from Drax, and more than 1,000 jobs exist at the Selby site.  Schools are encouraged to send pupils on site visits there, in particular girls to get them interested in a career in engineering.

Questions to Clare were on a range of topics, including east-west transport connectivity (with particular reference to re-opening the 11-mile Skipton-Colne rail link), having a post-Brexit energy provision plan, promoting engineering and energy to a diverse future workforce, and the further development of biomass fuel to support the environment.  Before the lunch, Gerald Jennings was re-elected as Chairman of the Chamber Board, which is made up of business representatives from across West and North Yorkshire, plus the organisation’s Chief Executive, Sandy Needham.

Gerald said afterwards:

“It was great to hear from a successful and responsible employer working in a sector that has seen significant change in the last few years.  We are all taking our responsibilities seriously in relation to the environment, and that was evidenced in the number of questions that Clare fielded in a short space of time.  It was also pleasing to note that the Chamber is in a strong position to continue providing top quality business support services and representing its members in influential circles.”

The event was sponsored by the Business Enterprise Fund.

BCC response to PM’s Brexit Statement

The British Chambers of Commerce has responded to the Prime Minister’s statement today (Friday 21 Sep 2018) on the negotiations with the EU on Brexit.  The BCC response is below.

“While the Prime Minister’s determination to reach a deal is appreciated, businesses tell us over and over that the time for posturing from both sides is over.  Businesses across the UK want the negotiators to knuckle down and deliver tangible results that enable them to plan for the future. Firms need clarity, precision, and answers to their real-word, practical questions – and they need them fast. There is no time to lose. People’s livelihoods, major investments in our towns and cities and business confidence are at stake.”

On the possibility of the UK leaving the EU without a negotiated outcome:

“Many firms are hugely worried about a messy and disorderly outcome, and the potential impact on their ability to trade and grow. Others could be caught flat-footed. Both sides must make every effort to avoid this scenario.”

On EU citizens working in UK businesses:

“Businesses feel a strong sense of responsibility to their EU employees. We welcome the Prime Minister’s clear commitment to guaranteeing the rights of EU citizens currently in the UK, regardless of the outcome of negotiations. This must be translated into clear, precise guidance as soon as possible to give people the security they need.”

Theresa May has called on the EU to show more respect in the negotiations, and for it to present a credible alternative to her Chequers Plan.