East Midlands businesses are seeing slightly better sales activity and cashflow, with more jobs being filled and inflationary pressures easing according to a new regional survey.
New research from East Midlands Chamber suggests firms across Derbyshire, Leicestershire and Nottinghamshire are doing better than the national average – but there was a warning that Government should not ruin things with short term fiscal measures in a last ditch bid to try and win the next General Election.
While high inflation, rising interest rates and skills gaps continue to cause concerns for businesses across the UK, the chamber’s latest Quarterly Economic Survey –delivered in partnership with the University of Leicester School of Business – showed pressures easing in many areas of local industry.
However, the survey did show a decline in advanced orders, future recruitment plans and investment intentions – crucial in driving up productivity to bring down prices and, thus, inflation.
Chamber director of policy and insight Chris Hobson said: “Against a backdrop of continued challenges facing businesses when it comes to stubbornly high inflation, low growth and Bank of England decision-making, the results from our second QES of the year gives us cause for optimism the East Midlands is bucking the trend and delivering a strong performance.
“While any growth is relative to what has come before in terms of how these results should be interpreted, responses to questions around concerns and events driving price pressures give further credibility to the argument that factors such as higher utility costs, inflated wage settlements and expensive fuel are all easing as problems for businesses during 2023.”
He said the percentage of firms reporting pressure to put prices up had fallen sharply, suggesting many increased costs had now been passed on.
At the same time four in every 10 firms now expect profitability to grow over the next quarter, and those expecting profitability to drop had fallen from 41 per cent to 26 per cent.
He said it remained imperative that Government backed business by focusing on the ‘four Is’ – investment, innovation, infrastructure and international trade.
Mr Hobson said: “We’re clearly not completely out of the woods yet – advanced orders saw a slight slowdown and investment intentions remain stubbornly low – however, the regional economy is continuing the pick-up that began at the start of this year.
“A more stable policy environment over recent months will have supported an improvement in sentiment.
“As we get closer to a general election, it’s important that politicians and institutions behave responsibly with regards to policy announcements and fiscal decisions.
“The UK economy has already defied the expectations of six months ago – it’s important to capitalise on this now and not do anything that may inadvertently rocking the boat.”
However Professor Mohamed Shaban, associate dean for business and civic engagement at the University of Leicester School of Business, said business sentiment remained cautious and the business environment was likely to be affected by mixed expectations in relation to future political leadership and monetary policy.
He said: “There is no significant increase in recruitment, reflecting the hesitancy of many East Midlands businesses.
“Additionally, the shortage of employees applying for highly skilled full-time jobs highlights the importance of much-needed investment to upskilling the workforce, particularly regarding support from the educational institutions for local businesses.
“Inflation is still at undesirable levels. The slight positive increase in business confidence is likely to be crushed next quarter by the recent increase in the Bank of England base rate to 5 per cent, which will likely impact investment decisions and businesses' profitability in the short and medium term.”
