Sheffield City Region - Quarterly Economic Survey (Q1)

Sheffield City Region Quarterly Economic Survey

1st Quarter 2017

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Sheffield City Region Quarterly Economic Survey

Survey helps guide SCR thinking on growth I am delighted to introduce the results of the Quarterly Economic Survey that give an important insight into the current experience of businesses around the region. What business says helps to inform us in the Sheffield City Region Local Enterprise Partnership team, and our partners, as we work to increase economic growth and employment.

The Sheffield City Region has a £30billion economy and a strong offer for investors: the region’s success stories for the first quarter include supercar makers McLaren, and the World’s largest aerospace company, Boeing which are both making a major commitment to the region, bringing high value jobs and great supply chain opportunities.

What business has said to us is that more skilled staff and help with focused training are required for growth, and now we have our forward-looking ‘Skills Bank’ ready to invest in skills and expertise and the additional funds to drive business growth in the local economy. The Bank allows employers to create a training package which is right for their business, not a ‘one size fits all’ offer, and to receive funding for the majority of the cost.

We know that respondents to the Survey want to see support for starting and growing business: our Growth Hub is now the gateway for specialist support in a number of key areas, including innovation, exporting, accessing finance and training.

Looking at the Government’s proposed Industrial Strategy, we know that businesses want to see the right local institutions to support ‘people, industries and places’. That’s why we are telling Government that we want to see greater local decision-making as an important part of the Strategy.

Your views are valued: please keep them coming!

Sir Nigel Knowles Chair, Sheffield City Region Local Enterprise Partnership Q1 - 2017

Overarching Economy

Overview of the Overarching Economy The results of the Sheffield City Region Quarterly Economic Survey for businesses in the first quarter of 2017, show an encouraging and mainly positive start to the New Year.

Manufacturing and service firms continued to show growth in both domestic and export sales in the last quarter. Both sectors forecast a positive outlook for sales in the next quarter, with manufacturing firms foreseeing a substantial increase in both domestic and export markets – particularly across Europe, Asia and the Middle East. Possibly in response to this growth, both sectors have increased their investment in both plant, people and training investment.

While price pressures remain in the regional economy, manufacturing firms have shown a decrease in sentiment to raise prices since last quarter; however raw material costs remain a concern for the sector.

On balance, businesses in the Sheffield City Region remain to be convinced by the Government’s proposed Industrial Strategy.

The most important elements of the Industrial Strategy identified by businesses are: encouraging growth across the whole country; encouraging trade and inward investment and; supporting businesses to start and grow.

Overall, the message from Sheffield City Region businesses is positive as they look to invest in plant and people and see opportunities to increase sales - putting the turbulence of the last year behind them.

Prof. Andrew Simpson Associate Dean External Business Advancement Sheffield University Management School www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

Q1. UK sales

Results show

If your business is involved in the UK market, looking at the past 3 months (excluding seasonal variations), has your UK activity/sales/custom: Increased, remained constant or decreased?

This quarter: On balance, both sectors reported increased sales.

Year on year: Although the service sector shows a slight decrease in sales compared to Q1 2016, the manufacturing sector has shown a marked increase.

50%

30% 20%

Service

-4pts

10%

Year on year

% on balance

40%

Manufacturing

+36pts

0% -10%

Q2

Q3

Q4

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

‘17

Q2. Cash flow

Results show

Over the past 3 months, cash flow has: Increased, remained constant or decreased?

This quarter: On balance, both sectors reported small decreases in their cash flow positions.

Year on year: The manufacturing sector shows an improved position on this time last year. However, the service sector shows a worse position.

30% 25%

15% 10% 5% 0%

Service

-5%

-13.5pts

-10% -15% -20%

Q2

Q3

2014

Q1 - 2017

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

Year on year

% on balance

20%

Manufacturing

+23pts

Overarching Economy

Q3. Investment

Results show

Over the past 3 months, how have investment plans for plant/machinery/ equipment fared: Increased, remained constant or decreased?

This quarter: Both sectors show a positive sentiment for investment and an improved position from the previous quarter.

35%

Year on year: The position compared to last year, on balance, shows a small decline for the service sector and a small increase for the manufacturing sector.

30%

15%

Service

10%

-4pts

5%

Year on year

% on balance

25% 20%

Manufacturing

+5pts

0% -5%

Q2

Q3

Q4

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

‘17

Q4. Orders

Results show

For businesses involved in the UK market, for the next 3 months (excluding seasonal variations), have orders/advanced custom/ bookings: Increased, remained constant or decreased?

This quarter: On balance, both sectors expect an increase in orders compared to last quarter.

Year on year: Expectations of increased orders are at a lower level for the service sector compared to the same period last year, but the manufacturing sector is showing a large increase.

50%

30% 20%

Service

-16pts

10%

Year on year

% on balance

40%

Manufacturing

+29pts

0% -10%

Q2

2014

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

Q5. Turnover

Results show

During the next 12 months how do you think turnover will fare: Improve, remain the same or decrease?

This quarter: Both sectors continue to show an expectation of increased turnover, with noticeable increases since last quarter.

Year on year: For both sectors, the position is improved on this time last year.

80% 70%

50%

Service

40%

+3.5pts

30% 20%

Year on year

% on balance

60%

Manufacturing

+12pts

10% 0%

Q2

Q3

Q4

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

‘17

Q6. Profitability

Results show

During the next 12 months how do you think profitability will fare: Increase, remain constant or decrease?

This quarter: Both sectors expected, on balance, an increase in profitability and showed a reversal of the downward trend of the previous 2 quarters.

Year on year: Both sectors reported an improved position compared with the same period last year.

70%

50%

Service

40%

+5pts

30% 20% 10% 0%

Q2

Q3

2014

Q1 - 2017

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

Year on year

% on balance

60%

Manufacturing

+18pts

Overarching Economy

Q7. Price

Results show

Over the next 3 months do you expect the price of your goods/services to: Increase, remain constant or decrease?

This quarter: On balance, both sectors expect prices to rise in the next quarter; this sentiment is not as strong for manufacturing businesses but slightly stronger for service firms.

Year on year: The expectation of price increases is significantly higher for both sectors than last year.

60%

Year on year

% on balance

50% 40%

Service

30%

+10pts

20%

Manufacturing

+27pts

10% 0%

Q2

2014

Q3

Q4

Q1

Q2

2015

Q3

Q4

Q1

Q2

Q3

2016

Q4

Q1

‘17

Q8. Price Pressure

Results show

Is your business suffering price pressures to raise prices from any of the following?

This quarter and year on year, service firms are consistently most affected by the price pressures of other overheads and manufacturing firms by raw material costs.

Service

Manufacturing

Pay settlements Raw material costs

11%

17%

Finance costs Other overheads

24% 46%

22%

47%

18%

15%

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

Q9. Important Issues

Results show

Which of the following factors are more of a concern to your business than 3 months ago?

Government spending cuts and the triggering of Article 50 are the most important factors for service firms, whereas business rates and exchange rates are the most important for manufacturing firms.

Access to finance Access to skilled labour

14%

8%

8% 9%

Business rates Competition

8%

10%

13%

11%

Exchange rates

Service

Govt. spending cuts

12%

10%

9%

Inflation

14%

17%

7%

13%

Red tape and regulation

Manufacturing

9%

16%

Triggering of Article 50

11%

Q10. Industrial Strategy

Results show

Do you believe that the Government’s proposed Industrial Strategy can deliver on its aim of improving living standards and economic growth by increasing productivity and driving growth across the whole country:

The largest proportion of service and manufacturing firms “don’t know” if the proposed Industrial Strategy will deliver. A higher proportion of businesses in both sectors believe it can’t deliver rather than it can.

Service

Manufacturing

60% 50% 40% 30% 20% 10% 0%

Q1 - 2017

Yes %

No %

Don't know %

Overarching Economy

Q11. Industrial Strategy

Results show

Please rate the importance of the below elements of the Government’s proposed Industrial Strategy to your business?

The most important pillar in the Industrial Strategy for service firms is ‘Creating the right local institutions to support people, industries & places.’ This is closely followed by ‘Driving Growth across the whole country’ which is a concern shared by manufacturing firms who jointly rank ‘Encouraging trade & inward investment’ as their top concern.

Service

Manufacturing

Investing in science Upgrading infrastructure Improving procurement Affordable energy Growth across whole country Developing STEM & digital skills Supporting businesses to start & grow Encouraging trade & inward investment Cultivating worldleading sectors Creating the right local institutions 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% % ranking issue as extremely or very important

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

Q1. Workforce

Results show

During the last 3 months, has your workforce: Increased, remained constant or decreased?

This quarter: On balance, employment has increased for service and manufacturing firms.

Year on year: The service sector reported weaker employment growth than this time last year but the manufacturing sector shows the strongest position since Q1 of 2015.

35% 30%

15%

Service

-8pts

10%

Year on year

% on balance

25% 20%

Manufacturing

+18pts

5% 0%

Q2

Q3

Q4

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

‘17

Q2. Future workforce

Results show

Over the next 3 months, do you expect your workforce to: Increase, remain constant or decrease?

This quarter: On balance, both sectors foresee an increase in their employment over the next 3 months.

45%

Year on year: Both sectors have higher expectations of increased employment with the manufacturing sector showing the strongest position since Q2 2015 and the service sector at its strongest for over 4 years.

40%

25%

Service

20%

+3pts

15% 10% 5% 0%

Q2

Q3

2014

Q1 - 2017

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

Year on year

% on balance

35% 30%

Manufacturing

+15pts

Skills and Labour

Q3. Recruitment

Results show

Over the past 3 months, have you attempted to recruit staff? Yes, no.

This quarter: On balance, more firms attempted to recruit, with almost 75% of manufacturing firms attempting to recruit.

Year on year: There has been an upward trend for recruitment in manufacturing but little movement in the service sector.

80% 75%

65% 60%

Service

55%

-1.5pts

50%

Year on year

% on balance

70%

Manufacturing

+15pts

45% 40%

Q2

Q3

Q4

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

‘17

Q4. Job opportunities

Results show

If you attempted to recruit, were they for: Part-time jobs or full-time jobs?

This quarter: Both service and manufacturing looked to recruit for more full-time than part-time positions.

Year on year: The manufacturing sector shows a stronger requirement for full-time staff and the service sector shows a weaker requirement for part-time staff.

60%

Year on year

50%

Part-time services -8pts

% on balance

40% 30%

Full-time services -0.5pt

20% 10%

Part-time manufacturing 0.7pt

0% -10%

Q2

2014

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

Full-time manufacturing 8pts

‘17

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

Results show

Q5. Employment suitability

This quarter: Both sectors experienced more difficulties recruiting than last quarter.

During the past 3 months, did you experience any difficulties in finding suitable staff: Yes, no?

Year on year: Both sectors had more difficulties recruiting than for the same period last year.

80% 70%

50%

Service

40%

+3pts

30% 20%

Year on year

% on balance

60%

Manufacturing

+9pts

10% 0%

Q2

Q3

Q4

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

‘17

Q6. Training

Results show

Over the past 3 months, how have investment plans for training fared: Increased, remained constant, decreased?

This quarter: There was an increase in training investment across both sectors.

Year on year: Service firms reported a relatively unchanged position in training investment but manufacturing firms reported a marked increase.

40% 35%

25%

Service

+1pts

20% 15% 10% 5%

Q2

Q3

2014

Q1 - 2017

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

Year on year

% on balance

30%

Manufacturing

+12pts

Skills and Labour

Q7. Job requirements

Results show

If you experienced difficulties recruiting, was it for: Skilled manual/technical, professional/managerial, clerical or semi/ unskilled?

This quarter: The categories of greatest difficulty for recruitment remain skilled manual/technical for manufacturing businesses and professional/managerial for service firms.

Year on year: In both sectors, there is increasing difficulty in recruiting for professional and managerial positions. For manufacturing firms it is consistently problematic to recruit for skilled manual and technical staff.

Service

Manufacturing

50%

40%

30%

20%

10%

0%

Skilled manual/technical Professional / managerial

% on balance

Skilled manual/technical

Clerical

Professional/managerial

Semi/unskilled

Clerical

Service

Manufacturing

60%

60%

50%

50%

40%

40%

30%

30%

20%

20%

10%

10%

0%

Q2

2014

Q3

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

0%

Q2

Q3

2014

Q4

Q1

2015

Semi/unskilled

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

Results show

Q1. Overseas activity/ sales/custom

This quarter: On balance, export sales increased for both sectors from last quarter.

If your business is involved in the overseas market, looking at the past 3 months (excluding seasonal variations), has your overseas activity/sales/custom: Increased, remained constant or decreased?

Year on year: The service sector showed a decrease in overseas activity/sales/ custom compared to last year but the manufacturing sector significantly increased.

40%

20% 10%

Service

0%

-8.5pts

Year on year

% on balance

30%

Manufacturing

+29pts

-10% -20%

Q2

Q3

Q4

2014

Q1

Q2

Q3

Q4

2015

Q1

Q2

Q3

Q4

2016

Q1

‘17

Q2. Export Orders

Results show

If your business is involved in the overseas market, for the next 3 months (excluding seasonal variations), have orders/advanced custom/bookings: Increased, remained constant or decreased?

This quarter: Service firms are seeing little change in export orders compared to last quarter but manufacturing firms report a substantial increase.

Year on year: The service sector saw a decrease in export orders, while manufacturing firms are in their strongest position for over 4 years.

40% 30%

10% 0%

Service

-10%

-22pts

-20% -30% -40%

Q2

Q3

2014

Q1 - 2017

Q4

Q1

2015

Q2

Q3

Q4

Q1

2016

Q2

Q3

Q4

Q1

‘17

Year on year

% on balance

20%

Manufacturing

+24pts

International Trade and Export

Q3. Cash flow

Results show

Over the past 3 months, cash flow has: Increased, remained constant, decreased?

There was negligible change in the proportion of exporters who reported improved or constant cash flow compared to last quarter.

The upward trend in cash flow position has continued for service firms over the last 12 months but manufacturing firms are reporting a slightly worse position over the last 2 quarters.

18% 31%

51%

Increased Remained the same Decreased

Q4. Plant/machinery/ equipment investment In your export business, over the past 3 months, how have investment plans for plant/machinery/equipment fared: Improved, remained constant or decreased?

Results show Investment plans for plant and machinery have increased for exporters since last quarter and both service and manufacturing firms have reported the strongest sentiment in this area for the last year.

10% 32%

58%

Increased Remained constant Decreased

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

Q5. Overseas markets

Results show

Over the past 3 months (excluding seasonal variations) how have the following markets fared?

The best performing region in terms of perception remains the Middle East & Africa, although the biggest increase since last quarter is the European Union.

Improved

Remained the same

Decreased

European Union Middle East and Africa Asia Non-European Union Europe including Russia North America Australasia Central and South America 0%

20%

40%

60%

80%

100%

Q6. Turnover

Results show

During the next 12 months how do you think turnover in your export market will fare: Improve, remain the same or decrease?

There has been an increase in exporters’ expectations for improved future turnover with two thirds of exporters expecting it to improve over the next 12 months.

9%

24% 67%

Improve Remain the same Decrease

Q1 - 2017

International Trade and Export

Q7. Profitability

Results show

During the next 12 months how do you think profitability will fare: Improve, remain the same or decrease?

There was a small increase, from last quarter, in exporters’ expectations of future profitability.

11%

54%

35%

Improve Remain the same Decrease

Q8. Prices

Results show

Over the next 3 months do you expect the price of your goods/services to: Increase, remain constant, decrease?

There has been a reduction in the proportion of exporters who expect the price of their goods/services to increase over the next 3 months with the majority of exporters expecting their prices to remain constant.

2%

55%

43% Increase Remain the same Decrease

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey

International Trade and Export

Q9. Price Pressures

Results show

Is your business currently suffering pressures to raise its prices from any of the following: Pay settlements, raw material prices, finance costs or other overheads?

The price pressures in manufacturing continue to be primarily from raw material costs. Service sector exporters are, on balance, mostly seeing price pressures coming from other overheads.

Service

Manufacturing

60% 50% 40% 30% 20% 10% 0%

Pay settlements

Raw material prices

Finance costs

Other overheads

Q10. Factors of concern

Results show

Which of the following factors are more of a concern to your business than 3 months ago?

Exchange rates remain the main area of concern for both sectors. This is followed by business rates and access to skilled labour for manufacturing firms, and the triggering of Article 50 and business rates for service firms.

Access to skilled labour

15%

Business rates Competition Exchange rates Govt. spending cuts Inflation Red tape and regulation Triggering of Article 50

Q1 - 2017

10%

11%

4% 14%

8% Service 11% 13%

17%

9% 6%

11%

16%

Manufacturing

26%

17%

12%

Dates for your Diary

QES Dates for your Diary Q2 2017 Survey open: 22 May to 12 June 2017 QES Breakfast: 18 July 2017 Q3 2017 Survey open: 21 August to 11 September 2017 QES Breakfast: 27 October 2017 Q4 2017 Survey open: 6 November to 27 November 2017 QES Breakfast: 12 January 2018 Take the survey, view past economic trends, and book now for the QES Breakfasts to hear the results first, on the Sheffield City Region Quarterly Economic Survey website. www.screconomy.org.uk

www.screconomy.org.uk @screconomy

Sheffield City Region Quarterly Economic Survey The Quarterly Economic Survey (QES) sponsored

by The Source, brings together results completed

by Sheffield City Region businesses. The survey is conducted by the Chambers of Commerce in Barnsley & Rotherham, Doncaster, East Midlands and Sheffield, with the backing of the Local Enterprise Partnership and support from Sheffield University Management School.

The results are used to influence local, regional and national governments and decision-makers as well as to help shape the support structures available to the local business community. www.screconomy.org.uk @screconomy #screconomy

Š Doncaster Chamber 2017