NORTH WEST BUSINESSES OPTIMISTIC FOLLOWING CHALLENGES OF 2021

Healthy sales and investment outlook despite labour market challenges

The ICAEW’s Business Confidence MonitorTM (BCM) for Q4 2021 found that business confidence in the North West remains firmly in positive territory, despite the present labour market challenges.

Domestic sales and exports have grown whilst customer demand remains a growing challenge. Domestic sales are 3.2% higher year-on-year in Q4 2021 which is in line with the national average. Exports have also recovered, rising by 1.9% over the last year, which slightly outpaces the national rate. And businesses anticipate much stronger rates of growth in the year ahead, as the recovery gains more impetus.

Associated with the healthier demand environment, businesses have started to increase their headcounts. Year-on-year employment growth in Q4 2021 stands at 1.6%. A further 3.0% increase is planned for the year ahead, a near record rate for the region. In conjunction with this, staff development budgets are expected to rise at a similar pace to employment. And as the labour market recovers, so too should average total salary growth. After barely changing during the pandemic, companies plan a 2.9% increase over the coming year.

Q4

2021

Business challenges

Businesses may also be planning to increase salaries to tackle some of the issues that they are dealing with in the labour market. Labour shortages are apparent as many companies try to recruit staff at the same time. Consequently, the availability of management and non-management skills have surged as growing challenges in the year to Q4 2021, with the former cited by 26% of companies and the latter by 38%. Both are record rates for the region since the survey began in 2004. Difficulties in recruitment are also reflected in staff turnover as a growing source of difficulty for 43% of businesses. This is also a record high for the region.

Beyond labour market challenges, transport problems are also widespread, and a more pressing issue for 34% of companies. This is the joint highest rate since the survey began and probably reflects freight capacity constraints as demand surges, including a shortage of HGV drivers. It is also possible that businesses have had difficulties in adjusting to new Brexit-related procedures and border controls. Adding to these obstacles, regulatory requirements are more widely cited in the region as a growing challenge than elsewhere in the UK. Again, Brexit may be part of the explanation here.

It is clear that there are still some significant challenges ahead, however businesses in the North West are well placed to capitalize and achieve substantial growth over the next year or so. We have fantastic breadth of expertise in the region around fintech, digital and manufacturing and it is time for the North West to take the lead and make levelling up happen.