Quarterly Business Report

Henrietta Brealey

The final Quarterly Business Report of 2022 looks back at the last three months of another rollercoaster year for businesses and customers alike. The repercussions of Russia’s invasion of Ukraine continue to reverberate across the globe and the ongoing impact continues to be felt by businesses across Greater Birmingham. The data from our latest Quarterly Business Report revealed that price pressures for businesses reached a record high, concerns over the impact of interest rates reached levels not witnessed for twenty years and recruitment challenges remain ingrained as the cost of doing business crisis continues to bite.

Despite these well documented challenges, cautious optimism abounds as we enter 2023. It’s heartening to see that the majority of businesses expect their profits and turnover to go up over the next 12 months. Domestic sales remain anchored in positive territory, export activity picked up this quarter for service firms and we saw a greater number of businesses investing in training their staff this quarter which underlines the durability and resilience of the Greater Birmingham business community. Reflecting on the last twelve months, it was brilliant to see our fantastic city shine on the international stage as the 2022 Commonwealth Games captured the imagination both home and abroad. It’s essential we harness the spirit of those amazing two weeks in July to deliver a lasting legacy for our region that will drive long term economic growth and unlock the potential that exists at the heart of Greater Birmingham.

Professor Julian Beer

Deputy Vice-Chancellor Birmingham City University

A review of macro trends across the year indicates an increase in the proportion of businesses anticipating reduced turnover and profitability (+7 and +13 percentage points respectively between Q1 and Q4); decreases in both sales and advanced orders, and limited labour force growth.

Whilst maintaining this broader view is important, we also know that businesses, especially SMEs, are affected by seasonality in terms of the demand for products and services, cashflow, and associated workforce size. For example, when comparing the Q4 position with the previous quarter, recruitment saw an uplift of +9 percentage points in the proportion of firms looking to recruit, and an associated reduction (albeit slight) in respondents who had experienced recruitment difficulties.

Reflecting investment plans between Q3 and Q4 - whilst caution remained in terms of the planned purchase of equipment, there was an uplift of 5 percentage points in the number of businesses planning to invest in training. Another positive trend between Q3 and Q4 was that fewer businesses were found to suffer from pressure to raise prices as a result of labour costs (-4 percentage points), raw materials (-3 pp), utilities (-8), and fuel (-3).

As we move into 2023, the latest survey results provide cause for cautious optimism. However, with continued fluidity in the macro-economic picture, damaged consumer confidence, and no immediate end in sight regarding geopolitical tensions, the business operating environment will remain uncertain.

In terms of the labour market, employment intentions were found to have slowed with two thirds of businesses (66%) indicating that their workforce will likely remain constant over the next 3 months. Of those looking to recruit, whilst difficulties appear to have stabilised somewhat since Q2, at 71% of firms experiencing challenge, this still remained high. Particular challenge was found with regard to professional/ managerial and skilled manual/technical categories of employee, perhaps reflecting increased caution amongst employees in changing jobs.