About the Quarterly Business Report

The Greater Birmingham Chambers of Commerce’s (GBCC) Quarterly Business Report offers an up-to-date snapshot of the performance of the Greater Birmingham business community. It is the most comprehensive, regular report of its kind in the city-region. Underpinning our report is data gathered from quarterly surveys on key indicators such as sales, exports, investment intentions and the workforce. The Greater Birmingham Quarterly Business Report launched in 2016, succeeding the previous Quarterly Economic Survey Report.

The Chamber surveys businesses across the Greater Birmingham area, which includes Birmingham, Solihull, Sutton Coldfield, Lichfield and Tamworth, Cannock Chase and Burtonon-Trent. Balance figures are determined according to business responses to the indicators: an increase (multiplied by 1), remain constant (multiplied by 0.5), decrease (multiplied by 0).

A figure over 50 is indicative of growth; a figure under 50 represents contraction. Note that figures may not always total exactly due to rounding differences.

The domestic sales balance score fell for the third consecutive quarter but remains in healthy territory.

In total, 40% of businesses reported an increase in UK sales (slightly lower than the 41% recorded in Q3), however, this was offset by the fact that 21% of firms saw their domestic sales fall in the current quarter (an increase of 5% compared to the previous quarter) which led to a two-point drop in the balance score to a figure of 60. A similar picture emerged in the individual sectors. The service sector balance score for UK sales fell by three points to a figure of 62 – much of this was down to the fact that 18% of service firms noted a fall in sales this quarter (an increase of 3% compared to Q3). Challenges were more pronounced in the manufacturing sector as the domestic sales balance score fell to 49 – the first time the score had entered negative territory since the start of 2021. 36% of manufacturers saw their UK sales drop in Q4 (compared to 24% in Q3) which was the predominant driver behind the balance score falling by four points.

Looking ahead to Q1 of next year, the domestic orders balance score for both sectors combined fell by two points to a figure of 57 as 21% of firms expect their UK sales to decrease in the next three months (up from 19% in Q3). In December, the ONS revealed that UK GDP was estimated to have fallen by 0.3% between July and September 2022. Whereas the service sector grew by 0.1%, output fell in the production sector by 2.5% and the construction sector by 0.2% which added to the expectation that the UK is facing the prospect of a recession as we enter 2023.

PRICE PRESSURES & EXTERNAL FACTORS

A total of 58% of businesses across the two sectors expect their prices to go up as we head into the new year (compared to 55% in Q3) whereas 41% suggested that their prices would stay the same (compared to 43% in Q3) which led to the balance score go up by two points. In terms of the main reasons cited by businesses as to why they were under pressure to raise their prices, 26% cited labour costs, 23% cited cost of utilities and 17% referred to fuel costs. The cash flow balance score also picked up for the two sectors combined but remains close to negative territory at 51. 26% saw their cash flow situation improve compared to three months earlier –a five percent increase from Q3, which led to the rise in the balance score.

On 15th December the Bank of England announced it had raised interest rates for the ninth time in a row, with a 0.5% increase to 3.5%. Within this context, it was no surprise to see a fifth of businesses noting an apprehension around the impact of interest rates – an increase of 2% compared to Q3. Concerns around corporate taxation (from 13% to 15%) and business rates (from 10% to 11%) also proved to be more prominent this quarter. However, this was perhaps no surprise given that the Chancellor confirmed at the recent Autumn Statement that the planned increase in Corporation Tax to 25% for companies registering profits over £250,000 would go ahead. The annual rate of inflation in the UK eased to 10.7% in November from 11.1% and it was pleasing to see concerns related to the impact of inflation lessened amongst local firms this quarter (down from 40% to 35% but still one of the largest percentages on record).

Export activity picked up for service firms, however, challenges persist for manufacturers as the export order balance score entered negative territory

Across the two sectors combined, 29% of businesses reported an increase in their international sales, an uplift of 4% in comparison to the previous quarter which led to the overall balance score going up by two points to 54. It was reassuring to see the service sector balance score return to positive territory as 27% saw their export sales rise in the last three months (an increase of 8% from Q3) and 20% noted a fall (down from 27% in Q3) which meant the balance score rose from 46 in Q3 to 54 in the current quarter. By contrast, the export sales balance score for manufacturers fell by 7 points to 55 – 24% of manufacturing businesses saw their export sales decrease in Q4 (14% higher than the figure recorded in Q3).

The diverging trend across the two sectors also occurred in relation to export orders. The overall balance score went up by a solitary point to 55 as a greater percentage of businesses in both sectors reported constancy in their non-UK orders for the next three months (up from 51% to 55% in Q4). The service sector balance score witnessed a healthy uplift of 9 points to 57 (with a greater number of service firms expecting their export orders to stay the same next quarter, up from 52% to 62% in Q4). However, the manufacturing balance score for export orders went down by 14 points to a figure of 48, the first time the indicator had entered negative territory since Q4 2020- just under a third of manufacturers anticipate their advanced international orders to fall in the next three months (compared to a figure of 14% in Q3).

Nationally, the value of goods imported decreased by £1.4bn in October 2022, however, when removing the effect of inflation, the import of goods increased by £0.9bn. The value of goods exports fell by £0.7bn (2.2%) in October 2022, with exports to both EU and non-EU countries falling, once the effect of inflation was removed, the export of goods decreased by £1.3bn. For those businesses that are currently experiencing trade related disruption, the GBCC International team is on hand to provide dedicated support and services for exporters and importers. Companies can seek assistance with trade documentation, overseas market information, translation services and foreign currency exchange support – full details can be found on our website.