QUARTERLY BUSINESS REPORT
Q4 | 2024
HENRIETTA BREALEY
CHIEF EXECUTIVE OFFICER,
GREATER BIRMINGHAM CHAMBERS OF COMMERCE
As 2024 drew to a close, it’s fair to say it was an eventful year – particularly as we saw the election of a new Government and closer to home, a new Mayor of the West Midlands.
Data from our latest Quarterly Business Report presents a mixed picture as we look ahead to 2025. In light of the business tax rises announced in the recent Autumn Budget and the introduction of the Make Work Pay programme, it was perhaps no surprise to see a record number of firms expressing concerns around the impact of corporate taxation, A fall in recruitment activity and that price pressures were the highest on record since the end of 2022 following Russia’s invasion of Ukraine.
Profitability and turnover projections were also impacted as businesses continue to operate in an uncertain climate. Nevertheless, the data also revealed that both domestic and export activity picked up towards the end of year and recruitment levels remained broadly similar – a testament to the resolve that many businesses continue to display across the region. Looking ahead to 2025, the West Midlands Combined Authority will be delivering its Growth Plan in the coming months which will outline a blueprint for unlocking prosperity and raising productivity –two central tenets which underpinned the work of the Business Commission West Midlands (BCWM). We look forward to working with the Mayor and his team on implementing the recommendations made by the Commission in order to create a platform which allows local businesses to flourish and grow.
ABOUT THE QUARTERLY BUSINESS REPORT
PRO VICE-CHANCELLOR (PVC) ENGAGEMENT, ENTERPRISE AND INNOVATION
BIRMINGHAM CITY UNIVERSITY
The Q4 survey revealed progression in domestic demand recovery, with 47% of firms reporting increased UK sales – an increase of +7 pp over the past three months. However, this was tempered by almost 1 in 5 businesses (19%) reporting a decrease over the same period.
Export activity, which lagged behind domestic sales throughout 2024, showed signs of improvement in Q4, with 33% of firms reporting an increase in sales, custom and bookings – the highest level since Q2 2023. However, a granular view by sector revealed that this was predominantly driven by a 15pp uptick in the manufacturing sector (from 38% to 53%), compared to a decline of -3pp amongst service sector-based businesses to 20%.
Employer cost implications arising from the 2024 Autumn Budget, such as national insurance contributions and minimum wage increases, may have contributed to a tempering of hiring activity. Only 26% of firms expanded their workforce in Q4 (-4 pp from Q3 and -10 pp since the start of 2024). Additionally, fewer than a third of businesses (30%) expected workforce growth in the coming quarter, whilst just 44% of firms reported operating at full capacity – the lowest level since Q1 2021.
Notably from the survey, business confidence weakened considerably over the last quarter, with just 47% of firms anticipating improved profitability – a decline of -10 pp over the past three months. Concerns over profitability were linked to rising costs forecasted for 2025, with half of businesses surveyed anticipating price increases in the next quarter. Manufacturers were particularly affected, with 70% predicting price rises, the highest rate since Q4 2022. Taxation concerns had also surged across the regional business base, cited by 32% of firms (+18 pp from Q1 2024), alongside persistent inflationary pressures reported by 24% of respondents, further straining business optimism.
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 Burton-on-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.
DOMESTIC DEMAND
THE BALANCE SCORE FOR DOMESTIC SALES IN Q4 2024 IS 65, HAVING INCREASED BY 3 POINTS SINCE THE PREVIOUS QUARTER.
Following Q3’s fall in domestic demand (whereby the number of firms seeing an increase in their UK sales fell by 4 percentage points to 40%), Q4 saw strong recovery in this area with 47% reporting an uptick in domestic sales activity. This is 7 percentage points higher than one year ago in Q4 2023 and is the highest figure recorded since Q2 2023, when exactly half of respondents cited an uplift in domestic activity. Furthermore, 35% reported constancy in their domestic sales in Q4, which is 9 percentage points lower than the previous quarter and therefore indicates a prevailing trend of growth in this area for Greater Birmingham businesses. Nevertheless, almost a fifth (19%) of firms found that their UK sales decreased in Q4, which is the highest figure recorded since Q4 2022. This highlights that, despite many businesses experiencing growth, a sizeable minority have experienced a challenging final quarter of 2024.
The sectoral breakdown shows that manufacturing firms continue to face significant challenges to business growth – in this sector, there were almost as many businesses seeing their UK sales decrease as those retaining existing sales volumes (26% and 29% respectively). However, despite these challenges, a significant proportion of the manufacturers surveyed in Q4 have gained momentum in their domestic growth, with 44%
citing an increase in UK sales (up from 31% in Q3). Looking at services firms, 47% saw their sales increase in Q4, which is 6 percentage points higher than in Q3 and is the highest figure recorded since Q2 2023. 36% saw constancy in domestic activity and 17% noted a fall in this area.
Despite the positive trends in domestic activity locally, national data from the Office for National Statistics (ONS) reveals that Q4 began with a slight decline in growth. Monthly real gross domestic product (GDP) is estimated to have fallen by 0.1% in October 2024, largely because of a decline in production output, which fell by 0.6%. Within this sector, there was a 0.6% decrease in manufacturing output and a fall of 3.1% in mining and quarrying. For services, output is estimated to have shown no growth in October 2024 – of the 14 subsectors, seven had increased output, one showed no growth, and six saw output decline. The largest positive contribution in the services sector in October 2024 came from the information and communication subsector, where output rose by 0.9%, closely followed by growth of 0.8% in transportation and storage. These national sectoral trends align with local QBR data for Greater Birmingham, mirroring the distinct challenges faced by manufacturers and services firms and their impact on economic output.
EXPORT DEMAND
THE BALANCE SCORE FOR EXPORT SALES INCREASED BY 4 POINTS TO 58 –THE HIGHEST SCORE RECORDED SINCE Q2 2023.
Overall, 2024 saw export activity struggle to keep pace with the momentum in domestic sales growth, however, Q4 data shows early signs that this trend is beginning to reverse. 33% of firms reported increasing their export sales volumes, which is 6 percentage points higher than in Q3 and is the highest figure recorded since Q2 2023. 49% cited constancy in overseas sales and 18% saw a decrease.
The upwards trajectory of export activity is overwhelmingly driven by manufacturers, amongst which 53% increased their international sales in Q4 (15 percentage points higher than Q3), marking the most significant export growth in this sector since Q2 2019. Nevertheless, a greater proportion of firms in this sector reported seeing their export sales decrease than remain the same as the previous quarter – 26% noted a fall in this area, in contrast to 13% in Q3. Services firms saw more modest export growth in Q4, with the number of businesses increasing sales volumes falling by 3 percentage points to 20%. There is,
however, a strong trend of constancy in export growth in this sector, with 67% having retained existing sales levels (up from 54% in Q3). There has also been a 10-percentage point drop in the number of firms seeing a decrease in export sales to 13% – the lowest figure recorded since Q2 2022.
HMRC statistics on exports from the West Midlands in Q3 2024 show that the value of exported goods has declined. The value of regional exports to the EU has fallen by £0.4bn between Q2 and Q3 to reach £3.3bn, non-EU exports devalued by £0.2bn to £4.8bn and total export volumes across the world were valued at £8.1bn, down from £8.8bn the previous quarter. Given that the total value of imports to the West Midlands was £10.1bn in Q3, the region had a trade deficit of £2.0bn.
WORKFORCE & RECRUITMENT
IN Q4 2024, THE WORKFORCE BALANCE SCORE FELL BY 4 POINTS TO 56 –THE LOWEST SCORE RECORDED SINCE Q3 2022.
Having seen stability in workforce headcount trends throughout the summer, the final quarter of 2024 has seen fewer firms hire staff. 26% of respondents reported increasing their headcount throughout Q4, which is 4 percentage points lower than in Q3 and 10 percentage points lower than at the start of 2024. 60% cited retaining existing staffing levels and 14% saw their headcount decrease. Despite this downturn, 30% of businesses reported that they expect to increase their workforce over the next 3 months. This optimism for recruitment activity in the near future is reflected by the number of firms that attempted to hire staff in Q4 increasing by 2 percentage points to reach 54%. Additionally, the number encountering difficulties in doing so decreased by one percentage point to 66%. On the one hand, this data signals tentative optimism that the prevalent recruitment difficulties seen throughout 2024 may be beginning to level off. However, on the other hand, it cannot be ignored that the increase to employer’s national insurance contributions and the minimum wage outlined in the 2024 Autumn Budget are likely to lead to some businesses taking a more cautious approach to hiring to protect against increased costs.
There was little discrepancy in headcount increases between manufacturers and services firms throughout Q4, with 24% and 26% having increased
their headcount, resulting in balance scores of 55 and 56 respectively.
Nevertheless, data on those businesses that have attempted to hire staff in Q4 and those that have had difficulty in doing so reveals that manufacturers continue to be most significantly impacted by recruitment challenges. Within this sector, 56% of firms attempted to recruit in Q4 (down from 59% in Q3), and 86% cited difficulties in doing so (up from 85% in Q3 and the highest figure recorded since Q3 2023). By contrast, 54% of services firms attempted to recruit (up from 50% in Q3) with 63% reporting having encountered challenges.
The mixed picture of recruitment activity seen in Greater Birmingham is contrasted by clear positive trends at the regional level. ONS data shows that the West Midlands’ employment rate increased by 0.6 percentage points between August to October to reach 73.9%, while the national rate increased by 0.1 percentage points to 74.9%. The West Midlands’ unemployment rate is now in line with the national rate of 4.3%, having fallen by 0.5 percentage points between August and October.
*Please note that the ONS Labour Force Survey (LFS) estimates have been affected by increased volatility, resulting from smaller achieved sample sizes, meaning that estimates of change should be treated with additional caution.
PRICE PRESSURES & EXTERNAL FACTORS
THE PRICE INDEX BALANCE SCORE ROSE BY 4 POINTS TO REACH 75 IN Q4 2024 –THE HIGHEST SCORE RECORDED SINCE THE END OF 2022.
Businesses have dealt with substantial price pressures throughout 2024, which increased significantly towards the end of the year. In Q4, 50% of respondents reported that they expect their prices to go up over the next 3 months, which is 7 percentage points higher than Q3 and the highest figure recorded since Q1 2023. 49% expect to keep prices the same (down from 56% in Q3) and 1% anticipate lowering their prices. Historically, manufacturers have faced greater price pressures than services firms, and this trend became even more prevalent in Q4. 70% of manufacturers anticipated having to increase prices in the next 3 months, which is 20 percentage points higher than the previous quarter and indicative of the most significant price pressures seen in this sector since Q4 2022. A more modest uptick of 5 percentage points was recorded for service providers anticipating price increases next quarter, reaching 47%.
Across all sectors, labour costs have been the most prevalent source of cost pressures, and the proportion of firms citing these has increased by 3 percentage points to 33%, which is the highest figure recorded since Q2 2023. As for the external factors impacting businesses, it is clear that the Chancellor’s measures to increase taxation on firms outlined in the Autumn Budget are continuing to have a significant impact on business confidence. In Q4, 32% of firms cited tax
raises as a growing concern, having increased by 9 percentage points since Q3 and by 18 percentage points since the start of 2024. Most notably, this figure is the highest ever recorded for taxation concerns in the QBR dataset dating back to 1997. Businesses also remain mindful of the impact of inflation, with the proportion of respondents citing this rising slightly from 22% to 24%. Conversely, business rates concerns have diminished slightly and were name checked by 11% of respondents. This remains in line with figures recorded in this area over the past two years, despite the Chancellor’s announcement that the business rates multiplier for SMEs has been frozen.
The slight uptick in concern about inflation is reflected in the ONS’ recent statistics on the Consumer Price Index (CPI) and CPI including occupiers’ housing costs (CPIH), although recent figures remain far below the peaks in both the rate of inflation and businesses’ concern regarding it seen two years ago. In the 12 months to November 2024, CPI rose by 2.6% (up from 2.3% in the 12 months to October), and during the same time period, CPIH rose by 3.5%, having increased from 3.2%. The most significant upwards contributions to the changes in CPIH and CPI came from transport, with CPIH being boosted further by housing and household services.
INVESTMENT & BUSINESS CONFIDENCE
THE BALANCE SCORE FOR TURNOVER HAS DECREASED BY 4 POINTS TO 74, WHILE FOR PROFITABILITY IT FELL BY 8 POINTS TO 64.
Despite heightened concern about price pressures and inflation in Q4, there has been a slight uptick in investment confidence. For capex investment, the balance score increased by 2 points to reach 52 and 22% of respondents reported having revised their investment plans upwards in this area, in comparison to 19% in Q3. 59% retained existing investment levels and 19% looked to decrease such expenditure. Services firms show slightly more investment confidence than manufacturers, with 22% and 19% having increased capex investment respectively.
In line with recent trends, more businesses cite increasing their training expenditure than capex. In Q4, 25% of respondents reported spending more on training than the previous quarter, this measure having increased from 22% in Q3. 59% retained existing levels of investment and 16% invested less. A notable trend amongst manufacturers is that Q4 saw 31% of firms in this sector spending less on training, in contrast to only 19% in Q3. This also led to 44% retaining existing levels of spending in this area in Q4, in contrast to 58% in Q3. As for respondents from the services sector, 61% made no change in Q4 and 13% revised this downwards.
Meanwhile, the positive upturn in business confidence for the next 12 months seen in mid-2024 reversed at the close of the year. 59% of businesses in Q4 were confident that their turnover would
RAJ KANDOLA
DIRECTOR OF EXTERNAL AFFAIRS, GREATER BIRMINGHAM CHAMBERS OF COMMERCE
increase over the coming year, as opposed to 65% in Q3. 30% predicted it would remain the same (up from 25% in Q3) and 11% anticipated seeing a decrease. This decrease in turnover confidence is evident in both the manufacturing and service sectors, but particularly amongst manufacturers. This sector experienced a 12-percentage point decrease between Q3 and Q4 in the number of firms expecting to increase their turnover, falling to 47% – the lowest figure recorded since Q4 2022. Furthermore, 22% of manufacturers cited expecting to see a decrease in turnover over the next 12 months this quarter, in comparison to 9% in Q3. Services firms saw a more modest 6 percentage point decrease in those businesses expecting to grow their turnover, dropping to 60% in Q4.
Across all sectors, the fall in confidence relating to profitability has been more pronounced than that for turnover, which is no doubt reflective of anticipated cost increases facing many employers from April 2025 onwards. In Q4, 47% of businesses cited expecting to improve their profitability over the next 12 months, which marks a 10 percentage-point drop compared to Q3. 33% reported expecting their profitability levels to remain constant (up from 30%) and 20% expected to see a decrease (up from 14%). Manufacturers in particular expect to see a decline in profitability, with 28% of respondents citing this in Q4 as opposed to 16% in Q3.
The Chancellor has been very clear from the outset of her tenure that she will maintain resolute fiscal discipline in order to unlock growth in the coming months and years
However, recently, questions have been asked about the approach undertaken by the new Government, particularly in light of the announcements made at the Autumn Budget and with the introduction of the Employment Rights Bill given the knock-on impact on the business community. At the start of January, Government borrowing costs were on the up – with 10-year gilt yields reaching a 17-year high and the 30-year gilt yield up to its highest level in 27 years.
Nevertheless, it’s also clear this issue isn’t unique to the UK as borrowing costs have risen for the likes of Germany, France and Italy with the possibility that global markets are responding to President Trump’s plans to raise tariffs and the impact this could have on US inflation and interest rates. Ultimately, if the Chancellor is to remain within the constraints of her chosen fiscal parameters, then clearly this will have an impact on tax and spending plans and the pathway to growth.
As our data reveals, business confidence has been shaken, with turnover and profitability projections taking a notable hit and price pressures remaining a prominent obstacle to growth for the majority of businesses across the region. The Government must use the upcoming Comprehensive Spending Review to set out a vision that will restore confidence, drive foreign direct investment and ultimately give businesses the spur they need to invest in new products and services and developing their staff –a key factor in raising stagnant levels of productivity.
ABOUT GREATER BIRMINGHAM CHAMBERS
OF COMMERCE
The Greater Birmingham Chambers of Commerce is a membership-led, business support organisation that has acted as the voice of local businesses since 1813. Today, we continue to connect, support and grow local businesses.
We are one of the largest Chambers in the country, with 2,500 member companies covering six geographic areas across the region (Birmingham, Burton, Cannock Chase, Lichfield and Tamworth, Solihull and Sutton Coldfield) and four themed divisions (Asian Business Chamber of Commerce, Future Faces, the Transatlantic Chamber of Commerce and the Greater Birmingham Global Chamber of Commerce).
Members range from young professionals to SMEs and large, high-profile organisations, including 37 Chamber Patrons comprising companies such as RSM, HS2 and The NEC Group.
ABOUT BIRMINGHAM CITY UNIVERSITY
Birmingham City University (BCU) is a dynamic practice led, research inspired anchor institution with 30,000 students from 126 countries, contributing £392m GVA annually to regional GDP (£532m nationally). It comprises four faculties delivering 1,000+ courses, supported by 1,545 practice-based academics.
BCU’s ‘University for Birmingham’ mission reflects its civic university role, with a strategy which places regional engagement at the core of its ambition. The University has an established national and international profile for its work on STEAM (STEM with Arts) – an approach that uses interdisciplinary and trans-disciplinary thinking, stimulating new knowledge and ideas, supporting open innovation and regional growth, and driving talent to support future employer needs.
BCU actively engages with 3,000+ businesses regionally, nationally and internationally and has extensive sector linkages driving research, collaboration and innovation around identified priority areas and economic strengths including creative and digital, health, and green technologies. In 2021, the University secured the Investor in Innovation standard from the Institute for Innovation and Knowledge Exchange in recognition of its work with businesses and partners to drive innovation and growth – just the second university in the country to be handed the accreditation.
QUARTERLY BUSINESS REPORT CONTACTS
If you have any further questions on the report, please contact Gemma Dilkes on G.Dilkes@birmingham-chamber.com
For more information, go to greaterbirminghamchambers.com Join the conversation by following @grbhamchambers and using #GBCCQBR