Greater Manchester Chamber’s
Quarterly Economic Survey Full Report & Economic Brief Quarter 4 2011 www.gmchamber.co.uk
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Chief Executive’s Foreword This quarter’s survey response has been a record for the Chamber, with 827 businesses seeing the importance of sparing just a couple of minutes to complete the survey. I extend my thanks to all that have participated and would encourage those that have yet to respond to do so in Q1; you will be surprised, as many are, to find just how simple the survey is to complete and how effective the results can be. As 2011 draws nearer to a close it seems the uncertainty and weakness of the current economic climate that developed during the summer months across Europe and the global economy remains very much with us. Our quarter three survey opened with an overview that the economy was proving resilient, perhaps more so than expected, though looking into quarter four future demand appeared to be weak. On balance demand has eased only slightly and a fall off expected off the back of the Q3 results has not materialised. The outlook remains challenging however we continue to see resilience in the business community of Greater Manchester. Clive Memmott Chief Executive, Greater Manchester Chamber of Commerce
Government austerity, weak consumer demand and concern over the health of the economies of our main trading partners in Europe continue to weigh heavily on our prospects for growth. With that in mind the Chamber, backed by members’ evidence, has put forward a strong case for improving domestic demand, encouraging exports and putting
in place the policies that will improve the country’s long term ability to compete. We are pleased that a considerable amount of that message has been heard and the Chancellor’s Autumn Statement included measures for infrastructure investment, regulatory reform, support for exporters and measures to provide training opportunities for our young people, too many of whom continue to face considerable challenges when seeking employment. Looking back and taking up valuable time and resources describing how things might have been done differently serves no purpose now, so we must look forward and grasp the opportunities ahead and work to ensure that projects get underway without further delay and businesses are supported. It is with this forward-looking outlook that the Chamber remains upbeat on the prospects for the Greater Manchester region. We continue to be realistic about the immediate prospects for the region and 2012 will bring another challenging year of weak growth. Sectoral and sub-regional experience of the slow growth environment will vary considerably with some areas failing to register growth in the months ahead. The knock-on impact of this for job creation is also weaker, though our region appears to be holding its own at present against the challenge of public sector job losses and weak household demand. As the year progresses, inflationary pressures will ease though further rounds of government spending cuts and job losses will continue to hold back consumer confidence. Key to improving prospects in the New Year will be those infrastructure projects that will provide much needed work for the construction sector. It is by listening to the views and opinions of the Chamber’s membership that we are able to accurately report on business conditions and highlight what is needed to support the area’s economy. The Quarterly Economic Survey is the most effective tool we have for engaging as broad a base of businesses as possible. The value of this data cannot be understated and it has been crucial to our understanding of the impact of the austerity measures and the challenging global environment on businesses across the region. Indeed, it will be through the Quarterly Economic Survey that the Chamber will get the first indication as to whether the Chancellor has made the right decisions or whether more needs to be done. Once again I sincerely hope you enjoy the brief, and I look forward to your continued support.
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Contents Section
Page
Economic Outlook
4
Survey Summary for Manufacturing
5
Survey Summary for Services
6
UK Sales and Orders
7
Export Sales and Orders
8
Employment and Recruitment in Manufacturing
9
Employment and Recruitment in Services
10
Business Confidence
11
Investment Intentions
12
Cashflow and Prices
13
Price pressures and external factors: Manufacturing
14
Price pressures and external factors: Services
15
Recent Quarter Results - Manufacturing
16
Recent Quarter Results - Services
17
Appendix 1 - Manufacturing Sector Split Q4 2011
18
Appendix 2 - Manufacturing Sector Split Q3 2011
19
Appendix 3 - Background Economic Data About the Survey Autumn Statement 2011 Update
20-21 22 23-25
For more information
26
Action For Business - Update Q1 2012
27
Action For Business - Our Mission
28-29
3
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Economic Outlook The backdrop of economic news this quarter four gives me a sense of déjà vu, and that we were here three months ago for our Q3 update. What is clear is that our anticipation that growth would be weak for some time has proved a more realistic projection, and the update from the Office of Budget Responsibility (OBR), presented alongside the Chancellor’s Autumn Statement at the end of November, confirms what the rest of us already knew and have in fact anticipated for some time.
Dr Brian Sloan Chief Economist, Greater Manchester Chamber of Commerce
Updated forecasts The highlights of the OBR’s forecast are that growth will be slower in 2011 at 0.9% (down from 1.7%) – in fact slower in each year until 2014 (2.7% down from 2.9%) – and as a consequence of higher unemployment than forecast (peaking at 8.7% or 2.8m in Q4 2012 instead of 8.1%), borrowing will be higher. As a result the Chancellor has announced that public sector cuts will go on for a further two years in line with the 2010 spending review. The Government’s plan is to now balance the books by 2016/17. The OBR handed the Chancellor a “Get Out of Jail Free” card, blaming the debt crisis in Europe for slow economic growth in the UK and they claim the domestic economy has been hit by an unexpected external inflation shock.
Help for exporters Whether growth could be foreseen to be so weak or that inflation would get so high will be the subject of intense debate, but the Chamber has been arguing for some time that domestic demand would be weak and growth in 2011 would not match expectations. Given the economy’s exposure to our traditional export markets, which themselves are exposed to debt and austerity, the Chamber had called for more needed to be done to support our exporters to access emerging markets, and the Autumn Statement delivered on that call. Growth will remain weak Conditions are likely to remain challenging through 2012 with weak growth as consumer spending, the main component of UK growth in 2010, will also remain weak. Further holding back the recovery is the much needed rebalancing of the economy towards the private sector and exports. This has yet to be realised and has indeed suffered a setback as our major trading partners in Europe are seeing weaker growth. Retail sales have improved slightly in recent months, but come off the back of a flat picture, and the heavy pre-Christmas discounting is indicative of the challenges faced by retailers who will see their margins squeezed. Inflation will fall as the impact of the VAT increase and higher fuel and energy prices drop out of the annual measure, but incomes have not kept pace. Infrastructure investment The Chamber is pleased that the Autumn Statement has put in place the plans for infrastructure investment which will be a key element of driving demand in the region’s economy and establishing the longer term attractiveness of our region for inward investment. There were also policies targeting unnecessary legislation and improving the skills of our young people, but the infrastructure investment and projects need to be underway now. The time taken for Regional Growth Fund money to get into place is a powerful example of how long it can take to get these projects up and running. Credit easing The Chancellor also announced measures on credit easing and financing in response to the difficulties that many firms are having accessing finance. A number of measures have been announced, though the Chancellor himself admits that he is not clear on how some of these schemes will work at present, but we should be thankful that they are on the table. Proposals for credit easing should permit banks to provide cheaper loans to businesses as they are underwritten by the Treasury, but will this work in practice? Will the price of lending remain at current levels? The concern is that many smaller businesses remain fearful of approaching the banks, thereby suppressing demand, but at least this time monitoring of net and new lending is to be put in place, showing that lessons have been learnt from the Project Merlin agreement. Region holding up and better placed The challenges are evident, though this quarter’s survey shows the Greater Manchester region is performing well against the backdrop of gloomy domestic and Eurozone outlooks. There is a slight easing of demand, though this has not dramatically fallen away since the Q3 survey and, as a consequence, confidence has eased but remains positive. Understandably, given the uncertainty, investment has also eased, but again it remains positive and it is investment in people that is strongest. With the capacity to deliver growth, the region is both well placed and showing the resilience to respond to the current economic challenges.
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Survey Summary for Manufacturing The broad manufacturing sector measures saw continued growth in the domestic market at the same level as Q3, though there has been an easing of export demand. Within the detail, the manufacturing sector continues to see growth, albeit easing slightly over recent months. Construction firms have had better quarter with domestic demand showing growth after an almost flat Q3. The manufacturing sector is continuing to experience growth and outperforming much of the rest of the economy. The broad manufacturing results are split into manufacturing and construction respondents in the appendix. The domestic market balances for sales and orders have both remained steady at +9% for sales, indicating growth, and orders have remained flat. Export sales and orders have also continued to grow, though the pace of that growth slowed this quarter to +11% and +9%, down from +20% and +19% respectively. Manufacturers themselves, whilst seeing growth continue, saw demand ease on all measures. Domestic sales and orders were down three points and two points to +9% and +5% respectively, whilst the export measures were down five points and six points to +13% and +8%. Constructors saw the domestic sales balance increase five points to +6% continuing the improvement seen from Q2’s -26% that coincided with the most challenging quarter for the sector in over 10 years based on Office of National Statistics data. Positive private job creation continued across the sector in Greater Manchester, slightly ahead of expectations of Q3, and at +14% is not quite hitting the high of +15% in Q3 2007, though the expectation looking ahead has seen something of a downturn to -1%, the lowest balance since Q3 2009. Manufacturing job creation has been steady this quarter, but has weakened ahead, leading to the broad measure turning negative as the construction outlook for job creation remains negative. Investment in training is once again up in the manufacturing sector, increasing three points to +12%, the highest level since Q3 2008. Despite this, investment in plant and machinery is down at +5%, but remains positive. Confidence across the broad manufacturing sector has dipped back. Having improved in Q3, it is now back at the Q2 levels; turnover is now +15% and profitability 0% (+23% and +6% in Q3 2011). Manufacturers’ confidence is down on Q3, whereas constructor confidence has improved, perhaps indicating the sector’s emerging growth prospects. The cashflow situation across the sector appears to have deteriorated to -11%, though the balance of manufacturing and construction firms responding this quarter has changed the measure and each sector is seeing a similar situation to Q3. Therefore news of the Government’s financial support for construction firms with projects that have planning permission will be very welcome, as these firms continue to see finance challenges. Intentions to increase prices have eased considerably across the sector this month, even within manufacturers themselves. The measure has fallen 15 points from +27% to +12%. Raw material prices have fallen further, easing the pressure on firms and there has been a fall in pressure from wage settlements. Inflation concerns have fallen back for the third consecutive month, suggesting that inflationary pressures may be easing through supply chains. Whilst there may have been concerns in Q3 that performance in the manufacturing sector would be much weaker this quarter given the ongoing situation in the Eurozone, and the sector’s reliance on exports, the measures recorded here are perhaps better than expected. A softening of demand has led to an easing of confidence and intentions to recruit moving into the New Year, but this is a low growth environment and it is encouraging to see positive investment plans. Investment in infrastructure should help to stimulate both the construction sector and subsequently domestic demand for manufacturing as the recovery progresses, but one eye should be firmly on the shift to support and encourage exporters looking to emerging markets, as these offer the potential for growth in the future despite the current global slowdown.
5
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Survey Summary for Services After a concerning downturn in export demand in the service sector in Q3 it was reassuring to see that the sales measure remained flat across Greater Manchester for Q4. Though the export order measure continued to indicate anticipated contraction, the nature of demand in the sector means this measure can understate the outcome in the months ahead. It is however the weakest this measure has been since Q3 2009. The domestic market has continued to enjoy growth and only a slight downturn in order is recorded. Removing the recently strong financial and professional services sector from the analysis does weaken the demand measures, suggesting that conditions remain challenging, particularly in the areas beyond Manchester city centre. The service sector domestic market across Greater Manchester continues to see sales order growth, the same as the figure recorded in Q3, and orders have deteriorated to -2%. Export sales and orders are understandably poor, but the sharp downturn seen in Q3 has not continued and the fall has come to a stop with a sales measure flat. Export orders have deteriorated further, down five points to -7%. Domestic demand has help to sustain job creation in the service sector at +8%, down from +13% in Q3. Whilst this has not met expectations of Q3 (+19%), it is nonetheless positive and helping to keep down unemployment in the region and maintain consumer confidence and economic activity. The claimant count fell in the most recent month’s data, but looking ahead expectations have weakened to +8%; interestingly beyond financial and professional services, firms’ expectations to recruit are stronger. We repeat that this optimism should be treated with caution as the service sector has typically anticipated creating more jobs than it has gone on to actually create since the onset of the recession. Confidence across the service sector has remained positive and steady in spite of the tough conditions. The turnover measure fell by four points to +29%, though profitability was up three points to +21%. The overall cashflow balance, whilst still negative and indicating challenging conditions, has eased to -2% from -8% in Q3. Although this is the best outcome on this measure since Q4 2007, it still remains the smallest of businesses that are the hardest hit as these are more liquidity constrained. Perhaps indicative of easing demand, plans for investment have also eased slightly; plans for plant and machinery and training are +2% and +5% respectively, down from +3% and +8% in Q3. A slight increase in the proportion of service sector businesses operating at capacity to 36% has also led to a rise in the balance intending to increase prices in the coming months, up 8 points to +26%. However, this balance is coming more into line with the longer-term trend for this measure after a dip in Q3. Inflation concerns have eased in the sector, with finance costs being the factor increasingly of concern to those in services with a rise of five points. This quarter’s service sector performance demonstrates some resilience to the challenging economic backdrop. Although performance in terms of demand measures is improved by the better performing financial and professional services sector, the wider service sector can be seen to be maintaining confidence, investment and employment creation. The recovery remains fragile and that this is indicative of the low growth environment that we are in at present as the economy readjusts. As some have been overly optimistic with recent forecasts for growth they are now overstating the gloom and whilst recognising the difficulties at present we do not share this pessimism.
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
UK Sales and Orders UK Sales Manufacturing
Service
50 40 30 Net Balance %
20 10 0 -10 -20 -30 -40 -50 -60
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Broad manufacturing has held level this quarter with sales at +9% and orders remaining flat (their position for three of this year’s quarters). Within these figures there lies a different sectoral picture: narrow manufacturing has seen its sales figures ease three points to +9% whilst its future order book fell a small two points to +5%. Construction, however, has had another difficult but more positive quarter than last, seeing its sales increase by five points to +6% and fewer companies recording a contraction in their order books as that measure has risen from -18% to -9%. The service sector has, since the recession, proved to be more resilient than the broad manufacturing measure, recording only one negative quarter in sales over the past two years. This strength remains in GM this quarter, with sales remaining steady at +9%. The outlook, however, is less certain as the order measure falls four points into negative territory at -2%. This measure was negative in Q3 2010 and Q1 2011 but, with the exception of a small contraction only once to -1% in Q1, sales have been broadly positive; a contraction in Q1 is, therefore, far from certain.
UK Orders Manufacturing
Service
40 30
Net Balance %
20 10 0 -10 -20 -30 -40 -50 -60
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
7
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Export Sales and Orders Manufacturing Exports Export Sales
Export Orders
30 20
Net Balance %
10 0 -10 -20 -30 -40 -50
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Following strong growth in both narrow manufacturing and construction last quarter in export markets, manufacturing has seen both sales and orders return closer to their two-year trend with falls of nine and ten points respectively to +11% and +9%. The construction sector was the largest contributor to the downward trajectory, seeing a 25-point drop in export sales to -5% and a huge 39-point drop in export orders, though the measure remains positive at +5%. Following a steep decline in exports from the service sector in quarter three, this quarter provides some respite from a contracting market. Orders have continued to decline, though at a much slower rate, and the measure now stands at -7%, a fall of only five points compared to last quarter’s decline of sixteen points. Export sales from this sector have ceased contraction this quarter and the measure is now flat, a small rise from Q3’s figure of -3%.
Service Exports Export Sales
Export Orders
20
Net Balance %
10 0 -10 -20 -30 -40
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Employment & Recruitment in Manufacturing Employment in Manufacturing Actual Change
Expected Change
20 15
Net Balance %
10 5 0 -5 -10 -15 -20 -25 -30
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Manufacturing sector employment has gained some ground this quarter, nudging up one point to +14%. Driven by a large increase from construction companies (up seven points to +10%), this is the highest figure since Q3 2007; narrow manufacturing shows a one-point fall to +14%. Expectations for the first quarter of 2012 have, however, declined further on top of last quarter’s fall and now indicate the possibility of contraction at -1% for the first time in nine quarters. For the past year, manufacturing employers have been rather pessimistic about their employment expectations with the outcome having been better than predicted throughout 2011, so there may yet be cause for some optimism. The number of manufacturing firms attempting to recruit to positions has been level for three quarters at +51%, marginally above its long-term average, and is broadly equal between narrow manufacturing and construction. The measures for the types of job being recruited for are broadly similar to those of the previous quarter, though there has been a noticeable decline in the number of permanent jobs being sought. Down 15 points to +32% across the whole sector, this hides a large drop of 29 points (to +24%) within construction; permanent positions within narrow manufacturing has fallen by 10 points to +39%. Recruitment difficulties have risen this quarter to stand at +69% from Q3’s figure of +63%. Construction companies report a ten-point drop in the difficulty of recruiting to professional/managerial positions whilst reporting an eight-point rise in the trouble of filling clerical posts. Narrow manufacturing reports clerical positions as being easier to fill this quarter, with the index falling six points to +22%.
Recruitment in Manufacturing % Tried to Recruit
Recruitment Difficulties
80 70 60
%
50 40 30 20 10 0
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
9
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Employment & Recruitment in Services Employment in Services Actual Change
Expected Change
30 25 20 Net Balance %
15 10 5 0 -5 -10 -15 -20 -25
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Whilst manufacturing has accurately anticipated employment expectations, the service sector has consistently been overoptimistic about its recruitment intentions. Only in three quarters over the last eight years has the sector achieved or passed the recruitment levels that it predicts. As the sector’s employment index has fallen this quarter by five points to +8%, the same level as its intention to recruit for next quarter, the over-optimism that we have seen in these figures historically may suggest that Q1 2012 could be flat or even negative for employment in this crucial sector. The number of companies within the sector attempting to recruit has remained broadly level, though there is a larger increase in the number recruiting to temporary positions (up four points to +22%) than to permanent positions (up two points to +33%). A similar number of companies this quarter are reporting recruitment difficulties (+68%) whilst those reporting that professional/managerial positions are hard to fill have eased by five points (+26%), the same margin by which the difficulty in filling semi/unskilled positions has risen, and now stands at +16%.
Recruitment in Services % Tried to Recruit
Recruitment Difficulties
80 70 60
%
50 40 30 20 10 0
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Business Confidence Manufacturing Confidence Turnover
Profitability
60
Net Balance %
40 20 0 -20 -40 -60
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Business confidence across the broad manufacturing sector for 2012 has eased this quarter on both measures, erasing the gains made last quarter. Turnover confidence has fallen seven points to +15%, only one point above the 18-month low it saw in quarter one of this year. This fall is driven by a larger fall within narrow manufacturing of 11 points this quarter to +27%; construction has gained nine points in this index for Q4, bringing this index back into the black at +3%. Confidence in turnover for next year has eased back slightly for the service sector, too, though unlike manufacturing this is for the second consecutive quarter. Standing now at +29%, a decline of four points on the quarter, this measure remains below its long-run average. Profitability for the manufacturing sector has also fallen this quarter and now stands flat, a six-point fall on quarter three and driven entirely by a decline in this index for narrow manufacturing; construction profitability has risen by five points but remains firmly in negative territory at -20%. In contrast, the service sector has shown a small increase in its profit expectations. This measure rose by three points to 21%. Data from within the financial and professional services sector within Manchester city centre shows, on average, a greater confidence for increased turnover during 2012 as well as for profitability, though the latter is less prominent.
Service Confidence Turnover
Profitability
60 50
Net Balance %
40 30 20 10 0 -10 -20 -30 -40
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
11
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Investment Intentions Investment in Plant and Machinery Manufacturing
Service
40 30
Net Balance %
20 10 0 -10 -20 -30 -40
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
The sharp rise in recruitment difficulties for construction firms appears to be feeding through into higher budgets for staff training as it becomes clearer that the required skills cannot be easily found in the marketplace. Along with a one-point rise in this index for narrow manufacturing, the broad measure has risen by three points this quarter to +12%, the sector’s long-term average; this level was last reached in the third quarter of 2008. Plant and machinery investment has, however, eased this quarter in both manufacturing (down five points) and construction (down one point) to stand six points down on the broader measure at +5%. The service sector’s training investment plans remain well below their long-term average of +16%, standing at +5% this quarter, down three points from quarter three. The same is true for plant and machinery investment which, at only +2% (from +3% in Q3) also remains below the +9% average for the sector.
Investment in Training Manufacturing
Service
30 25
Net Balance %
20 15 10 5 0 -5 -10 -15
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Cashflow and Prices Cashflow Manufacturing
Service
20 10
Net Balance %
0 -10 -20 -30 -40 -50
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Cashflow, a measure which has been hit particularly hard since the onset of the recession and is so important to business solvency has, in the service sector, climbed six points to -2%, a figure which, whilst still negative, has not been reached since Q4 2007. With profitability continuing to increase for the sector this quarter, if the (pessimistic) forecast downturn in orders fails to materialise in Q1, this sector may lift its cashflow positive for the first time in four years in 2012. The sector’s intention to increase prices has risen eight points to +26% this quarter. Whilst this measure has been higher during 2010/11, the broad trend for this index appears to be levelling out, indicating that broad inflationary pressures may be easing. Manufacturing sees continued decline in inflation with its third consecutive quarter of a decline in the pricing measure to +12%, a fall of 15 points. As highlighted later in this report, the high pressures on prices from raw materials experienced over the past few years are continuing to ease and this trend appears to becoming embedded in future price setting policy within the sector. This trend appears in both narrow manufacturing and construction; the measure for the latter is now, on balance, at -5%. Whilst the pressure on inflation appears to be easing for manufacturing firms, the cashflow measure has also contracted this quarter. Falling back five points to -11%, the figure masks a broadly level figure of -1% for narrow manufacturing (down one point) and a more critical problem for construction companies whose cashflow index this quarter has retreated a further two points to -26%.
Intentions to Increase Prices Manufacturing
Service
70 60
Net Balance %
50 40 30 20 10 0 -10 -20
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
13
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Price pressures and external factors: Manufacturing Pay Settlements
Raw Materials
Financial Costs
Other Overheads
100 90 80 70
%
60 50 40 30 20 10 0
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
As discussed earlier, the principal inflationary pressure within manufacturing over a number of years has been raw materials. This measure is now in its second consecutive quarter of decline (by 12 points to +57%, though the greatest contribution to this fall is from construction with a fifteen-point decline against only five points for narrow manufacturing), though the trend of easing below the long term average in this index began in late 2008. Pay settlements and other overheads also both fell this quarter (by four and five points each respectively, to +18% and +41%), strengthening the evidence for a general weakening of price pressures, though finance costs have risen this quarter, perhaps due to the continued under-supplied credit markets, with this measure now standing at +21%, a one-point increase on quarter three. External factors are, in broad terms, relatively stable across the 2011 average, though inflation is now in its third consecutive quarter of decline as a principal issue, registering +43%, a one-point fall from Q3 and 13 points below Q1 2011. Exchange rates, business rates and competition have all also seen small declines on last quarter’s figures; however interest rates and corporate taxation have both increased slightly by three and two points respectively.
Interest Rates
Exchange Rates
Business Rates
Inflation
Competition
Taxation
70 60 50
%
40 30 20 10 0
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Price pressures and external factors: Services Pay Settlements
Raw Materials
Financial Costs
Other Overheads
80 70 60
%
50 40 30 20 10 0
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
The service sector showed a large decrease in all of its input prices leading into 2010 and all measures have remained broadly level since then. This quarter has seen a steeper than usual rise in the measure for financial costs (up five points to +19%); this is most likely driven by the same issues affecting manufacturing, i.e. the decreased availability of credit in the banking markets. Pay settlements, however, have been increasing slowly but steadily for the past two years. This quarter has seen a one-point rise to +12% – not a large amount in itself – but a continued rise in this indicator, which is the largest single contributor to the service industry’s costs, could keep inflationary pressures on prices on the upside. Like manufacturing, external factors have remained broadly steady over the year, though concerns over interest rates have declined quarter-on-quarter and now stand at +20%, two points lower than quarter three and twelve points down on Q1 2011. Business rates and competition worries are both slightly higher this quarter by two points (to +26% and +43% respectively) whilst exchange rates and inflation concerns have eased this quarter by four points each to +16% and +40% and corporate tax concerns have dropped by three points to +24%.
Interest Rates
Exchange Rates
Business Rates
Inflation
Competition
Taxation
50 45 40 35
%
30 25 20 15 10 5 0
Q4-10
Q1-11
Q2-11
Q3-11
Q4-11
15
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Recent Quarter Results - Manufacturing Deliveries & Orders
Q4-10
Q1-11
Q2-11
Q3-11
-2
-6
9
9
UK orders
0
-7
0
0
Export sales
20
9
20
11
Export orders
12
11
19
9
0
7
13
14
UK sales
Labour Employment in the last quarter Employment expectations for next quarter
6
11
8
-1
% Tried to recruit staff
41
51
51
51
If yes, were they for:
% Part-time jobs
15
14
14
14
% Full-time jobs
76
79
75
75
% Temporary jobs
27
34
32
28
% Permanent jobs
41
40
47
32
74
72
63
69
% Recruitment difficulties If yes, were they for:
% Skilled manual/ technical
47
46
44
39
% Professional/ managerial
12
14
13
9
% Clerical
26
29
32
33
% Semi/unskilled
15
16
11
11
-27
-19
-6
-11
Cash flow Investment Plans Investment plant & machinery
-4
2
11
5
Investment training
2
8
9
12
Turnover
14
16
23
15
Profitability
-7
-1
6
0
27
34
35
35
35
34
27
12
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs Balance of firms expecting to increase prices Is your business currently suffering
% Pay settlements
15
19
22
18
pressures to raise its prices from
% Raw material prices
72
72
69
57
any of the following?
% Finance costs
20
18
20
21
% Other overheads
48
46
46
41
External Factors Affecting your business more than
Interest rates
26
27
18
21
than three months ago.
Exchange rates
26
26
29
28
Business rates
30
31
34
30
Inflation
56
49
44
43
Competition
53
53
53
50
Corporate taxation
27
28
27
29
Number of respondent companies
254
219
215
228
70,437
13,740
10,679
23,855
Number of employees
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Recent Quarter Results - Services Deliveries & Orders UK sales
Q4-10
Q1-11
Q2-11
Q3-11
-1
10
9
9
UK orders
-5
8
2
-2
Export sales
17
14
-3
0
Export orders
9
14
-2
-7
4
8
13
8
Employment expectations for next quarter
6
17
19
8
% Tried to recruit staff
43
50
47
48
Labour Employment in the last quarter
If yes, were they for:
% Part-time jobs
37
24
26
29
% Full-time jobs
71
75
74
71
% Temporary jobs
18
14
18
22
% Permanent jobs
45
32
31
33
68
65
69
68
If yes, were they for:
% Skilled manual/ technical
21
18
22
21
% Professional/ managerial
14
14
31
26
% Recruitment difficulties
% Clerical
44
42
32
33
% Semi/unskilled
16
11
11
16
-17
-5
-8
-2
Cash flow Investment Plans Investment plant & machinery
-9
8
3
2
Investment training
-3
10
8
5
Turnover
21
34
33
29
Profitability
4
21
18
21
29
38
33
36
31
28
18
26
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs Balance of firms expecting to increase prices Is your business currently suffering
% Pay settlements
11
13
11
12
pressures to raise its prices from
% Raw material prices
27
19
23
19
any of the following?
% Finance costs
20
16
14
19
% Other overheads
45
39
42
40
External Factors Affecting your business more
Interest rates
32
27
22
20
than three months ago.
Exchange rates
15
12
20
16
Business rates
30
23
24
26
Inflation
45
39
44
40
Competition
44
42
41
43
Corporate taxation
28
24
27
24
Number of respondent companies
449
584
415
599
158,727
234,966
301,538
125,453
Number of employees
17
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Appendix 1 - Manufacturing Sector Split Q4 2011 Deliveries & Orders
Broader Measure
Manufacturers Only
Constructors Only
UK sales
9
9
6
UK orders
0
5
-9
Export sales
11
13
-5
Export orders
9
8
5
Employment in the last quarter
14
17
10
Employment expectations for next quarter
-1
6
-8
Labour
% Tried to recruit staff
51
52
50
If yes, were they for:
% Part-time jobs
14
12
8
% Full-time jobs
75
80
75
% Temporary jobs
28
29
31
% Permanent jobs
32
39
24
69
68
73
% Recruitment difficulties If yes, were they for:
% Skilled manual/ technical
39
47
31
% Professional/ managerial
9
8
10
% Clerical
33
22
45
% Semi/unskilled
11
14
10
-11
-1
-26
Investment plant & machinery
5
10
2
Investment training
12
17
8
Turnover
15
27
3
Profitability
0
15
-20
35
34
38
Balance of firms expecting to increase prices
12
27
-5
Is your business currently suffering
% Pay settlements
18
18
18
pressures to raise its prices from
% Raw material prices
57
75
38
any of the following?
% Finance costs
21
12
26
% Other overheads
21
20
23
Affecting your business more
Interest rates
21
20
23
than three months ago.
Exchange rates
28
47
6
Business rates
30
36
20
Inflation
43
43
44
Competition
Cash flow Investment Plans
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs
External Factors
50
43
62
Corporate taxation
29
27
29
Number of respondent companies
228
114
102
23,855
4,606
19,113
Number of employees
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Appendix 2 - Manufacturing Sector Split Q3 2011 Deliveries & Orders
Broader Measure
Manufacturers Only
Constructors Only
UK sales
9
12
1
UK orders
0
7
-18
Export sales
20
18
20
Export orders
19
14
44
Employment in the last quarter
13
16
3
Employment expectations for next quarter
8
14
-10
Labour
% Tried to recruit staff
51
52
47
If yes, were they for:
% Part-time jobs
14
12
11
% Full-time jobs
75
81
66
% Temporary jobs
32
32
31
% Permanent jobs
47
49
43
63
69
57
% Recruitment difficulties If yes, were they for:
% Skilled manual/ technical
44
50
34
% Professional/ managerial
13
9
20
% Clerical
32
28
37
% Semi/unskilled
11
12
11
-6
0
-24
Investment plant & machinery
11
15
3
Investment training
9
16
-4
Turnover
23
38
-6
Profitability
6
21
-25
35
33
34
Balance of firms expecting to increase prices
27
36
14
Is your business currently suffering
% Pay settlements
22
23
23
pressures to raise its prices from
% Raw material prices
69
80
53
any of the following?
% Finance costs
20
14
32
% Other overheads
18
14
24
Affecting your business more
Interest rates
18
14
24
than three months ago.
Exchange rates
29
43
5
Business rates
34
37
31
Inflation
44
44
43
Competition
53
46
64
27
27
24
Cash flow Investment Plans
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs
External Factors
Corporate taxation Number of respondent companies Number of employees
215
131
74
10,679
6,791
3,433
19
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Appendix 3 - Headline Data Claimant Count Local Breakdown
May 2011
June 2011
No.
Rate
No.
Rate
No.
Rate
No.
Rate
No.
Rate
No.
Rate
Bolton
7,778
4.6
7,907
4.7
8,094
4.8
8,236
4.9
8,292
4.9
8,292
4.9
Bury
4,335
3.7
4,268
3.6
4,410
3.8
4,544
3.9
4,649
4.0
4,615
3.9
Manchester
18,029
5.0
18,100
5.0
18,582
5.1
19,191
5.3
19,482
5.4
19,490
5.4
Oldham
6,992
5.1
7,049
5.1
7,187
5.2
7,595
5.5
7,692
5.6
7,569
5.5
Rochdale
7,138
5.4
7,236
5.5
7,384
5.6
7,603
5.8
7,766
5.9
7,741
5.9
Salford
7,362
4.8
7,328
4.8
7,583
4.9
7,783
5.1
7,998
5.2
7,985
5.2
Stockport
5,656
3.1
5,559
3.1
5,895
3.3
5,995
3.3
6,080
3.4
6,076
3.4
Tameside
6,427
4.6
6,370
4.5
6,579
4.7
6.773
4.8
6,932
4.9
7,004
5.0
Trafford
4,290
3.1
4,263
3.1
4,495
3.2
4,548
3.3
4,617
3.3
4,592
3.3
Wigan
8,595
4.3
8,597
4.3
8,866
4.5
9,047
4.6
8,968
4.5
8,876
4.5
76,602
4.4
76,677
4.4
79,075
4.6
81,315
4.7
82,476
4.8
82,240
4.8
Greater Manchester North West United Kingdom
July 2011
August 2011
Sept 2011
Oct 2011
185,928
4.2
184,816
4.1
190,696
4.3
195,886
4.4
198,614
4.4
196,338
4.4
1,504,913
3.7
1,493,077
3.7
1,541,793
3.8
1,576,835
3.9
1,578,609
3.9
1,562,501
3.9
20
20
0/
/1
01
8/
20
20
6/
/0
01
/0
01
4/
20
2/
/0
01
20
20
2/
/0
01
/1
01
0/
20
20
8/
/1
01
/0
01
6/
20
4/
/0
01
20
2/
/0
01
/0
01
20
2/
20
0/
/1
01
/1
01
20
8/
20
6/
/0
01
20
4/
/0
01
/0
01
20
2/
20
2/
/0
01
/1
01
20
20
0/
/1
01
8/
20
6/
/0
01
/0
01
20
4/
20
2/
/0
01
/0
01
20
20
2/
/1
01
0/
20
8/
/1
01
/0
01
20
6/
20
20
4/
/0
01
/0
01
2/
20
20
2/
/0
01
/1
01
0/
/1
01
11
11
11
11
11
10
10
10
10
10
10
09
09
09
09
09
09
08
08
08
08
08
08
07
07
07
07
07
07
06
06
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
01
11
20
11
20
1/
/1
9/
/0
11
11
20
7/
/0
20
11
11
20
5/
/0
3/
/0
20
10
20
1/
/0
1/
/1
10
10
20
9/
/0
20
10
20
7/
/0
5/
/0
10
20
10
20
3/
/0
1/
/0
09
09
20
1/
/1
20
09
20
9/
/0
7/
/0
09
20
09
20
5/
/0
3/
/0
09
08
20
1/
/0
20
08
20
1/
/1
9/
/0
08
20
08
20
7/
/0
5/
/0
08
08
20
3/
/0
20
07
20
1/
/0
1/
/1
07
20
07
20
9/
/0
7/
/0
07
07
20
5/
/0
20
3/
/0
07
06
20
1/
/0
06
20
1/
20
9/
/1
/0
Ju
ct
O
n
ug
A
11
20
11
20
b
pr
A
11
20
11
20
ec
Fe
11
20
D
10
ct
O
10
20 20
n
ug
A
Ju
10
10
20
20
b
pr
A
10
20
Fe
ec
ct
O
D
10
20
09
20
n
ug
A
09
20
09
20
pr
Ju
09
20
A
b
Fe
09
20
09
20
ec
ct
O
D
08
20
08
20
n
ug
A
08
20
Ju
pr
A
08
20
b
Fe
08
20
ct
ec
D
08
20
07
n
ug
O
07
20 20
Ju
A
b
pr
A
07
07
20
20
ct
ec
Fe
07
20
07
20
O
D
06
20
06
20
Percentage Change
1.6
1.4
140
120
100
80
60
40
20
0 Q3 -‐2 01 1
Q2 -‐2 01 1
Q1 -‐2 01 1
Q4 -‐2 01 0
Q3 -‐2 01 0
Q2 -‐2 01 0
Q1 -‐2 01 0
Q4 -‐2 00 9
Q3 -‐2 00 9
Q2 -‐2 00 9
Q1 -‐2 00 9
Q4 -‐2 00 8
Q3 -‐2 00 8
Q2 -‐2 00 8
Q1 -‐2 00 8
Q4 -‐2 00 7
Q3 -‐2 00 7
Q2 -‐2 00 7
Q1 -‐2 00 7
Q4 -‐2 00 6
Q3 -‐2 00 6
Percentage Change
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Appendix 3 - Headline Data UK Quarter on Quarter GDP
1.5
0.5 1
-‐0.5 0
-‐1
-‐1.5
-‐2
-‐2.5
Infla.on and Interest Rates
7
6
5
4
3 CPI
2 RPI
1 Base rate
-‐1 0
-‐2
Exchange Rates
2.2
2
1.8
Euro
US Dollar
1.2
1
160
Fuel prices
Brent Crude ($/ barrel) Unleaded (p/litre)
Diesel (p/ litre)
21 21
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
About the Survey About the Chamber Greater Manchester Chamber of Commerce is the largest Chamber of Commerce in the United Kingdom, with a membership of over 5,200 businesses. The Chamber is recognised as a leader in its field. Its reputation has grown in Government circles both locally and nationally, as well as in the region and overseas. The aim of Greater Manchester Chamber of Commerce is to create the best climate for business in the region to prosper. This can be achieved by ensuring that those taking decisions on key issues such as transport, taxation and business regulation hear the voice of our members. The representation of our members’ views is central to the work of the policy team at the Chamber. These views are gathered in a range of ways including focus groups, meetings with politicians, consultations and this Quarterly Economic Survey.
About this Quarter’s Survey The survey collection period for the Q4 2011 survey was from 7th to 30th November. A total of 827 businesses from across Greater Manchester, employing 149,281 people, responded to this quarter’s survey. • •
From the manufacturing sector, 228 businesses employing 23,855 people responded to the survey; From the service sector, 599 businesses employing 125,453 people responded to the survey.
The report has been researched, written and compiled by: Dr Brian Sloan - Chief Economist Christian Spence - Research Manager The Chamber would like to thank ProManchester for their members’ contribution to this survey’s dataset. If you require any further information about the production or detail of this report, please contact Christian on 0161 237 4045 or email christian.spence@gmchamber.co.uk NB: Net balance figures, referred to throughout this report, are determined by subtracting the percentage of businesses reporting decreases in a factor from the percentage of businesses reporting an increase.
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Autumn Statement 2011 Update On 29th November, George Osborne delivered the 2011 Autumn Statement outlining progress on the Government’s deficit reduction plan and what future policy activity the Government will be introducing to act as a catalyst for growth and assist business. A month before this, and in response to consultation with members, we wrote to the Chancellor outlining what we believed were the key “asks” that we think would help businesses through the current economic and trading challenges. We have listed below what was announced, how this matched our members’ needs and what further action may be required. Transport, Infrastructure & Planning • A re-iteration that the Government will launch a new £400 million ‘Get Britain Building’ investment fund, which will support firms in need of development finance. • Release of the second National Infrastructure Plan, seeking to provide overall strategy to investment and development of the UK’s transport and utilities network. £30bn is to be sought for ‘shovel ready’ projects. • Roads: M56/A6 bypass link road to Manchester Airport. • Rail: electrify Transpennine railway (£290m) Manchester to Leeds. • Government to fund a reduction in the planned rail fare increase, from RPI + 3% to RPI +1% (this will also apply to bus and tube fares). Whilst the Chamber welcomes the large number of infrastructure projects brought forward in the Autumn Statement, early research by the Institute for Public Policy Research North shows that 83% of all infrastructure investment announced is in London or the South East. If the Government is serious about achieving a rebalancing of the UK economy to more broadly support the regions, then investment spending must be more equally distributed. Notwithstanding this, the projects announced for Greater Manchester and the wider North West will help to improve the region’s infrastructure. The electrification of the Transpennine route was unexpected, but its full benefits will only be realised if the Northern Hub project is delivered in full; the Chamber will be placing itself at the front of the campaign in the new year to ensure that this vital scheme is progressed. The long-awaited M56/A6 bypass will help to support other regional motorway network improvements announced in the Budget of Spring 2011. Finance & Taxation • Expansion of the Enterprise Finance Guarantee from January 2012. • Credit Easing (National Loan Guarantee Scheme) will reduce the cost of bank loans for businesses with turnover of up to £50 million, by guaranteeing the raising of bank funds. • £1bn Business Finance Partnership offering finance for mid-sized companies as an alternative to debt finance. • Industry group to be established on developing non-bank lending channels to SMEs. • Launch of a new Seed Enterprise Investment Scheme from April 2012, with 50% income tax relief on investments, as well as offering CGT exemption on gains in 2012-13 run through the SEIS. • 100 per cent capital allowances available in the Black Country, Humber, Liverpool, North Eastern, Sheffield, and Tees Valley Enterprise Zones. • Increase the Regional Growth Fund for England by £1bn and extend it into 2014-15. • Increase in the Bank Levy to 0.088% from January 2012, in an attempt to raise £2.5bn. • The Government will extend the small business rate relief holiday for a further six months from 1st October 2012. • The Government has confirmed that business rates will increase by 5.6% next year, but to soften the impact it is giving businesses the opportunity to defer 60 per cent of the increase in their 2012-13 business rate bills as a result of the Retail Prices Index up-rating, to be re-paid equally across the following two years. • Rises in Air Passenger Duty will go ahead from April 2012 with extension to business jets effective from April 2013. • Postponement of the planned January 3p and August 5p rise in fuel duty. It will now rise by 3p in August. • The Chancellor will announce details of fair fuel stabiliser in Budget 2012. • Government to abolish Low Value Consignment Relief (LVCR), exempting low value goods (currently £15) sent to the UK from the Channel Islands from VAT. This will take effect from 1st April 2012.
23
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Businesses will welcome a number of new avenues to access finance announced in this statement, and that net and new lending by the banks will be monitored, though this does not address the reluctance by some firms to approach the high street lenders. The exact details of how these new schemes for lending will work, as the Chancellor admitted in his speech, have yet to be finalised so we await further details. The proposals to lend to businesses that have projects with planning approval will be very welcome, as the construction sector has experienced challenges accessing finance to get projects underway. The Chamber is disappointed that the Chancellor has decided to go ahead with an increase in business rates at the full rate of inflation, though the ability to defer a large proportion of this tax increase will limit the immediate impact of the increase. Businesses will, however, be pleased that the planned increase in fuel duty this coming January has been abandoned and August 2012’s increase has been reduced by 2p, as this would impact on costs, particularly for transport and distribution firms. Skills & Employment • The Government will cut health and safety red tape for business by implementing the Löfstedt Review’s recommendations (announced 28/11/11): - The number of regulations that businesses have to comply with will be reduced by 50% by 2014. - All ‘strict liability’ provisions will be reviewed to ensure firms are only held accountable for things they can realistically manage. - HSE will review all 53 Approved Codes of Practice. • The Government will also look to go further than the Löfstedt Review’s recommendations through the Red Tape Challenge. • The Chancellor confirmed the Government will consult on changes to TUPE (Transfer of Undertakings Protection of Employment) regulations, collective redundancy rules and the dismissal process. He also confirmed that automatic financial penalties for employers will not be going ahead and that claimants will have to pay a fee to access the Tribunal system. Other changes include a review of Agency Workers Directive paperwork requirements in 18 months and consolidation of National Minimum Wage rules. • Re-iteration of Apprenticeship improvements announced by Vince Cable: - 40,000 incentive payments of up to £1,500 for small firms to take on young apprentices. - All apprenticeships to ensure English and Maths up to good GCSE standard. - Reduce red tape - removing all excess health and safety requirements for apprenticeships. - Shorten timescales so that employers are able to advertise a vacancy within a month of deciding to take on an apprentice and have them ready to start work within three months. - Opportunity in 2012 for organisations to bid for funding to extend Higher Apprenticeship provision. - Employer-led review into the quality and standards of apprenticeships to report by spring 2012. • Re-iteration of Youth Contract announced by Nick Clegg on 25/11/11: - After three months on Job Seekers Allowance (JSA) - offer of optional work experience or a sector-based Work Academy place for every unemployed 18–24 year old. - After nine months (three months for most disadvantaged) on JSA - wage incentives for private sector employers to take on 160,000 18-24 year olds (worth half min wage). - Strict conditionality: young people who opt out may face mandatory work. - £4.5m to be spent on providing post-16 work experience placements over the next two years. • £600m from the new infrastructure investment to fund 100 additional free schools including new ‘Maths Free Schools’ for 16-18 year olds. The Autumn Statement saw the confirmation of a number of announcements that had been made in the preceding weeks on skills and legislation issues, answering some of the concerns that the Chamber has raised with a number of government departments. The push on helping young people is welcome and reflects broad concerns expressed by members about the social impact of this issue, as well as the ease of recruiting adequately skilled workers when vacancies arise. This is an issue that the Chamber will continue to campaign on as the lack of a skilled and work-ready labour force is an obvious barrier to growth for business. We will also keep a watching brief on moves to cut red tape and legislation. This is as equally important in creating the right environment for growth as financial incentives. Government’s track record of delivery on this has been poor with the right noises frequently made, but followed by a lack of obvious action. The major new area of policy was the announcement of investment for schools with the focus on maths being welcome. The Chamber has been vocal around the impact of the decision to scrap the Building Schools for the Future programme and we await further details on the initiative to refurbish schools.
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Trade & Innovation • Confirmation of £35 million budget to support SMEs and doubling of target for SMEs supported to 50,000. • Additional measures to support exports - £10 million to be made available to 500 mid-sized businesses each year for bespoke export support services through UKTI. • Government will launch a food and drink export action plan in January 2012. • Introduction of an “above the line” tax credit in 2013 to encourage research and development activity by larger companies. There will be no changes to SME R&D credits, and the new credit will be consulted on in 2012. The Chamber has been lobbying strongly for the restoration and increase of the UKTI budget, which is particularly important at a time when the domestic economy is subdued and may remain so for some time. The additional funding, directed at SMEs and mid-sized firms, is, therefore, extremely welcome and we will be encouraging our members to make use of the services available. Recent Chamber research shows that the North West could miss out on an additional £2.5bn of trade per year by 2016 if it doesn’t maintain and increase its current level of exports. The UK manufacturing sector suffers by having a limited amount of R&D here, with many large firms basing their departments offshore. The Chamber therefore welcomes the initiative of a new “above the line” tax credit and will actively promote it to its members to help keep vital R&D departments in the region and encourage the growth of new facilities. Resource Efficiency & Carbon Reduction • The Government intends to implement measures to reduce the impact of policy on the costs of electricity for the most electricity-intensive industries, beginning in 2013 and worth around £250 million over the Spending Review period. • The Government will also increase the level of relief from the climate change levy on electricity for Climate Change Agreement participants to 90 per cent. • Up to £100million will be made available in the next financial year for commercial and industrial energy efficiency projects. Ahead of obtaining state aid approval for the Green Investment Bank, the Government will invest as UK Green Investments (UKGI) in green infrastructure projects from April 2012. • £200million will be made available to promote uptake of the Green Deal. The Autumn Statement could be seen as being a high-carbon budget with some missed opportunities. The sector is still reeling from the recent decision to slash the Feed in Tariff. Whilst the decisions taken affect all businesses, there is a perception that with further thought the same results could have been achieved but with a greater focus on driving efficiency. Low carbon businesses will benefit from the broader growth and finance initiatives announced, but there is still some disconnect that economic growth can be achieved within a low carbon environment and that low carbon technology is in itself a huge growth area. Economic Forecasts • OBR forecasts growth of 0.9% in 2011 (down from 1.7%), 0.7% in 2012 (down from 2.5%), 2.1% in 2013 (down from 2.9%), 2.7% in 2014 (down from 2.9%), and 3% in 2015 (up from 2.8%). • OBR forecasts that borrowing will be £127bn in 2011-12 (up from £122bn), £120bn in 2012-13 (up from £101bn), £100bn in 2013-14 (up from £70bn), £79bn 2014-15 (up from £46bn), and £53bn in 2015-16 (up from £29bn). • Debt will peak at 78% of GDP in 2014/15, falling thereafter (previous estimate of a peak of 70.9% in 2013-14). • OBR states that Government is on course to meet its targets of balancing the current budget by 2016-17, and seeing public sector net debt falling in 2015-16. • OBR forecasts unemployment at 8.1% of the workforce in 2011, 8.7% in 2012, 8.6% in 2013, 8% in 2014, 7.2% in 2015 and 6.2% in 2016 (a peak of 2.8m in the fourth quarter of 2012). • OBR forecasts that General Government Employment will reduce by 710,000 between 2011 and 2017 (previous estimate was 400,000). • OBR forecasts CPI inflation at 4.5% in 2011, 2.7% in 2012, 2.1% in 2013 and 2% in 2014. • The Chancellor set plans for public spending in 2015-16 and 2016-17 in line with the reductions over the Spending Review 2010 period. • The State Pension Age will rise to 67 between April 2026 and April 2028 and this will save around £60bn in today’s prices between 2026–27 and 2035–36. • The Government has asked independent Pay Review Bodies to consider how public sector pay can be made more responsive to local labour markets, and to report by July 2012. • Public sector pay awards will average one per cent for each of the two years following the end of the pay freeze.
25
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
For more information Chris Fletcher Director of Policy, Research & External Affairs chris.fletcher@gmchamber.co.uk Dr Brian Sloan Chief Economist brian.sloan@gmchamber.co.uk Christian Spence Research Manager christian.spence@gmchamber.co.uk
For further details about information contained within this brochure, contact: Chris Fletcher Director of Policy, Research & External Affairs chris.fletcher@gmchamber.co.uk Dr Brian Sloan Chief Economist brian.sloan@gmchamber.co.uk Christian Spence Research Manager christian.spence@gmchamber.co.uk
Greater Manchester Chamber of Commerce would like to thank Marketing Manchester and associated photographers for kindly supplying the images used in this brochure.
1241GMCC
www.gmchamber.co.uk
Greater Manchester Chamber of Commerce - QES Survey - Q4 2011
Action For Business - Update Q1 2012 Launched in April 2011, following consultation with members, the Chamber’s Action For Business document set out, all in one place, what businesses told us they needed to overcome the tough economic and trading environment, and get the right conditions for growth. Since then, we have taken forward specific pieces of work, visited members, set up surveys, held meetings with key decision-makers and represented members’ views through a number of consultations and key events - the most recent being the Autumn Statement. Over the next few pages, you will find the latest Action For Business update, which gives a brief, but comprehensive, overview of what we have done so far. It also identifies the key issues for action in the future. We have a number of tools at our disposal to make sure that we can accurately identify what the issues are, what action is needed and how successful we have been. Now, more than ever, in these tough economic conditions, we have to make sure that the voice of business - your voice - is not only heard, but what we ask for is recognised as being grounded in reality. The Quarterly Economic Survey is not only the premier survey mechanism for identifying economic conditions; the policy experts we have at the Chamber can interpret the wealth of information it supplies so that it can also act as an early warning indicator across a range of other business issues. That is why we place so much emphasis on the QES. To ensure that at all times we are fully engaged with, and representing, our members’ views, we have begun the process of building on the successful work already done by our member councils and committees. There are already over 300 members engaged with our ten local councils, seven specialist committees and five sector councils. We will continue with further developments in the New Year, which will allow us to become more effective and efficient in the work that we do in taking action for business. None of this works though without your input. What we say and do on your behalf has to be genuine and have a clear mandate. Over the coming 12 months, conditions do not look as though they will get any easier, so now, more than ever, you need to know we are here to work on your behalf. We will produce quarterly updates on Action For Business and will present our work in ways that are more accessible than ever before. As ever, your views count, so please get in touch and let us know how we can take Action For Business for you.
Chris Fletcher Director of Policy, Research & External Affairs
29