Introduction

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The following report uses data taken from the Quarterly Economic Survey carried out by the Chamber in the first quarter (Q1) of 2021. This regular survey asks businesses a series of questions on key economic indicators. The survey ran from 14/02/22 and 09/03/22.

Summary

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In total, there were 354 responses. Of these, 40.0% can be broadly classified as Manufacturers. 60.0% can be broadly classified as Service Sector businesses. 40.0% of businesses employed fewer than 10 people. 32.0% employed 10-49 people. 21.0% employed 50-249 people. 7.0% employed over 250 people. 53.0% of businesses were active in international markets over the course of past quarter.

Wider Economic Context

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The unemployment rate reported by the Office for National Statistics (ONS) fell subsequently by 0.7% compared to the previous three-month (August to October) period to 3.6% in the September to November period in 2021. Youth (16-17 years) unemployment remains high at 20.4% with a huge decline from 25.2% compared to previous quarter. Nationally, the number of job vacancies for the period December’21 to February’22 was 1,318,000 and increased by 105,000 with half of sectors showing record high figures.

According to Bank of England’s latest report, inflation is above 2% due to high energy and goods prices and is expected to rise to 7% around the spring. Looking at the exchange rates, the GBP stands at €1.19 in March – €0.01 lower than in February. The latest data from Department for International Trade (Q3 2021) show exports valuing £5.02 billion from the East Midlands region.

Region at a Glance

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*Net Value = Increase - Decrease

State of Economy Index

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Compared to previous quarter, this quarter saw slight growth. The state of economy index value for the current quarter is 323.

Your personalised results

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Chamber Commentary

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A good performance against a backdrop of known unknowns

A first glance, and the results of the economic survey for the start of 2022 look encouraging. UK orders are strongly up on last quarter. Overseas sales and orders, strongly up. Businesses continue to recruit and overall confidence in prospects for turnover and profitability also ticked upwards. So why is there not more bullish sentiment in our conversations with businesses?

There are a couple of reasons for this. Firstly, the improvements come off the back of a weak final quarter to 2021. Back in November there was uncertainty around Omicron and how the country would respond, and inflationary pressures were slowing down plans for investment. Many of the QES indicators are relative to what has come before – for example, asking whether sales have gone up, gone down or remained the same from the last quarter. This means after a slow quarter one would hope to see decent improvements. Secondly, some of the key indicators that we know can act as a canary in the mine are struggling. Net Cashflow movement is down into negative territory again, suggesting the squeeze is coming on again with inflationary pressures from all directions. Price increases are up again on already almost sky-high levels and investment in machinery is down, limiting one of the tools that businesses have to respond to increases in demand and the need to introduce efficiencies.

What's behind this mixed picture? We spent much of 2021 trying to figure out the impact of the pandemic while the coronavirus continued to move the goalposts with new variants. We also continued to learn more about the longer-term impacts of the UK leaving the EU – which issues were part of a learning curve and which may hint at more structural limitations in the new way of working. While on this last point we're yet to see the rebound in exporting figures, as we reached the end of the year it felt that things were finally becoming clearer. The unknowns that we entered 2021 with were transitioning to knowns – things that can be planned for and dealt with. Unfortunately, just as we were getting into the swing of 2022, new unknowns have arrived.

First and foremost, the terrible events in Ukraine represent a humanitarian crisis not seen in Europe for 80 years, and one that, as with coronavirus, nations are coming together to support on. Businesses and business people are already doing their bit where they can to offer resources and relief. This effort will rightly continue, with the Chamber also offering its full support of these efforts. However, while the economic impact is obviously secondary in this, it is real and one that, right now, we just don't know how it will play out. The supply of oils and gas, zinc, copper, steel, nickel, wheat and many other commodities are all being disrupted or in some cases, halted. Beyond the obvious increases in energy costs, this will have many other direct short-term impacts – for example car manufacturers pausing operations due to raw material shortages – but also the potential for as yet unknown medium and longer-term impacts.

These new unknowns have undoubtedly impacted confidence and slowed the growth we would have hoped to see in our Q1 survey. The impact throughout the remainder of 2022 is not yet clear and much will depend on what happens next in Ukraine. There is, however, one thing we do know. Businesses in the East Midlands will respond to this with tenacity, drive and a desire to do the right thing – both with regards to offering support where it is needed, but also looking at their own growth prospects and the positive impacts that has on the local economy and the communities in which they are based.