Introduction


The following report uses data taken from the Quarterly Economic Survey carried out by the Chamber in the third quarter (Q3) of 2021. This regular survey asks businesses a series of questions on key economic indicators. The survey ran from 23/08/21 and 14/09/21.

Summary


In total, there were 408 responses. Of these, 38.0% can be broadly classified as Manufacturers. 62.0% can be broadly classified as Service Sector businesses. 37.0% of businesses employed fewer than 10 people. 34.0% employed 10-49 people. 22.0% employed 50-249 people. 7.0% employed over 250 people. 46.0% of businesses were active in international markets over the course of past quarter.

Wider Economic Context


The unemployment rate reported by the Office for National Statistics (ONS) fell to 4.2% in the April to June period this year, below by 0.5% compared to the previous three-month (March to May) period and 0.5% below the UK average. Youth (16-17 years) unemployment remains high at 28% with a declining trend over previous periods. Nationally, the number of job vacancies for the period June to August was 1,034,000 and is 249,000 above pre-pandemic level.

According to Bank of England’s latest report, inflation is above 2% and is expected to rise in coming months. Looking at the exchange rates, the vaccination programme is helping UK economy recover rapidly with GBP standing as strong as €1.17 in September. The latest data from Department for International Trade (Q1 2021) data show exports valuing Β£4.58 billion from the East Midlands region.

Region at a Glance


*Net Value = Increase - Decrease

IndicatorsNet Value - Q2 2021Net Value - Q3 2021Net change over quarterDirection of changeUK Sales31.0 %37.0 %6.0 %🟒UK Orders34.0 %36.0 %2.0 %🟒Overseas Sales0.0 %8.0 %8.0 %🟒Overseas Orders11.0 %6.0 %-5.0 %πŸ”΄Labour Force (Past 3 Months)20.0 %25.0 %5.0 %🟒Cash Flow7.0 %15.0 %8.0 %🟒Workforce (Next 3 months)41.0 %38.0 %-3.0 %πŸ”΄Future Prices48.0 %46.0 %-2.0 %πŸ”΄Investment in Machinery17.0 %16.0 %-1.0 %πŸ”΄Investment in Training23.0 %26.0 %3.0 %🟒Confidence Turnover62.0 %63.0 %1.0 %🟒Confidence Profitability41.0 %37.0 %-4.0 %πŸ”΄

State of Economy Index


Compared to previous quarter, this quarter saw slight growth. The state of economy index value for the current quarter is 353.

Q1 2011Q2 2011Q3 2011Q4 2011Q1 2012Q2 2012Q3 2012Q4 2012Q1 2013Q2 2013Q3 2013Q4 2013Q1 2014Q2 2014Q3 2014Q4 2014Q1 2015Q2 2015Q3 2015Q4 2015Q1 2016Q2 2016Q3 2016Q4 2016Q1 2017Q2 2017Q3 2017Q4 2017Q1 2018Q2 2018Q3 2018Q4 2018Q1 2019Q2 2019Q3 2019Q4 2019Q1 2020Q2 2020Q3 2020Q4 2020Q1 2021Q2 2021Q3 2021βˆ’400βˆ’2000200400
QuarterSoE Value

Your personalised results


503713IncreasedRemained ConstantDecreased0%10%20%30%40%50%
UK SalesResponsesPercentage
484012IncreasedRemained ConstantDecreased0%10%20%30%40%50%
UK OrdersResponsesPercentage
314623IncreasedRemained ConstantDecreased0%10%20%30%40%
Overseas SalesResponsesPercentage
285022IncreasedRemained ConstantDecreased0%10%20%30%40%50%
Overseas OrdersResponsesPercentage
365311IncreasedRemained ConstantDecreased0%10%20%30%40%50%
Past EmploymentResponsesPercentage
43525IncreaseRemain ConstantDecrease0%10%20%30%40%50%
Future EmploymentResponsesPercentage
6733YesNo0%10%20%30%40%50%60%70%
Recruitment AttemptedResponsesPercentage
Full-Time: 217Permanent: 133Part-Time: 91Temporary: 60
Past Employment Positions Filled
364321IncreasedRemained ConstantDecreased0%10%20%30%40%
Cash FlowResponsesPercentage
5941Below Full CapacityFull Capacity0%10%20%30%40%50%60%
Operating CapacityResponsesPercentage
47521IncreaseRemain The SameDecrease0%10%20%30%40%50%
Future PricesResponsesPercentage
Raw Material Costs: 185Other Overheads: 117Pay Settlements: 80Finance Costs: 40
Price Rise Pressures
24688Revised UpwardsRemained The SameRevised Downwards0%10%20%30%40%50%60%70%
Investment in MachineryResponsesPercentage
30664Revised UpwardsRemained The SameRevised Downwards0%10%20%30%40%50%60%
Investment in TrainingResponsesPercentage
71218ImproveRemain The SameWorsen0%10%20%30%40%50%60%70%
Confidence TurnoverResponsesPercentage
533016ImproveRemain The SameWorsen0%10%20%30%40%50%
Confidence ProfitabilityResponsesPercentage
Skilled Manual/Technical: 102Professional/Managerial: 96Unskilled/Semi-Skilled: 76Clerical: 43
Recruitment Difficulties Problems
Inflation: 154Competition: 94Corporate Taxation: 73Business Rates: 63Exchange Rates: 46Interest Rates: 38
Business Concerns

Chamber Commentary


A mixed picture in a choppy recovery

The top-level results from the Quarterly Economic Survey for the third quarter of 2021 show a mixed picture that hides a number of variables at play in the East Midlands economy.

Firstly, the positives. Growth continues across most indicators, with domestic markets again being the strongest performer.

Cashflow continues to improve for more businesses than not, training investment intentions are positive and overall confidence in future turnover continues its upward trajectory. As the economy continues its reopening after a successful vaccine rollout, the pent-up demand that characterised much of the summer remains a positive factor.

But there are also a few of areas of concern. Price pressures continue to come from increased raw material costs, pay settlements and, increasingly, energy costs.

This has knock-on effects with investment in machinery and equipment growth – an important ingredient in fuelling a recovery – falling back slightly on the previous quarter.

Performance in overseas markets remains volatile and, while turnover confidence has grown from Q2, confidence in increased profitability has fallen back, a result of squeezed margins.

Recruitment is also a growing problem, with over seven in 10 struggling to fill vacancies across all skills levels.

So what does all of this mean for the longer-term prospects for businesses in the East Midlands?

Well, there's still much that we don't yet fully understand. There are many factors at play in shaping current challenges for businesses – the impact of policy responses to the pandemic on the recovery, changes in individual approaches to work expectations, structural changes to supply chain operations and immigration rules as a result of Brexit, and global shortages as the whole world looks to bounce back, to name but a few.

The balance of influence of these different factors, some which are temporary and others that may be longer term, is still being unpicked. As we learn more over the coming months, we'll have a better idea of whether they are flies in the ointment or something more fundamental.

There is also trepidation ahead of the 27 October Autumn Statement, where we'll find out more about how Government plans to tackle supporting the economy over the next period and the balance between tax and spend.

Regardless, the coming months will be instructive as to what shape the recovery will take. As we learn more about which challenges are going to be longer term, it's important that policy responds to this appropriately and doesn't get distracted with temporary issues the market can take care of itself.