Introduction

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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

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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

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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 £4.58 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 353.

Your personalised results

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Chamber Commentary

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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.