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 2022. This regular survey asks businesses a series of questions on key economic indicators. The survey ran from 22/08/22 and 16/09/22.

Summary

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In total, there were 324 responses. Of these, 32.0% can be broadly classified as Manufacturers. 68.0% can be broadly classified as Service Sector businesses. 36.0% of businesses employed fewer than 10 people. 35.0% employed 10-49 people. 22.0% employed 50-249 people. 7.0% employed over 250 people. 45.0% of businesses were active in international markets over the course of past quarter.

Wider Economic Context

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The unemployment rate for East Midlands reported by the Office for National Statistics (ONS) increased by 0.5% compared to the previous three-month (April’22 to June’22) period to 2.8% in the May’22 to July’22 period. Youth (16-17 years) unemployment has reduced majorly from 25.2% to 15.1% compared to previous quarter. Nationally, the number of job vacancies for the period February’22 to April’22 was 1,266,000 and decreased by 34,000 from the previous quarter. Accomodation and food service activities and human health and social work saw largest increases – adding up to 83000.

According to Bank of England’s latest report, inflation is expected to rise to 13% over the next few months due to high energy prices. Looking at the exchange rates, the GBP stands at €1.18 in September – €0.02 lower than in May’22. The latest data from Department for International Trade (Q1 2022) show exports valuing £5.44 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 steep fall. The state of economy index value for the current quarter is 105.

Your personalised results

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Chamber Commentary

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Quarterly Economic Survey shows necessity of Government action

The Quarterly Economic Survey results for the third quarter of the year paint a difficult picture for businesses. Many of the sentiment indicators of how the economy is performing – those relating to investment intentions and confidence levels – have been trending downwards for a few quarters now.

However, for the first time, demand indicators – how busy businesses are in selling their goods and services – have also dropped, both internationally and here in the UK. This is a concern as it suggests the impacts of inflation, especially the increasing volatility in energy markets and subsequent interest rate rises, is starting to dull activity.

Cashflow is now worsening for more businesses than it's improving for and the well-publicised price pressures from areas such as energy, staffing costs, raw materials and fuel haven't gone away. Indeed, for many businesses these are now at a critical point. More positively, employment has held up, although difficulties in recruitment remain at record levels across the board.

All this points to the need for immediate action to support businesses, along with a longer-term strategy in order to instil confidence and give them the encouragement they need to start taking more strategic decisions around investment.

In conversation with businesses, they ask for action from Government in three areas: Get the basics right; provide consistency and a long-term approach; and don't put up any blockers to growth.

Off the back of these messages, the new Chancellor's 'mini-budget' appears to have gone some way to responding.

Measures such as a reversal in national insurance increases, plans to increase corporation tax, and a commitment – albeit for six months – to support businesses on energy costs will put money back in the pockets of businesses right at the time when they most need it.

A commitment to streamline planning processes, develop infrastructure and incentivise meaningful business investment is also welcomed, although these are not necessarily new messages and there remains some scepticism about the ability to deliver.

From a bigger picture perspective, the very clear and significant shift in approach from the Government is one that will take some time for businesses to digest, although action to get the economy moving again is undoubtedly needed.

The impacts of the increased costs of these schemes are as of yet unknown. Following recent turmoil with sterling and in bond markets, it's essential that Government now offers clear reassurance about its plans to ensure that as a country, we are taking a responsible approach to managing our finances and aren't viewed as a risk by external investors.

Further detail on the costings of recent proposals, along with anticipated growth returns and timescales for this, is now needed.

The current market uncertainty damages consumer confidence and doesn't support those that are looking to invest in their businesses, despite what positive measures might have been in the Chancellor's Growth Plan. As such, the current proposal from Government of giving further details and costings towards the end of November feels too far away for businesses to wait.