Quarterly Economic Survey
Greater Manchester Chamber’s
Quarterly Economic Survey
Full Report & Economic Brief
Quarter 2 - 2011
1
Greater Manchester Chamber QES Survey, Q2 2011
Contents
Chief Executive’s Foreword
Chief Executive’s Foreword
3
Economic Outlook
4
Survey Summary for Manufacturing
6
Survey Summary for Services
7
UK Sales and Orders
8
Export Sales and Orders
9
the economic intelligence that can be collected through this survey. Recognising
Employment and Recruitment in Manufacturing
10
the number of members responding to the survey and raise its profile. This has
Dating back to the mid-1980s the British Chambers of Commerce Quarterly Economic Survey has firmly established itself as a leading indicator of economic activity in the UK. Consistently referenced by the Bank of England and used by Government and independent economists, the survey is a simple yet effective tool that reports on business confidence, employment trends and investment intentions.
Greater Manchester Chamber of Commerce, representing the business community in the UK’s second largest economy, understands the importance of the importance and pedigree of the QES we have worked hard to keep improving seen a consistent and sustained rise in responses over the last 12 months with
Employment and Recruitment in Services
quarter on quarter increases backed up by increasing demands from local
11
government, regional and national organisations and decision-makers to access Business Confidence
the results. We speak with accuracy and with authority on the challenges facing
12
the region’s economy, often before other official data is released. Investment Intentions
13
Cashflow and Prices
14
Price Pressures in Manufacturing
15
This quarter’s survey is the first to be launched at our new City Breakfast event, an opportunity for businesses to be the first to hear what the local economic picture is, to engage with us and debate what the results are telling us about the
External Factors in Manufacturing
15
Price Pressures in Services
16
External Factors in Services
16
Recent Quarter Results - Manufacturing
17
Recent Quarter Results - Services
18
Appendix 1 - Manufacturing Sector Split Q1 2011
19
Appendix 2 - Manufacturing Sector Split Q4 2010
20
Appendix 3 - Background Economic Data
21
region’s economy, the implications for the future and what can be done about it now.
I sincerely hope you enjoy the briefing, and that you continue to support the Survey.
2
Clive Memmott Chief Executive, Greater Manchester Chamber of Commerce
3
Greater Manchester Chamber QES Survey, Q2 2011
Economic Outlook
The Chamber’s economic outlook since last year’s Emergency Budget has been one of the more consistent since that time, recognising the ongoing challenges facing the UK economy. The current global economic environment is also not without its challenges that might also impact on businesses here in the UK; however it also presents a great opportunity for business given the right encouragement and support. With this in mind the Chamber has remained realistic on growth, predicting 1.3% in 2011 before picking up further in 2012.
Spare capacity? The question of capacity has been one that has troubled the Monetary Policy Committee. The Chamber is supportive of the Bank of England’s stance on interest rates; however a rate of 0.5% cannot be sustained indefinitely. Businesses report that margins on lending have increased and do not reflect the low Bank of England rate, and households remain holding high levels of debt. As inflation erodes real incomes households are struggling to pay down these high levels of debt. If the global economy picks up again after what seems to be a weakening in recent months, demand for oil and
Encouraging signs
commodities will require a strengthening of Sterling with an interest rate rise that could damage household demand and the recovery.
After a very disappointing set of results for Q1, this quarter’s survey for Greater Manchester provides encouragement and supports our assessment that the economy will experience growth and there will be an improvement in employment prospects towards the end of the year. The domestic economy is weak as a result of public sector cuts, inflation and the Government’s austerity measures, though growth is being secured by growing exports in the region. Job creation in the private sector has slowed, but remains positive, and despite public sector losses and Government policy aimed at moving people from various forms of benefit to Jobseekers Allowance, the claimant count has remained broadly neutral since the
Cost of capital A low interest environment in the UK is making it less attractive to hold capital here when much of the global economy is enjoying growth nearing 5% or more. In addition to this the proposals to increase the capital ratios of UK banks and ring fence retailing banking operations from investment banking, laid down in the Vickers Report, will increase further the costs for businesses and individuals and the cost of capital. Making banks safer is certainly more desirable, but acting in isolation could make our banks less competitive and deprive the economy of investment capital in the future.
Q1 survey. Debt will remain a concern Investment picking up There are signs that larger, less liquidity constrained firms, are now looking to increase investment, however debt and credit issues remain serious challenges for the UK and exposure to external shocks increases the uncertainty facing businesses. Smaller businesses however are still finding difficulty accessing finance and are not yet increasingly their plans for investment. A key question hanging over the future of business investment, that is expected to support further
The UK economy remains vulnerable to the levels of both Government and household debt over the coming years and as the recovery gathers momentum and interest rate rises start there will be further downward pressure on growth. The recovery is underway, but it will be a slow and uncertain one with periods of regional and sectoral poor or negative growth. Encouraging job creation and supporting exporters to access new and emerging high growth markets is vital to ensuring the recovery can be maintained.
growth in the coming years, is to what extent there is spare capacity in the economy? Given that part-time and more flexible working was adopted during the recession, keeping more people in employment, it could be that large numbers of people will not return to employment unless this “spare” capacity is in low growth sectors.
Dr Brian Sloan Head of Business and Economic Policy
4
5
Greater Manchester Chamber QES Survey, Q2 2011
Survey Summary for Manufacturing
Survey Summary for Services
• Export demand weakens across manufacturing and construction
• An upturn of sorts, dominated by financial and professional services
• Constructors remain cash constrained, but less pessimistic
• Strong job creation in the city, but weaker across the wider region
• More manufacturers are recruiting this quarter
• Business confidence rebounds
• Costs and inflationary concerns appear to be easing, though pay demands are on the increase
• Larger, less liquidity constrained firms are making investment plans, but smallest firms still encountering finance challenges
• A slight improvement in investment plans is encouraging.
• Price increase intentions ease as competition remains tough.
The manufacturing sector’s performance in terms of sales and order measures in Q2 will, on the face of it, disappoint this quarter. There is an indication that this does not tell the whole story and overall the outlook is more encouraging. Once again we provide a breakdown of the broad manufacturing results split into manufacturing and construction respondents in the appendix. Manufacturers continue to see very positive growth, and though official figures for construction across the wider North West suggest that demand is more flat at present, clearly constructors responding to the survey are continuing to experience challenges.
The service sector as a whole across Greater Manchester has seen something of an upturn in Q2, driven by improving conditions and outlook for financial and professional services businesses located predominantly in Manchester’s city centre. The service sector is still being challenged by the impact of public sector cuts and inflationary forces on both business and consumer demand, therefore sub-sector performance is variable, as is the performance across different sub-regions of Greater Manchester. In spite of this, after stripping out the financial and professional services sector we are able to see that there has been a slight improvement in confidence and investment plans since Q1.
The domestic market balances for sales and orders have both deteriorated to -6% and -7% respectively, though medium sized manufacturers saw an improvement in the growth of UK sales in contrast to smaller firms. The negative balances for the sector overall are driven by the ongoing challenges facing construction respondents and it is a concern that having seen some positive growth in export sales and orders for this group last quarter, there has been a downturn. Manufacturers also saw weaker export sales growth. Across the whole manufacturing sector export sales and order balances are now +9% and +11%, down 11% and 1% respectively since Q1.
The otherwise flat service sector domestic market across Greater Manchester has performed well in Q2 due to the improvement in financial and professional services, with the upturn in sales and orders reaching +10% and +8% in Q2, up from -1% and -5% in Q1. Service sector businesses have benefited from export growth in recent quarters, and although falling back slightly this quarter sales remain at a historically strong +14% and orders have reached a balance of +14%, a level not surpassed since Q1 2007.
More encouraging is the positive job creation and expectations for next quarter across the sector. Manufacturers are recruiting and expect this to increase further in Q3. It is also welcome that the pace of losses in the construction sector is slowing down. The broad measure of employment balances increased to +7% this quarter, and intentions to recruit have also strengthened to +11%. Although the manufacturing sector has increased recruitment it is perhaps telling that having experienced high levels of recruitment difficulties, there has been a boost in investment in training, increasing from +2% to +8%.
Investment in plant and machinery as a broad sector measure has been negative throughout 2010 and Q1 2011, so the +2% balance is a welcome return to positive territory for this measure. This is due to fewer construction firms scaling back investment plans.
Intentions to increase prices have eased very slightly by 1% to +34%, though the erosion of real earnings due to inflation is driving higher wage demands.
Overall domestic demand is holding up across the sector and there are signs that confidence and investment intentions are set to rise. With positive intentions to recruit there appears to be a growing confidence that the recovery is stabilising and firms are more willing to invest. This is encouraging and whilst growth is not yet expected to be strong, exports will help support the domestic recovery.
6
As a result of growth in the service sector employment has continued to grow at a slightly faster rate, the balance up 3% to +8%, the highest balance since Q3 2008. This is the first quarter that actual recruitment has exceeded the expectations of the previous quarter since Q3 2008, so with this in mind it is pleasing to see expectations rise strongly this quarter to a balance of +17% of firms looking to recruit. We do note that much of this job creation is occurring in financial and professional services.
The deteriorating investment intentions of Q1have now greatly improved with a rebounding of business confidence. The confidence measures for turnover and profitability have increased by 13% and 17% respectively to +34% and +21%. It is however the larger, less liquidity constrained firms that are more willing to invest at present than small firms that are more reliant on lines of credit than cash reserves. As a result of improved confidence, investment plans for plant and machinery and training have risen to +8% and +10% respectively.
Despite an increase in the balance of businesses (+38%) working at capacity, tough trading conditions and an easing of price pressures on businesses are making firms less likely to push up prices in the coming months. This may help to keep a lid on domestic inflation, though there is pressure from wage demands as a result of inflation eroding real earnings.
This quarter’s service sector performance eases the concerns of last quarter, and there is a more improved outlook, though we remain in a volatile and uncertain post recessionary environment. The impact of spending cuts and austerity measures, compounded by external shocks, such as the ongoing Eurozone debt crisis and a slowdown in global growth, continue to challenge businesses in our region. Whilst challenging it is our assessment that the area is better placed than most to deal with the challenges that remain ahead and the outlook, as we anticipated last year, is one of improving prospects towards the end of 2011. 7
Greater Manchester Chamber QES Survey, Q2 2011
UK Sales and Orders
Export Sales and Orders
“The domestic economy remains weak, but some sectors are performing well.”
“Sustained growth in exports is necessary to secure employment and investment across the wider Greater Manchester economy.”
UK Sales
Manufacturing Exports
Manufacturing
Service
Export Sales 30
50 40
20
30
10 Net Balance %
Net Balance %
20 10 0 -10 -20 -30
0 -10 -20 -30
-40
-40
-50 -60
Export Orders
Q2-07
Q3-07
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
-50
Q2-11
Q2-07
Q3-07
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
Manufacturing domestic sales fell this quarter 4% to -6%. Constructors saw this balance fall from -21% to -26%,
The broad manufacturing sector’s export sales have fallen this quarter from +20% to +9%. The construction sector saw
though manufacturers saw the rate of growth up with a balance increase of 2% to +8%.
a sharp downturn from +6% to -14%, whilst manufacturers saw continued growth, albeit weaker, down 7% to +14%.
Domestic order balances also suffered a down turn from 0% to -7% due to both weakening manufacturing orders
Export orders remain stable this quarter, decreasing slightly by 1% to +11%. Manufacturers saw a 1% increase in orders
and fewer construction orders, from +16% to +10% and -25% to -32% respectively.
and constructors no change.
A strong performance in the Financial and Professional Services sector within Manchester’s city centre this quarter
Service sector export sales fell back slightly this quarter from the recent highs to +14%, though this remains near to
led service sector domestic sales to recover strongly from -1% to +10%.
historical highs for this data series.
There was a similar response for domestic orders now standing at +8% from -5% last quarter. This is the highest it
Export orders on the other hand have continued to strengthen and now also stand at +14. This is the highest orders
has stood since Q1 2008.
have been since Q3 2007. It is encouraging that service sector firms are continuing to see growing export orders.
Service Exports
UK Orders Manufacturing
Export Sales
Service 30
40 30
20 10
10
Net Balance %
Net Balance %
20
0 -10 -20 -30
-10
-30
-50
8
0
-20
-40
-60
Export Orders
Q2-07
Q3-07
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
-40
Q2-07
Q3-07
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
9
Greater Manchester Chamber QES Survey, Q2 2011
Employment and Recruitment in Manufacturing
Employment and Recruitment in Services
“Growth in jobs, but recruitment difficulties remain a concern for the longer term.”
“Service sector job creation continues, helping to keep the claimant count down.”
Employment in Manufacturing Expected Change
Actual Change
20
30
15
25
10
20
0 -5 -10 -15
10 5 0 -5 -10
-20
-15
-25
-20
-30
Expected Change
15
5
Net Balance %
Net Balance %
Actual Change
Employment in Services
Q2-07
Q3-07
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
-25
Q2-11
Q2-07
Q3-07
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
Employment for the broad manufacturing sector has seen healthy growth with job creation rising from 0% to +7%.
The employment balance for the service sector has accelerated this quarter and now stands at +8%, the highest since
This is as a result of increasing employment in the manufacturing sector. Expectations to recruit next quarter are stronger
Q3 2008, and beating last quarter’s expectations of +6%. It is also the first time since Q3 2008 that the previous
overall with the broad measure standing at +11%. Manufacturers are increasing plans to recruit and construction firms
quarter’s expectations have been exceeded. Employment expectations for Q3 2011 have also strengthened with an
are easing plans for further job losses.
increase from +6% to +17%, reflecting recruitment intentions within the financial and professional services sector.
The number of manufacturing sector firms attempting to recruit increased by 10% this quarter to 51%. This reflects
The number of businesses attempting to recruit also increased this quarter to 50% of respondents, though the number
an increase in both construction and manufacturing firms trying to recruit. The number of respondents who have
of businesses reporting recruitment difficulties decreased by 3% to 65%. Despite a 2% fall to 42% in businesses
reported recruitment difficulties this quarter has remained fairly stable at +73%, down 1% from last quarter, primarily
experiencing difficulties filling clerical roles, these remain the hardest to fill. Those trying to recruit part-time fell sharply
easing for constructors but increasing for manufacturers.
to 24%, though full-time are the main requirement by 75% of those businesses that have recruited.
Recruitment in Services
Recruitment in Manufacturing
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
10
% Tried to Recruit
Recruitment Difficulties
%
%
% Tried to Recruit
Q2-07
Q3-07
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
0
Q2-07
Q3-07
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Recruitment Difficulties
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
11
Greater Manchester Chamber QES Survey, Q2 2011
Business Confidence
Investment Intentions
“Manufacturers’ confidence improves for profitability but construction concerns weigh on overall measures.”
“Signs of improvement in manufacturing investment, particularly skills and training.”
Manufacturing Confidence Turnover
Investment in Plant and Machinery
Profitability
Manufacturing
80
40
60
30 20 Net Balance %
Net Balance %
40 20 0 -20
10 0 -10 -20
-40 -60
Service
-30 Q2-07
Q3-07
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
-40
Q2-11
Q2-07
Q3-07
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
Business confidence in turnover for manufacturing has increased 2%; the balance now standing at +16%. Business
Intentions in the manufacturing sector to invest in plant and machinery moved positive for the first time since Q4 2009 to
confidence in profitability has partially recovered from -7% to -1%, which can be attributed to the fact that the
+2%. Investment in training also saw more improvement with an increase of 6% to +8%. Manufacturers have seen an
manufacturers within this sector expect better profitability, taking last quarter‘s +1% balance to +13%.
improvement in investment intentions, whilst fewer constructors appear to be scaling back investment.
Service sector confidence is showing real improvement this quarter with confidence in turnover strengthening from
Investment intentions for the service sector have recovered strongly with both investment for plant and machinery and
+21% to +34%. Business confidence in profitability for the next quarter has also accelerated dramatically from a weak
training entering positive figures +8% and +10 % from last quarter’s -9% and -3% respectively. Investment in plant and
+4% to +21%. This is again attributable to a more bullish outlook in the financial and professional services sector.
machinery is now at its highest since Q1 2008.
Investment in Training
Service Confidence
Manufacturing
Profitability
60
30
50
25
40
20
30
15
Net Balance %
Net Balance %
Turnover
20 10 0 -10
5 0
-10
-30
12
10
-5
-20
-40
Service
-15 Q2-07
Q3-07
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
Q2-07
Q3-07
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
13
Greater Manchester Chamber QES Survey, Q2 2011
Cashflow and Prices
Price Pressures in Manufacturing
“Cashflow still difficult with weak domestic demand and credit restrictions”
Pay Settlements
Cashflow
Raw Materials
Financial Costs
Other Overheads
100
Manufacturing
90
Service
80
Net Balance %
20
70 60
0
50
%
10
40
-10
30
-20
20
-30
10
-40 -50
0 Q2-07
Q3-07
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
Q2-07
Q3-07
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
Q2-11
Price pressures as a result of raw materials is still the main factor for the manufacturing sector. This has remained Cash flow difficulties still remain for the manufacturing sector. After last quarter’s steep deterioration things improved
stable at 72%. Pressure from finance costs and other overheads both eased 2% this quarter to 18% and 46%
this quarter by 8%, though the balance -19% indicates continuing challenges.
respectively, though pay settlement pressures are now at the highest level since Q4 2008, 19%, indicating
Cash flow difficulties also remain in the service sector. Although the balance remains negative, cash flow difficulties
strengthening of wages demands as real earnings are falling due to inflation.
appear to have eased from -17% last quarter to -5% this quarter.
External Factors in Manufacturing Manufacturing intentions to increase prices eased by 1% this quarter, the broader measure now standing at +34%. Constructors in particular are reluctant to increase prices, indicating poor demand and tough competition.
Interest Rates
The balance of service sector firms expecting to increase prices over the next quarter also eased by 3% to +28%,
Exchange Rates
Business Rates
Inflation
Competition
Taxation
70
as demand in the domestic economy weakens.
60 50
Intentions to Increase Prices %
40
Manufacturing
Service
30 20
70 60
10
Net Balance %
50 40
0
30
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
20 10
External factors affecting the sector have been reasonably stable this quarter. The only fall was concern over inflation,
0
down 7% at 49%, after a sharp rise in Q1. This may indicate an easing of input price rises. Interest rates, business rates
-10 -20
Q2-07
Q3-07
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
and corporation tax concerns all increased 1% this quarter to 27%, 31% and 28% respectively. Competition remains the highest concern in the post-recession environment with weak demand, despite remaining stable at 53%. Exchange rates also remained constant at 26%.
14
15
Greater Manchester Chamber QES Survey, Q2 2011
Price Pressures in Services
Recent Quarter Results - Manufacturing Deliveries & Orders
%
Pay Settlements
Raw Materials
Financial Costs
Other Overheads
Q3-10
Q4-10
Q1-11
Q2-11
UK sales
9
6
-2
-6
UK orders
4
-3
0
-7
80
Export sales
23
13
20
9
70
Export orders
18
8
12
11
60
Labour
50
Employment in the last quarter
8
-1
0
7
40
Employment expectations for next quarter
2
1
6
11
30
% Tried to recruit staff
51
40
41
51
% Part-time jobs
15
12
15
14
% Full-time jobs
76
78
76
79
% Temporary jobs
25
28
27
34
% Perminant jobs
40
41
41
40
58
72
74
72
If yes, were they for:
20 10 0
Q2-07
Q3-07
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
% Recruitment difficulties The service sector saw price pressures from raw materials, finance costs and other overheads all fall this quarter to 19%, 16% and 39%. All this helped to ease pressures to pass on price increases. However, whilst still subdued, pay settlement pressures have nudged up 2% to 13% this quarter.
If yes, were they for:
% Skilled manual/technical
28
48
47
46
% Professional/managerial
8
12
12
14
% Clerical
27
30
26
29
% Semi/unskilled
16
20
15
16
-17
-9
-27
-19
Investment plant & machinery
-3
-2
-4
2
Investment training
5
4
2
8
Turnover
21
19
14
16
Profitability
6
-7
-7
-1
26
31
27
34
Cash flow Investment Plans
External Factors in Services
Confidence (For Next 12 Months) Interest Rates
Exchange Rates
Business Rates
Inflation
Competition
Taxation
50 45
Production
40
% At full capacity
35
Prices / Costs
25
Balance of firms expecting to increase prices
25
30
35
34
20
Is your business currently suffering % Pay settlements
16
14
15
19
15
pressures to raise its prices from % Raw material prices
68
69
72
72
10
any of the following? % Finance costs
25
24
20
18
% Other overheads
33
35
48
46
25
16
26
27
than three months ago. Exchange rates
34
29
26
26
Despite competition pressures easing 2% to 42% and having last quarter being superseded by inflation as the external
Business rates
29
28
30
31
factor most affecting businesses it is now once again the highest rated factor. Business rates and inflation have both
Inflation
29
30
56
49
decreased by 7% and 6% and now stand at 23% and 39% respectively. Interest rates, exchange rates and corporation
Competition
58
57
53
53
Corporate taxation
25
26
27
28
Number of respondent companies
173
209
254
219
12702
84683
70437
13740
%
30
5 0
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
External Factors Affecting your business more
taxation all eased as external factors of concern, down from last quarter to +27%, +12% and +24% respectively.
Number of employees 16
Interest rates
17
Greater Manchester Chamber QES Survey, Q2 2011
Recent Quarter Results - Service Deliveries & Orders
Appendix 1 - Manufacturing Sector Split Q2 2011 Deliveries & Orders
Broader Measure
Manufacturers Only
Constructors Only
UK sales
-6
9
-26
Q3-10
Q4-10
Q1-11
Q2-11
UK sales
9
6
-1
10
UK orders
-4
1
-5
8
Export sales
5
15
17
14
Export orders
1
3
9
14
Employment in the last quarter
4
5
4
8
Employment expectations for next quarter
11
9
6
17
% Tried to recruit staff
49
46
43
50
% Part-time jobs
35
30
37
24
If yes, were they for:
% Full-time jobs
78
74
71
75
% Temporary jobs
16
20
18
14
% Perminant jobs
42
36
45
32
63
68
68
65
% Recruitment difficulties
Labour
If yes, were they for:
UK orders
-7
10
-32
Export sales
9
15
-14
Export orders
11
16
-6
Employment in the last quarter
7
21
-10
Employment expectations for next quarter
11
24
-8
% Tried to recruit staff
51
58
44
% Part-time jobs
14
16
12
% Full-time jobs
79
81
76
% Temporary jobs
34
26
46
% Perminant jobs
40
42
39
72
67
83
Labour
% Recruitment difficulties If yes, were they for:
% Skilled manual/technical
18
22
21
18
If yes, were they for:
% Skilled manual/technical
46
43
49
% Professional/managerial
17
24
14
14
% Professional/managerial
14
16
12
% Clerical
33
36
44
42
% Clerical
29
25
34
% Semi/unskilled
13
15
16
11
% Semi/unskilled
16
20
10
-10
-10
-17
-5
Cash flow
-19
-8
-35
Investment plant & machinery
0
-2
-9
8
Investment plant & machinery
2
9
-8
Investment training
12
0
-3
10
Investment training
8
13
0
Turnover
29
28
21
34
Profitability
13
16
4
21
Turnover
16
32
-4
Profitability
-1
13
-18
34
31
29
38
34
38
28
Balance of firms expecting to increase prices
14
28
31
28
% Pay settlements Is your business currently suffering
10
10
11
13
Balance of firms expecting to increase prices
34
52
10
pressures to raise its prices from % Raw material prices
21
20
27
19
Is your business currently suffering % Pay settlements
19
23
14
any of the following? % Finance costs
20
21
20
16
pressures to raise its prices from % Raw material prices
72
84
58
% Other overheads
40
39
45
39
any of the following? % Finance costs
18
15
20
% Other overheads
27
26
29
29
28
32
27
than three months ago. Exchange rates
11
13
15
12
27
26
29
Business rates
32
26
30
23
than three months ago. Exchange rates
26
44
3
Inflation
32
27
45
39
Business rates
31
29
33
Competition
44
47
44
42
Inflation
49
50
46
Corporate taxation
26
31
28
24
Competition
53
39
70
Corporate taxation
28
25
32
Number of respondent companies
311
413
449
584
185636
133554
158727
234966
Number of respondent companies
219
119
93
13740
7831
5860
Cash flow Investment Plans
Investment Plans
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs
External Factors Affecting your business more
Number of employees 18
Interest rates
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs
External Factors Affecting your business more
Number of employees
Interest rates
19
Greater Manchester Chamber QES Survey, Q2 2011
Appendix 2 - Manufacturing Sector Split Q1 2011 Deliveries & Orders UK sales
Appendix 3 - Headline Data
Broader Measure
Manufacturers Only
Constructors Only
-2
6
-21
UK orders
0
16
-25
Export sales
20
21
6
Export orders
12
15
-6
Labour
Quarterly GDP Increase, Q1 2011
0.5%
Up 1% on Q4 2010
Base Rate
0.5%
Unchanged since March 2009
CPI Inflation
4.5%
May, unchanged from April
5.2%
May, unchanged from April
$1.62
17th June, up 4.5% since beginning of year
Exchange rate £:€
€ 1.13
17th June, down 2.6% since beginning of year
Oil price (Brent Crude, spot)
$114.58
16th June, up 24% since beginning of year
21
AA Fuel Prices, May 2011
Price
Change
73
76
Petrol (per Litre)
£1.369
Up 1.1p since April
Diesel (per Litre)
£1.415
Down 0.5p since April
6
-11
Employment expectations for next quarter
6
16
-13
% Tried to recruit staff
41
43
35
% Part-time jobs
15
13
12
% Full-time jobs
76
81
68
% Temporary jobs
27
21
38
% Perminant jobs
41
55
74
If yes, were they for:
% Skilled manual/technical
47
44
56
% Professional/managerial
12
10
9
% Clerical
26
24
29
% Semi/unskilled
15
21
6
-27
-24
-38
Cash flow
Change
Exchange rate £:$
0
% Recruitment difficulties
Rate
RPI Inflation
Employment in the last quarter
If yes, were they for:
Background Economic Data - June 2011
Investment Plans Investment plant & machinery
-4
9
-27
Investment training
2
5
-5
Turnover
14
31
-13
Profitability
-7
1
-22
Claimant Count, May 2011
Number
Rate
Change
UK
1,504,913
3.7%
Down 15,893 since April
North West
185,928
4.2%
Down 880 since April
Greater Manchester
76,602
4.5%
Down 142 since April
Confidence (For Next 12 Months)
Production % At full capacity
Claimant Count - Local Breakdown
January 2011 February 2011
March 2011
April 2011
May 2011
No.
Rate
No.
Rate
No.
Rate
No.
Rate
No.
Rate
Bolton
7,601
4.5
7,668
4.5
7,737
4.6
7,916
4.7
7,778
4.6
Bury
4,178
3.6
4,276
3.7
4,280
3.7
4,316
3.7
4,335
3.7
Manchester
17,637
5.1
18,032
5.2
17,659
5.1
18,032
5.2
18,029
5.2
27
25
33
Oldham
6,798
4.9
6,985
5.1
6,940
5.0
6,948
5.0
6,992
5.1
Balance of firms expecting to increase prices
35
52
18
Rochdale
7,031
5.4
7,154
5.5
7,091
5.4
7,109
5.4
7,138
5.4
Is your business currently suffering % Pay settlements
15
20
10
Salford
7,109
4.7
7,270
4.8
7,136
4.7
7,305
4.8
7,362
4.9
pressures to raise its prices from % Raw material prices
72
85
56
Stockport
5,760
3.2
5,854
3.2
5,678
3.1
5,680
3.1
5,656
3.1
any of the following? % Finance costs
20
15
25
Tameside
6,062
4.3
6,172
4.4
6,156
4.4
6,418
4.6
6,427
4.6
% Other overheads
26
16
42
Trafford
4,307
3.1
4,445
3.2
4,258
3.1
4,271
3.1
4,290
3.1
Wigan
8,790
4.4
8,892
4.5
8,754
4.4
8,749
4.4
8,595
4.3
75,273
4.4
76,748
4.5
75,689
4.4
76,744
4.5
76,602
4.5
Prices / Costs
External Factors Affecting your business more
26
16
42
than three months ago. Exchange rates
26
42
4
Business rates
30
34
23
Inflation
56
54
55
Competition
53
41
65
Corporate taxation
27
27
29
Number of respondent companies
254
143
97
70437
7794
59963
Number of employees 20
Interest rates
Greater Manchester
21
Greater Manchester Chamber QES Survey, Q2 2011
Appendix 3 - Headline Data
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.
UK Quarter on Quarter GDP 1.5
The Chamber is recognised as a leader in its field. Its reputation has grown in Government circles both locally and
Percentage Change
1
nationally, as well as in the region and overseas.
0.5 0
The aim of Greater Manchester Chamber of Commerce is to create the best climate for business in the region to prosper.
-‐0.5
This can be achieved by ensuring that those taking decisions on key issues such as transport, taxation and business
-‐1
regulation hear the voice of our members. The representation of our members’ views is central to the work of the policy
-‐1.5
team at the Chamber. These views are gathered in a range of ways including focus groups, meetings with politicians,
-‐2
consultations and this Quarterly Economic Survey. 1 Q
4 20
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Q
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10 20
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Q
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06
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06
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-‐2.5
About this Quarter’s Survey
Infla.on 6
The survey collection period for the Q2 2011 survey was from
Percentage Change
5
23rd May to 15th June. A total of 803 businesses from across
4
Greater Manchester, employing 248,706 people, responded to
3 2
CPI
1
RPI
this quarter’s survey.
0 -‐1
20
pr A
From the manufacturing sector, 219 businesses employing
13,740 people responded to the survey;
•
From the service sector, 584 businesses employing 234,966
people responded to the survey.
11
b Fe
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D
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10
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06
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A
pr
-‐2
•
Exchange Rates 2.2 2 1.8 1.6
Euro
1.4
USD
1.2
The report has been researched, written and compiled by: Dr Brian Sloan – Head of Business and Economic Policy Sana Nabi – Policy Officer
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If you require any further information about the production or detail of this report, please contact: Sana on 0161 237 4045 or email [email protected]
Brent Crude Oil Spot Price 160 140
USD
120 100 80 60 40 20
NB: Net balance figures, referred to throughout this report, are determined by subtracting the percentage of businesses
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reporting decreases in a factor from the percentage of businesses reporting an increase. 23
Quarterly Economic Survey
Full Report & Economic Brief
Quarter 2 - 2011
1
Greater Manchester Chamber QES Survey, Q2 2011
Contents
Chief Executive’s Foreword
Chief Executive’s Foreword
3
Economic Outlook
4
Survey Summary for Manufacturing
6
Survey Summary for Services
7
UK Sales and Orders
8
Export Sales and Orders
9
the economic intelligence that can be collected through this survey. Recognising
Employment and Recruitment in Manufacturing
10
the number of members responding to the survey and raise its profile. This has
Dating back to the mid-1980s the British Chambers of Commerce Quarterly Economic Survey has firmly established itself as a leading indicator of economic activity in the UK. Consistently referenced by the Bank of England and used by Government and independent economists, the survey is a simple yet effective tool that reports on business confidence, employment trends and investment intentions.
Greater Manchester Chamber of Commerce, representing the business community in the UK’s second largest economy, understands the importance of the importance and pedigree of the QES we have worked hard to keep improving seen a consistent and sustained rise in responses over the last 12 months with
Employment and Recruitment in Services
quarter on quarter increases backed up by increasing demands from local
11
government, regional and national organisations and decision-makers to access Business Confidence
the results. We speak with accuracy and with authority on the challenges facing
12
the region’s economy, often before other official data is released. Investment Intentions
13
Cashflow and Prices
14
Price Pressures in Manufacturing
15
This quarter’s survey is the first to be launched at our new City Breakfast event, an opportunity for businesses to be the first to hear what the local economic picture is, to engage with us and debate what the results are telling us about the
External Factors in Manufacturing
15
Price Pressures in Services
16
External Factors in Services
16
Recent Quarter Results - Manufacturing
17
Recent Quarter Results - Services
18
Appendix 1 - Manufacturing Sector Split Q1 2011
19
Appendix 2 - Manufacturing Sector Split Q4 2010
20
Appendix 3 - Background Economic Data
21
region’s economy, the implications for the future and what can be done about it now.
I sincerely hope you enjoy the briefing, and that you continue to support the Survey.
2
Clive Memmott Chief Executive, Greater Manchester Chamber of Commerce
3
Greater Manchester Chamber QES Survey, Q2 2011
Economic Outlook
The Chamber’s economic outlook since last year’s Emergency Budget has been one of the more consistent since that time, recognising the ongoing challenges facing the UK economy. The current global economic environment is also not without its challenges that might also impact on businesses here in the UK; however it also presents a great opportunity for business given the right encouragement and support. With this in mind the Chamber has remained realistic on growth, predicting 1.3% in 2011 before picking up further in 2012.
Spare capacity? The question of capacity has been one that has troubled the Monetary Policy Committee. The Chamber is supportive of the Bank of England’s stance on interest rates; however a rate of 0.5% cannot be sustained indefinitely. Businesses report that margins on lending have increased and do not reflect the low Bank of England rate, and households remain holding high levels of debt. As inflation erodes real incomes households are struggling to pay down these high levels of debt. If the global economy picks up again after what seems to be a weakening in recent months, demand for oil and
Encouraging signs
commodities will require a strengthening of Sterling with an interest rate rise that could damage household demand and the recovery.
After a very disappointing set of results for Q1, this quarter’s survey for Greater Manchester provides encouragement and supports our assessment that the economy will experience growth and there will be an improvement in employment prospects towards the end of the year. The domestic economy is weak as a result of public sector cuts, inflation and the Government’s austerity measures, though growth is being secured by growing exports in the region. Job creation in the private sector has slowed, but remains positive, and despite public sector losses and Government policy aimed at moving people from various forms of benefit to Jobseekers Allowance, the claimant count has remained broadly neutral since the
Cost of capital A low interest environment in the UK is making it less attractive to hold capital here when much of the global economy is enjoying growth nearing 5% or more. In addition to this the proposals to increase the capital ratios of UK banks and ring fence retailing banking operations from investment banking, laid down in the Vickers Report, will increase further the costs for businesses and individuals and the cost of capital. Making banks safer is certainly more desirable, but acting in isolation could make our banks less competitive and deprive the economy of investment capital in the future.
Q1 survey. Debt will remain a concern Investment picking up There are signs that larger, less liquidity constrained firms, are now looking to increase investment, however debt and credit issues remain serious challenges for the UK and exposure to external shocks increases the uncertainty facing businesses. Smaller businesses however are still finding difficulty accessing finance and are not yet increasingly their plans for investment. A key question hanging over the future of business investment, that is expected to support further
The UK economy remains vulnerable to the levels of both Government and household debt over the coming years and as the recovery gathers momentum and interest rate rises start there will be further downward pressure on growth. The recovery is underway, but it will be a slow and uncertain one with periods of regional and sectoral poor or negative growth. Encouraging job creation and supporting exporters to access new and emerging high growth markets is vital to ensuring the recovery can be maintained.
growth in the coming years, is to what extent there is spare capacity in the economy? Given that part-time and more flexible working was adopted during the recession, keeping more people in employment, it could be that large numbers of people will not return to employment unless this “spare” capacity is in low growth sectors.
Dr Brian Sloan Head of Business and Economic Policy
4
5
Greater Manchester Chamber QES Survey, Q2 2011
Survey Summary for Manufacturing
Survey Summary for Services
• Export demand weakens across manufacturing and construction
• An upturn of sorts, dominated by financial and professional services
• Constructors remain cash constrained, but less pessimistic
• Strong job creation in the city, but weaker across the wider region
• More manufacturers are recruiting this quarter
• Business confidence rebounds
• Costs and inflationary concerns appear to be easing, though pay demands are on the increase
• Larger, less liquidity constrained firms are making investment plans, but smallest firms still encountering finance challenges
• A slight improvement in investment plans is encouraging.
• Price increase intentions ease as competition remains tough.
The manufacturing sector’s performance in terms of sales and order measures in Q2 will, on the face of it, disappoint this quarter. There is an indication that this does not tell the whole story and overall the outlook is more encouraging. Once again we provide a breakdown of the broad manufacturing results split into manufacturing and construction respondents in the appendix. Manufacturers continue to see very positive growth, and though official figures for construction across the wider North West suggest that demand is more flat at present, clearly constructors responding to the survey are continuing to experience challenges.
The service sector as a whole across Greater Manchester has seen something of an upturn in Q2, driven by improving conditions and outlook for financial and professional services businesses located predominantly in Manchester’s city centre. The service sector is still being challenged by the impact of public sector cuts and inflationary forces on both business and consumer demand, therefore sub-sector performance is variable, as is the performance across different sub-regions of Greater Manchester. In spite of this, after stripping out the financial and professional services sector we are able to see that there has been a slight improvement in confidence and investment plans since Q1.
The domestic market balances for sales and orders have both deteriorated to -6% and -7% respectively, though medium sized manufacturers saw an improvement in the growth of UK sales in contrast to smaller firms. The negative balances for the sector overall are driven by the ongoing challenges facing construction respondents and it is a concern that having seen some positive growth in export sales and orders for this group last quarter, there has been a downturn. Manufacturers also saw weaker export sales growth. Across the whole manufacturing sector export sales and order balances are now +9% and +11%, down 11% and 1% respectively since Q1.
The otherwise flat service sector domestic market across Greater Manchester has performed well in Q2 due to the improvement in financial and professional services, with the upturn in sales and orders reaching +10% and +8% in Q2, up from -1% and -5% in Q1. Service sector businesses have benefited from export growth in recent quarters, and although falling back slightly this quarter sales remain at a historically strong +14% and orders have reached a balance of +14%, a level not surpassed since Q1 2007.
More encouraging is the positive job creation and expectations for next quarter across the sector. Manufacturers are recruiting and expect this to increase further in Q3. It is also welcome that the pace of losses in the construction sector is slowing down. The broad measure of employment balances increased to +7% this quarter, and intentions to recruit have also strengthened to +11%. Although the manufacturing sector has increased recruitment it is perhaps telling that having experienced high levels of recruitment difficulties, there has been a boost in investment in training, increasing from +2% to +8%.
Investment in plant and machinery as a broad sector measure has been negative throughout 2010 and Q1 2011, so the +2% balance is a welcome return to positive territory for this measure. This is due to fewer construction firms scaling back investment plans.
Intentions to increase prices have eased very slightly by 1% to +34%, though the erosion of real earnings due to inflation is driving higher wage demands.
Overall domestic demand is holding up across the sector and there are signs that confidence and investment intentions are set to rise. With positive intentions to recruit there appears to be a growing confidence that the recovery is stabilising and firms are more willing to invest. This is encouraging and whilst growth is not yet expected to be strong, exports will help support the domestic recovery.
6
As a result of growth in the service sector employment has continued to grow at a slightly faster rate, the balance up 3% to +8%, the highest balance since Q3 2008. This is the first quarter that actual recruitment has exceeded the expectations of the previous quarter since Q3 2008, so with this in mind it is pleasing to see expectations rise strongly this quarter to a balance of +17% of firms looking to recruit. We do note that much of this job creation is occurring in financial and professional services.
The deteriorating investment intentions of Q1have now greatly improved with a rebounding of business confidence. The confidence measures for turnover and profitability have increased by 13% and 17% respectively to +34% and +21%. It is however the larger, less liquidity constrained firms that are more willing to invest at present than small firms that are more reliant on lines of credit than cash reserves. As a result of improved confidence, investment plans for plant and machinery and training have risen to +8% and +10% respectively.
Despite an increase in the balance of businesses (+38%) working at capacity, tough trading conditions and an easing of price pressures on businesses are making firms less likely to push up prices in the coming months. This may help to keep a lid on domestic inflation, though there is pressure from wage demands as a result of inflation eroding real earnings.
This quarter’s service sector performance eases the concerns of last quarter, and there is a more improved outlook, though we remain in a volatile and uncertain post recessionary environment. The impact of spending cuts and austerity measures, compounded by external shocks, such as the ongoing Eurozone debt crisis and a slowdown in global growth, continue to challenge businesses in our region. Whilst challenging it is our assessment that the area is better placed than most to deal with the challenges that remain ahead and the outlook, as we anticipated last year, is one of improving prospects towards the end of 2011. 7
Greater Manchester Chamber QES Survey, Q2 2011
UK Sales and Orders
Export Sales and Orders
“The domestic economy remains weak, but some sectors are performing well.”
“Sustained growth in exports is necessary to secure employment and investment across the wider Greater Manchester economy.”
UK Sales
Manufacturing Exports
Manufacturing
Service
Export Sales 30
50 40
20
30
10 Net Balance %
Net Balance %
20 10 0 -10 -20 -30
0 -10 -20 -30
-40
-40
-50 -60
Export Orders
Q2-07
Q3-07
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
-50
Q2-11
Q2-07
Q3-07
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
Manufacturing domestic sales fell this quarter 4% to -6%. Constructors saw this balance fall from -21% to -26%,
The broad manufacturing sector’s export sales have fallen this quarter from +20% to +9%. The construction sector saw
though manufacturers saw the rate of growth up with a balance increase of 2% to +8%.
a sharp downturn from +6% to -14%, whilst manufacturers saw continued growth, albeit weaker, down 7% to +14%.
Domestic order balances also suffered a down turn from 0% to -7% due to both weakening manufacturing orders
Export orders remain stable this quarter, decreasing slightly by 1% to +11%. Manufacturers saw a 1% increase in orders
and fewer construction orders, from +16% to +10% and -25% to -32% respectively.
and constructors no change.
A strong performance in the Financial and Professional Services sector within Manchester’s city centre this quarter
Service sector export sales fell back slightly this quarter from the recent highs to +14%, though this remains near to
led service sector domestic sales to recover strongly from -1% to +10%.
historical highs for this data series.
There was a similar response for domestic orders now standing at +8% from -5% last quarter. This is the highest it
Export orders on the other hand have continued to strengthen and now also stand at +14. This is the highest orders
has stood since Q1 2008.
have been since Q3 2007. It is encouraging that service sector firms are continuing to see growing export orders.
Service Exports
UK Orders Manufacturing
Export Sales
Service 30
40 30
20 10
10
Net Balance %
Net Balance %
20
0 -10 -20 -30
-10
-30
-50
8
0
-20
-40
-60
Export Orders
Q2-07
Q3-07
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
-40
Q2-07
Q3-07
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
9
Greater Manchester Chamber QES Survey, Q2 2011
Employment and Recruitment in Manufacturing
Employment and Recruitment in Services
“Growth in jobs, but recruitment difficulties remain a concern for the longer term.”
“Service sector job creation continues, helping to keep the claimant count down.”
Employment in Manufacturing Expected Change
Actual Change
20
30
15
25
10
20
0 -5 -10 -15
10 5 0 -5 -10
-20
-15
-25
-20
-30
Expected Change
15
5
Net Balance %
Net Balance %
Actual Change
Employment in Services
Q2-07
Q3-07
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
-25
Q2-11
Q2-07
Q3-07
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
Employment for the broad manufacturing sector has seen healthy growth with job creation rising from 0% to +7%.
The employment balance for the service sector has accelerated this quarter and now stands at +8%, the highest since
This is as a result of increasing employment in the manufacturing sector. Expectations to recruit next quarter are stronger
Q3 2008, and beating last quarter’s expectations of +6%. It is also the first time since Q3 2008 that the previous
overall with the broad measure standing at +11%. Manufacturers are increasing plans to recruit and construction firms
quarter’s expectations have been exceeded. Employment expectations for Q3 2011 have also strengthened with an
are easing plans for further job losses.
increase from +6% to +17%, reflecting recruitment intentions within the financial and professional services sector.
The number of manufacturing sector firms attempting to recruit increased by 10% this quarter to 51%. This reflects
The number of businesses attempting to recruit also increased this quarter to 50% of respondents, though the number
an increase in both construction and manufacturing firms trying to recruit. The number of respondents who have
of businesses reporting recruitment difficulties decreased by 3% to 65%. Despite a 2% fall to 42% in businesses
reported recruitment difficulties this quarter has remained fairly stable at +73%, down 1% from last quarter, primarily
experiencing difficulties filling clerical roles, these remain the hardest to fill. Those trying to recruit part-time fell sharply
easing for constructors but increasing for manufacturers.
to 24%, though full-time are the main requirement by 75% of those businesses that have recruited.
Recruitment in Services
Recruitment in Manufacturing
80
80
70
70
60
60
50
50
40
40
30
30
20
20
10
10
0
10
% Tried to Recruit
Recruitment Difficulties
%
%
% Tried to Recruit
Q2-07
Q3-07
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
0
Q2-07
Q3-07
Q4-07
Q1-08
Q2-08
Q3-08
Q4-08
Q1-09
Recruitment Difficulties
Q2-09
Q3-09
Q4-09
Q1-10
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
11
Greater Manchester Chamber QES Survey, Q2 2011
Business Confidence
Investment Intentions
“Manufacturers’ confidence improves for profitability but construction concerns weigh on overall measures.”
“Signs of improvement in manufacturing investment, particularly skills and training.”
Manufacturing Confidence Turnover
Investment in Plant and Machinery
Profitability
Manufacturing
80
40
60
30 20 Net Balance %
Net Balance %
40 20 0 -20
10 0 -10 -20
-40 -60
Service
-30 Q2-07
Q3-07
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
-40
Q2-11
Q2-07
Q3-07
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
Business confidence in turnover for manufacturing has increased 2%; the balance now standing at +16%. Business
Intentions in the manufacturing sector to invest in plant and machinery moved positive for the first time since Q4 2009 to
confidence in profitability has partially recovered from -7% to -1%, which can be attributed to the fact that the
+2%. Investment in training also saw more improvement with an increase of 6% to +8%. Manufacturers have seen an
manufacturers within this sector expect better profitability, taking last quarter‘s +1% balance to +13%.
improvement in investment intentions, whilst fewer constructors appear to be scaling back investment.
Service sector confidence is showing real improvement this quarter with confidence in turnover strengthening from
Investment intentions for the service sector have recovered strongly with both investment for plant and machinery and
+21% to +34%. Business confidence in profitability for the next quarter has also accelerated dramatically from a weak
training entering positive figures +8% and +10 % from last quarter’s -9% and -3% respectively. Investment in plant and
+4% to +21%. This is again attributable to a more bullish outlook in the financial and professional services sector.
machinery is now at its highest since Q1 2008.
Investment in Training
Service Confidence
Manufacturing
Profitability
60
30
50
25
40
20
30
15
Net Balance %
Net Balance %
Turnover
20 10 0 -10
5 0
-10
-30
12
10
-5
-20
-40
Service
-15 Q2-07
Q3-07
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
Q2-07
Q3-07
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
13
Greater Manchester Chamber QES Survey, Q2 2011
Cashflow and Prices
Price Pressures in Manufacturing
“Cashflow still difficult with weak domestic demand and credit restrictions”
Pay Settlements
Cashflow
Raw Materials
Financial Costs
Other Overheads
100
Manufacturing
90
Service
80
Net Balance %
20
70 60
0
50
%
10
40
-10
30
-20
20
-30
10
-40 -50
0 Q2-07
Q3-07
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
Q2-07
Q3-07
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
Q2-11
Price pressures as a result of raw materials is still the main factor for the manufacturing sector. This has remained Cash flow difficulties still remain for the manufacturing sector. After last quarter’s steep deterioration things improved
stable at 72%. Pressure from finance costs and other overheads both eased 2% this quarter to 18% and 46%
this quarter by 8%, though the balance -19% indicates continuing challenges.
respectively, though pay settlement pressures are now at the highest level since Q4 2008, 19%, indicating
Cash flow difficulties also remain in the service sector. Although the balance remains negative, cash flow difficulties
strengthening of wages demands as real earnings are falling due to inflation.
appear to have eased from -17% last quarter to -5% this quarter.
External Factors in Manufacturing Manufacturing intentions to increase prices eased by 1% this quarter, the broader measure now standing at +34%. Constructors in particular are reluctant to increase prices, indicating poor demand and tough competition.
Interest Rates
The balance of service sector firms expecting to increase prices over the next quarter also eased by 3% to +28%,
Exchange Rates
Business Rates
Inflation
Competition
Taxation
70
as demand in the domestic economy weakens.
60 50
Intentions to Increase Prices %
40
Manufacturing
Service
30 20
70 60
10
Net Balance %
50 40
0
30
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
20 10
External factors affecting the sector have been reasonably stable this quarter. The only fall was concern over inflation,
0
down 7% at 49%, after a sharp rise in Q1. This may indicate an easing of input price rises. Interest rates, business rates
-10 -20
Q2-07
Q3-07
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
and corporation tax concerns all increased 1% this quarter to 27%, 31% and 28% respectively. Competition remains the highest concern in the post-recession environment with weak demand, despite remaining stable at 53%. Exchange rates also remained constant at 26%.
14
15
Greater Manchester Chamber QES Survey, Q2 2011
Price Pressures in Services
Recent Quarter Results - Manufacturing Deliveries & Orders
%
Pay Settlements
Raw Materials
Financial Costs
Other Overheads
Q3-10
Q4-10
Q1-11
Q2-11
UK sales
9
6
-2
-6
UK orders
4
-3
0
-7
80
Export sales
23
13
20
9
70
Export orders
18
8
12
11
60
Labour
50
Employment in the last quarter
8
-1
0
7
40
Employment expectations for next quarter
2
1
6
11
30
% Tried to recruit staff
51
40
41
51
% Part-time jobs
15
12
15
14
% Full-time jobs
76
78
76
79
% Temporary jobs
25
28
27
34
% Perminant jobs
40
41
41
40
58
72
74
72
If yes, were they for:
20 10 0
Q2-07
Q3-07
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
% Recruitment difficulties The service sector saw price pressures from raw materials, finance costs and other overheads all fall this quarter to 19%, 16% and 39%. All this helped to ease pressures to pass on price increases. However, whilst still subdued, pay settlement pressures have nudged up 2% to 13% this quarter.
If yes, were they for:
% Skilled manual/technical
28
48
47
46
% Professional/managerial
8
12
12
14
% Clerical
27
30
26
29
% Semi/unskilled
16
20
15
16
-17
-9
-27
-19
Investment plant & machinery
-3
-2
-4
2
Investment training
5
4
2
8
Turnover
21
19
14
16
Profitability
6
-7
-7
-1
26
31
27
34
Cash flow Investment Plans
External Factors in Services
Confidence (For Next 12 Months) Interest Rates
Exchange Rates
Business Rates
Inflation
Competition
Taxation
50 45
Production
40
% At full capacity
35
Prices / Costs
25
Balance of firms expecting to increase prices
25
30
35
34
20
Is your business currently suffering % Pay settlements
16
14
15
19
15
pressures to raise its prices from % Raw material prices
68
69
72
72
10
any of the following? % Finance costs
25
24
20
18
% Other overheads
33
35
48
46
25
16
26
27
than three months ago. Exchange rates
34
29
26
26
Despite competition pressures easing 2% to 42% and having last quarter being superseded by inflation as the external
Business rates
29
28
30
31
factor most affecting businesses it is now once again the highest rated factor. Business rates and inflation have both
Inflation
29
30
56
49
decreased by 7% and 6% and now stand at 23% and 39% respectively. Interest rates, exchange rates and corporation
Competition
58
57
53
53
Corporate taxation
25
26
27
28
Number of respondent companies
173
209
254
219
12702
84683
70437
13740
%
30
5 0
Q2-10
Q3-10
Q4-10
Q1-11
Q2-11
External Factors Affecting your business more
taxation all eased as external factors of concern, down from last quarter to +27%, +12% and +24% respectively.
Number of employees 16
Interest rates
17
Greater Manchester Chamber QES Survey, Q2 2011
Recent Quarter Results - Service Deliveries & Orders
Appendix 1 - Manufacturing Sector Split Q2 2011 Deliveries & Orders
Broader Measure
Manufacturers Only
Constructors Only
UK sales
-6
9
-26
Q3-10
Q4-10
Q1-11
Q2-11
UK sales
9
6
-1
10
UK orders
-4
1
-5
8
Export sales
5
15
17
14
Export orders
1
3
9
14
Employment in the last quarter
4
5
4
8
Employment expectations for next quarter
11
9
6
17
% Tried to recruit staff
49
46
43
50
% Part-time jobs
35
30
37
24
If yes, were they for:
% Full-time jobs
78
74
71
75
% Temporary jobs
16
20
18
14
% Perminant jobs
42
36
45
32
63
68
68
65
% Recruitment difficulties
Labour
If yes, were they for:
UK orders
-7
10
-32
Export sales
9
15
-14
Export orders
11
16
-6
Employment in the last quarter
7
21
-10
Employment expectations for next quarter
11
24
-8
% Tried to recruit staff
51
58
44
% Part-time jobs
14
16
12
% Full-time jobs
79
81
76
% Temporary jobs
34
26
46
% Perminant jobs
40
42
39
72
67
83
Labour
% Recruitment difficulties If yes, were they for:
% Skilled manual/technical
18
22
21
18
If yes, were they for:
% Skilled manual/technical
46
43
49
% Professional/managerial
17
24
14
14
% Professional/managerial
14
16
12
% Clerical
33
36
44
42
% Clerical
29
25
34
% Semi/unskilled
13
15
16
11
% Semi/unskilled
16
20
10
-10
-10
-17
-5
Cash flow
-19
-8
-35
Investment plant & machinery
0
-2
-9
8
Investment plant & machinery
2
9
-8
Investment training
12
0
-3
10
Investment training
8
13
0
Turnover
29
28
21
34
Profitability
13
16
4
21
Turnover
16
32
-4
Profitability
-1
13
-18
34
31
29
38
34
38
28
Balance of firms expecting to increase prices
14
28
31
28
% Pay settlements Is your business currently suffering
10
10
11
13
Balance of firms expecting to increase prices
34
52
10
pressures to raise its prices from % Raw material prices
21
20
27
19
Is your business currently suffering % Pay settlements
19
23
14
any of the following? % Finance costs
20
21
20
16
pressures to raise its prices from % Raw material prices
72
84
58
% Other overheads
40
39
45
39
any of the following? % Finance costs
18
15
20
% Other overheads
27
26
29
29
28
32
27
than three months ago. Exchange rates
11
13
15
12
27
26
29
Business rates
32
26
30
23
than three months ago. Exchange rates
26
44
3
Inflation
32
27
45
39
Business rates
31
29
33
Competition
44
47
44
42
Inflation
49
50
46
Corporate taxation
26
31
28
24
Competition
53
39
70
Corporate taxation
28
25
32
Number of respondent companies
311
413
449
584
185636
133554
158727
234966
Number of respondent companies
219
119
93
13740
7831
5860
Cash flow Investment Plans
Investment Plans
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs
External Factors Affecting your business more
Number of employees 18
Interest rates
Confidence (For Next 12 Months)
Production % At full capacity Prices / Costs
External Factors Affecting your business more
Number of employees
Interest rates
19
Greater Manchester Chamber QES Survey, Q2 2011
Appendix 2 - Manufacturing Sector Split Q1 2011 Deliveries & Orders UK sales
Appendix 3 - Headline Data
Broader Measure
Manufacturers Only
Constructors Only
-2
6
-21
UK orders
0
16
-25
Export sales
20
21
6
Export orders
12
15
-6
Labour
Quarterly GDP Increase, Q1 2011
0.5%
Up 1% on Q4 2010
Base Rate
0.5%
Unchanged since March 2009
CPI Inflation
4.5%
May, unchanged from April
5.2%
May, unchanged from April
$1.62
17th June, up 4.5% since beginning of year
Exchange rate £:€
€ 1.13
17th June, down 2.6% since beginning of year
Oil price (Brent Crude, spot)
$114.58
16th June, up 24% since beginning of year
21
AA Fuel Prices, May 2011
Price
Change
73
76
Petrol (per Litre)
£1.369
Up 1.1p since April
Diesel (per Litre)
£1.415
Down 0.5p since April
6
-11
Employment expectations for next quarter
6
16
-13
% Tried to recruit staff
41
43
35
% Part-time jobs
15
13
12
% Full-time jobs
76
81
68
% Temporary jobs
27
21
38
% Perminant jobs
41
55
74
If yes, were they for:
% Skilled manual/technical
47
44
56
% Professional/managerial
12
10
9
% Clerical
26
24
29
% Semi/unskilled
15
21
6
-27
-24
-38
Cash flow
Change
Exchange rate £:$
0
% Recruitment difficulties
Rate
RPI Inflation
Employment in the last quarter
If yes, were they for:
Background Economic Data - June 2011
Investment Plans Investment plant & machinery
-4
9
-27
Investment training
2
5
-5
Turnover
14
31
-13
Profitability
-7
1
-22
Claimant Count, May 2011
Number
Rate
Change
UK
1,504,913
3.7%
Down 15,893 since April
North West
185,928
4.2%
Down 880 since April
Greater Manchester
76,602
4.5%
Down 142 since April
Confidence (For Next 12 Months)
Production % At full capacity
Claimant Count - Local Breakdown
January 2011 February 2011
March 2011
April 2011
May 2011
No.
Rate
No.
Rate
No.
Rate
No.
Rate
No.
Rate
Bolton
7,601
4.5
7,668
4.5
7,737
4.6
7,916
4.7
7,778
4.6
Bury
4,178
3.6
4,276
3.7
4,280
3.7
4,316
3.7
4,335
3.7
Manchester
17,637
5.1
18,032
5.2
17,659
5.1
18,032
5.2
18,029
5.2
27
25
33
Oldham
6,798
4.9
6,985
5.1
6,940
5.0
6,948
5.0
6,992
5.1
Balance of firms expecting to increase prices
35
52
18
Rochdale
7,031
5.4
7,154
5.5
7,091
5.4
7,109
5.4
7,138
5.4
Is your business currently suffering % Pay settlements
15
20
10
Salford
7,109
4.7
7,270
4.8
7,136
4.7
7,305
4.8
7,362
4.9
pressures to raise its prices from % Raw material prices
72
85
56
Stockport
5,760
3.2
5,854
3.2
5,678
3.1
5,680
3.1
5,656
3.1
any of the following? % Finance costs
20
15
25
Tameside
6,062
4.3
6,172
4.4
6,156
4.4
6,418
4.6
6,427
4.6
% Other overheads
26
16
42
Trafford
4,307
3.1
4,445
3.2
4,258
3.1
4,271
3.1
4,290
3.1
Wigan
8,790
4.4
8,892
4.5
8,754
4.4
8,749
4.4
8,595
4.3
75,273
4.4
76,748
4.5
75,689
4.4
76,744
4.5
76,602
4.5
Prices / Costs
External Factors Affecting your business more
26
16
42
than three months ago. Exchange rates
26
42
4
Business rates
30
34
23
Inflation
56
54
55
Competition
53
41
65
Corporate taxation
27
27
29
Number of respondent companies
254
143
97
70437
7794
59963
Number of employees 20
Interest rates
Greater Manchester
21
Greater Manchester Chamber QES Survey, Q2 2011
Appendix 3 - Headline Data
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.
UK Quarter on Quarter GDP 1.5
The Chamber is recognised as a leader in its field. Its reputation has grown in Government circles both locally and
Percentage Change
1
nationally, as well as in the region and overseas.
0.5 0
The aim of Greater Manchester Chamber of Commerce is to create the best climate for business in the region to prosper.
-‐0.5
This can be achieved by ensuring that those taking decisions on key issues such as transport, taxation and business
-‐1
regulation hear the voice of our members. The representation of our members’ views is central to the work of the policy
-‐1.5
team at the Chamber. These views are gathered in a range of ways including focus groups, meetings with politicians,
-‐2
consultations and this Quarterly Economic Survey. 1 Q
4 20
11
Q
3
10 20
10
Q
2 20
10
Q
1 20
20
10
Q
4 Q
3 20
09
Q
2 20
09
Q
1 20
09
Q
4 20
09
Q
3 20
08
Q
2 20
08
Q
1
08 20
08
Q
4 20
07
Q
3 20
07
Q
2 20
20
07
Q
1 Q
4 20
07
Q
3 20
06
Q
2
06
Q
20
06 20
20
06
Q
1
-‐2.5
About this Quarter’s Survey
Infla.on 6
The survey collection period for the Q2 2011 survey was from
Percentage Change
5
23rd May to 15th June. A total of 803 businesses from across
4
Greater Manchester, employing 248,706 people, responded to
3 2
CPI
1
RPI
this quarter’s survey.
0 -‐1
20
pr A
From the manufacturing sector, 219 businesses employing
13,740 people responded to the survey;
•
From the service sector, 584 businesses employing 234,966
people responded to the survey.
11
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pr
Ju
08
A
20
20
b Fe
08
08
20
ec
20
20
07
07
D
O
ct
20
20
07
A
ug
n
pr
Ju
A
07
20
07
b Fe
20
07
D
ec
ct O
06
06 20
20
20
20
06
A
ug
n Ju
06
20
20
06
A
pr
-‐2
•
Exchange Rates 2.2 2 1.8 1.6
Euro
1.4
USD
1.2
The report has been researched, written and compiled by: Dr Brian Sloan – Head of Business and Economic Policy Sana Nabi – Policy Officer
11
20
11 20
6/ /0
10
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11
10
20
20
2/ /0
10
10
20 0/
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2/
10
10
10
20
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8/ /0
6/
10
10
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10
10
20
1
If you require any further information about the production or detail of this report, please contact: Sana on 0161 237 4045 or email [email protected]
Brent Crude Oil Spot Price 160 140
USD
120 100 80 60 40 20
NB: Net balance figures, referred to throughout this report, are determined by subtracting the percentage of businesses
/0
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11
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reporting decreases in a factor from the percentage of businesses reporting an increase. 23
