Results from the British Chambers of Commerce’s Quarterly Economic Survey (QES) for Q2 2022 – the UK’s largest independent survey of business sentiment – were published earlier this week and show key economic indicators flashing red.
A sobering read then for Nadhim Zahawi – or whoever the Chancellor of the Exchequer is next week! One certainty is that they will inherit an unenviable scenario of inflation at a 40-year high, pressure on interest rates and soaring energy, fuel, and food costs.
The survey of over 5,700 firms (including 135 Staffordshire Chambers members) reveals a weakening proportion of firms reporting increased domestic sales, investment intentions, and longer-term turnover confidence.
Indicators for turnover and profitability confidence, as well as investment, all worsened from their Q1 positions. Firms expecting an increase in turnover over the year dropped from 63% to 54%, the lowest figure since Q4 2020 when much of the UK was under some form of lockdown.
Confidence in profitability also took a significant knock with 43% predicting an increase, down from 50% in Q1. More than a quarter (28%) are now predicting a decrease in profits. This decline in confidence in business performance has affected firms’ plans to increase investment, with 75% saying they have no plans to do so (up from 73% in Q1)
65% of firms now expect their prices to rise in the next three months, up from 62% in Q1, a record high and a 23-percentage-point rise on a year ago.
Expected price rises are most acute in the retail and wholesale sector, and construction and engineering sector, both at 78%, with production and manufacturing only slightly behind at 77%.
When asked which factors were driving price rises, 67% cited utility bills, 66% labour costs, 56% fuel and 53% raw materials. In the three sectors worse affected i.e., retail & wholesale, construction & engineering, manufacturing & production, raw materials was the biggest factor.
82% of firms cited inflation as the most worrying external factor. This is the highest on record and a rise from 77% in Q1 – the previous record! The percentage citing interest rates as a concern also rose for the third quarter running; 1 in 3 (33%) reported interest rates as a concern, up from 32% in Q1.
41% of respondents overall reported increased domestic sales in Q2, down from 42% in Q1, and the third consecutive quarterly fall. 18% reported a decrease, the same as the previous quarter.
In the services sector, the balance of firms reporting increased domestic sales stood at +24%, compared to +21% in Q1. In the manufacturing sector, the balance of firms reporting increased domestic sales fell to +19% in Q2, the lowest level since Q1 2021.
So, all in all, a pretty depressing read with all indicators on the Chambers’ economic dashboard flashing red and showing a deterioration since the last survey in March.
Business confidence has taken is low and fears over inflation and cost pressures are at new record highs.
However, as Chambers have been saying for months, it is not too late for the Government to take action to help businesses through these challenging times and put the economy on a more stable footing.
A cut in VAT on energy bills to 5%, and other steps to relieve the tax burden on firms to encourage investment are crucial.
Better infrastructure, a strategy to address labour shortages and a unified long-term economic strategy to give businesses more certainty is also needed.
Let’s hope the current mayhem in the Government is resolved quickly and we get ministers who will listen to our message and prove they are pro-business with a genuine desire to get the economy moving forwards.
We will continue to pressure the government for positive action and urge you to add your voice to our campaign by contacting us.
You can view the latest BCC economic data here: Economic data (britishchambers.org.uk)
If you want to talk to us about any business issues, including funding, you can call our switchboard on 01782 202222 or call the Stoke and Staffs Growth Hub Helpline on 0300 111 8002 or email: info@staffordshirechambers.co.uk
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