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13 Jul 2022

Monthly economic growth masks underlying issues, says East Midlands Chamber

Commenting on the latest figures by the Office for National Statistics (ONS) that show UK GDP grew by 0.5% in May 2022, East Midlands Chamber chief executive Scott Knowles said: “The GDP growth figure of 0.5% in May – following a slight contraction in the previous month – is welcome news and is particularly pleasing to see growth in sectors that are significant to the East Midlands economy, such as manufacturing, construction and road haulage.

“The rebound of the travel sector is also a huge sign of progress. Not only is East Midlands Airport a vital asset to our region’s economy and communities, but fully opening borders is a step in the right direction for internationally-focused businesses that are keen to forge global connections.

“However, these figures mask serious underlying concerns among businesses that are affecting their confidence to invest. In our latest Quarterly Economic Survey for Q2 2022, only a net 8% of companies in the region expected profitability to increase over the coming year, down from a net 31% at the start of the year.

“A net 42% of those surveyed during the second quarter of 2022 anticipate turnover to improve, down from a net 62% in the previous quarter.

“This nosedive in confidence stems from persistent price pressures for energy, raw materials, fuel and people driven by spiralling inflation, meaning six in 10 (62%)  businesses feel they will be forced to raise their own prices in the coming months.

“What this means is many firms don’t feel they have the headroom to make the investment in plant, machinery and people to make the productivity gains that will ultimately turn the tide and enable sustainable growth in the long term.

“Cutting VAT on businesses energy bills to 5% would go some way to easing the squeeze on firms’ cashflow and give them some room for manoeuvre.”