Wednesday, 7 October 2020
East Midlands Chamber survey shows region’s economy is slowly recovering – but job cuts continue
Jobs continue to be cut by businesses in the East Midlands as Covid-19 causes huge economic disruption, according to new research – but there could be signs of a recovery.
Figures released by East Midlands Chamber today (7 October) showed how a net 9% of employers reduced their workforce over the three months leading to September – with manufacturers most likely to be making redundancies – as cashflow worsened for a net 12% of organisations.
However, there is some hope as a net 6% of businesses now expect their workforces to increase in size over the next three months, while confidence has also returned with more businesses upping their investment intentions and reporting that turnover and profitability would likely improve over the coming year.
Some 470 businesses across Derbyshire, Nottinghamshire and Leicestershire took part in the Chamber’s Quarterly Economic Survey for Q3 2020.
Other key findings showed:
- A net 13% of businesses saw UK sales decline and a net 17% of businesses reported an overseas sales drop, although this is an improvement on net declines of 67% and 50% respectively in Q2.
- Advanced orders in the UK market increased for a net 2% of businesses in comparison to a 55% decline in Q2. They were down in overseas markets for a net 9% of businesses, although this was an improvement of a net 46% drop in Q2
- Service sector businesses slightly outperformed manufacturers in sales and order books, with the North American market the top performer in terms of improvements for exporters
- Following significant drops in investment intentions over the summer, 23% are now revising their plans upwards for capital investment (the same percentage is revising downwards) and 22% for training (versus 17% revising downwards)
- But cashflow continues to be an issue, with 38% of businesses reporting it had worsened, versus 26% saying it had improved – the third quarter in a row in which it was down
- Confidence levels have bounced back over the summer, with turnover and profitability expected to improve for a net 27% and 19% of companies respectively in Q3, compared to a net 25% expecting each figure to fall in Q2.
Chris Hobson, director of policy and external affairs at East Midlands Chamber, said: “Given everything that has taken place over the past six months, the economy across Derbyshire, Nottinghamshire and Leicestershire is in decent shape.
“UK market activity recovered from historic lows to return to positive territory for advanced orders and bookings, albeit only just, with export markets not too far behind.
“While the figures showed large numbers of businesses reducing their workforce size over the past three months, we also saw four in 10 employers looking to recruit to new roles and a further one in four expecting overall increases in the workforce over the coming quarter.
“This, along with the positive investment intentions and sentiment – which is important as it guides decision-making – is encouraging, although the continuing cashflow worries perhaps dents the ability for more businesses to invest.
“Given everything the country has been through, given the uncertainty that still exists and given the new ground we find ourselves on, these results should give some heart to people.
“There is still a long way to go – and as we discovered in March this year – things can change quickly, but the economy as a whole is not as bad as perhaps many feared.”
State of the Economy Index improves after record drop
The Chamber models the survey data across a range of key performance indicators, including sales and orders, recruitment, cashflow, investment intentions and confidence, to produce a quarterly State of the Economy Index, which enables it to compare local business performance quarter-by-quarter.
In Q2, the score fell to -411, its lowest level on record and the first time it’s fallen into negative territory. It was back into positive territory for Q3 – but only just at +17.
While the macro picture is a recovering one, Chris was keen to stress there remain wide variations in experience at a local level.
He added: “Looking by sector, manufacturers – such an important part of the East Midlands economy – have been slower to recover, while some in logistics or IT have performed strongly off the back of a growth in online retail and remote working.
“By geography, Derbyshire businesses have not performed as strongly, although this may be partially explained by a higher number of manufacturers. Many of the services in our city and town centres have struggled, whereas those able to shift to online or remote ways of service provision have fared better.
“In short, our 470 responses detail 470 different experiences and this poses tough questions around how we ensure continued support can be targeted to those that would most benefit, and how the positive learnings and ways of working that many have taken from the past six months can be built upon.
“Importantly, we need to harness our regional strengths without undermining the diversity of businesses, which we know gives us extra resilience.
“The Chamber will ensure these discussions take place over the coming quarter and that we involve the real experiences of our members in them.”
To view the full QES Q3 2020 report, click here.Back