Norfolk manufacturing and services firms reported mixed results to end 2014, according to the latest Quarterly Economic Survey (QES) published by the British Chambers of Commerce (BCC).
Shrugging off recent signs of a slowdown, Norfolk’s manufacturing sector recorded increased balances for export orders, however their domestic sales and orders continued a downwards trend, which started in Q2 2014.
The reverse was true of Norfolk’s service sector, who recorded increased domestic sales, which are now back up to levels last seen in Q2 2014, whilst their export orders and sales both dropped drastically to levels not seen since the beginning of 2012.
The survey, made up of responses from almost 7,000 businesses, also shows that Norfolk firms set out to recruit staff at an all-time high rate in the last three months of 2014. BCC’s Director General, John Longworth, advised that firms’ strong performance at the end of 2014 could translate to a strong year of growth in 2015 – but this will depend on unwavering support for business throughout the general election and beyond.
Key findings in the Q4 2014 Quarterly Economic Survey:
- Norfolk manufacturing, export order balances increased substantially (up 27 points to +60% in Q4). However export domestic sales and orders dropped to levels not seen since the beginning of 2013.
- In the Norfolk services sector, domestic sales balances rose (up by 14 points to +51%), yet domestic orders dipped (dropped by 19 points to +17%). The service sector’s export sales and orders continued to weaken.
- An all-time high number of Norfolk businesses have set out to recruit staff in the last three months, in both manufacturing (an increase of 24 points from +76% in Q3) and services (an increase of 32 points from +68% in Q3).
- The balance of Norfolk manufacturing firms operating at full capacity dipped by four points to +27% in Q4, while the number of Norfolk service firms operating at full capacity fell further dropping from +38% to +29%.
- A record number of Norfolk manufacturers invested in training in Q4 (+53%, up from +42% in Q3).
- In the Norfolk manufacturing sector, the turnover confidence balance rose to +80%, a record level not seen since 2010. Confidence in profitability also rose sharply (+86% from +57% in Q3).
- Norfolk’s service sector balances showed more positivity in their investments in plant and machinery, which rose by 5 points (+37% from +32%).
Commenting on the results, Caroline Williams, Chief Executive of Norfolk Chamber, said:
“This is a mixed set of results for Quarter 4 2014 in Norfolk. Whilst Norfolk businesses remain positive, a level of caution is reflected in these latest figures. Although manufacturing employers continued to be confident and invested in staff and training, the service sector employers showed a slight slowdown in terms of investing in training and staff, as their confidence in overall profitability was down. Increased concerns surrounding pay settlements may be one of the reasons for this.
Positively, export orders for Norfolk’s manufacturing sector have improved in both Norfolk and the East of England and the UK sales figures Norfolk’s service sector in this quarter increased from the previous quarter.
In the Chancellor’s Autumn Statement, Norfolk had positive news on funding for the improvements to the A47 and the Norwich in 90 rail campaign. When Norfolk Chamber members recently met the Prime Minister, in addition to the call for a swift commencement of these infrastructure projects, improved broadband and mobile coverage were also identified as key barriers to growth.
These QES results a showed a lower level of concern around business rates, which has been backed up by the Chancellor listening to the Chamber network and committing the government to a fundamental review.”
Commenting on the results, John Longworth, Director General of the BCC, said:
“British businesses are well placed to grow in 2015 – a testament to their hard-work and resilience. It is particularly pleasing to see the manufacturing sector bounce back, despite signs of a slowdown in recent months. However we must aim for growth that is sustainable for the long-term, rather than settle for second best.
With employment and investment intentions at historically high levels, businesses are gearing up for a big year in 2015. It is now vitally important that firms are able to convert their growth ambitions into reality. Strengthening our business finance system, which constrains the growth aspirations of too many firms, will remain a decisive factor in securing a sustainable recovery. Low interest rates and reduced regulation will also go a long way to creating an environment that encourages enterprise and wealth creation.
In spite of our survey showing an improvement in export balances, the UK’s lacklustre export performance and severely adverse current account balance, continue to act as drag anchors on GDP growth. This need not remain the case – lack of growth finance, patchy help on the ground in overseas markets, and a never-ending churn of short-term support schemes must be addressed without delay.
The UK’s economic recovery still faces several obstacles, intensified by the uncertainty of the upcoming general election. Businesses are bouncing back, but their optimism may not last if political point scoring outweighs sound economic policies. It is imperative that all political parties use the forthcoming election campaign to outline their plans to support long-term business growth and investment.
If current and future governments do the right things, there is no reason why the UK should not enjoy sustainable growth driven by re-energised and dynamic businesses. The UK economy is orientated towards the service sector, which is driven principally by people rather than equipment and machinery. The free movement of people in the EU means that capacity is no longer the barrier to growth it once might have been, and upward pressure on wages is much less likely to occur. With no signs of inflation and no upward pressure on wages, there is no justification for an early rise in interest rates.”
David Kern, Chief Economist at the BCC said:
“The latest results support our view that UK growth will stabilise well above 2%, and that Britain’s medium-term economic growth will be slightly higher in the next few years than the recent OBR forecast predicted.
However, many balances remain below the high levels seen earlier this year, indicating that the overall pace of GDP expansion is easing. In the face of a weak eurozone growth and domestic policies aimed at stabilizing our public finances, a slowdown in economic growth may yet occur in 2015 and 2016, despite increased strength and optimism from businesses.
Despite a slight improvement at the end of 2014, the current account deficit is unacceptably large. The UK needs a long-term push to rebalance the economy towards net exports and investment, rather than relying too heavily on consumer spending to keep growth going. With inflation likely to stay around 1% for much of the next year, the MPC must delay interest rate rises for the time being.”
