- Business conditions, measured by sales and cashflow improved in Q2, returning to pre-pandemic levels across the country
- Business confidence has stayed flat in the East, with 39% of firms expecting an increase in turnover in the next twelve months.
- Fewer firms expect to increase their prices in the next three months
- Concern from businesses about external factors continues to decline – with worries about inflation falling to 50% of Norfolk companies.
- Despite a boost in conditions and confidence most Norfolk firms (80%) are still not increasing investment, with wide sectoral variations.
The BCC’s Quarterly Economic Survey – the UK’s largest and longest-running independent business survey – shows measures of business confidence and business conditions slightly improved in Q2 2024, albeit from a very low base. Across Norfolk, 37% of firms said they had seen an increase in domestic sales over the previous three months, while 42% reported no change, and 21% a decrease. After a static national picture in Q1, business confidence in our county has increased slightly in Q2. 54% of firms say they are expecting an increase in turnover over the next year compared with 50% in Q1. Roughly 29% expect no change and only 18% expect a decrease. However, despite inflation easing to target – the data also reveals that more Norfolk firms (46% compared to 40% in Q1) expect to hike their own prices in the coming months. The survey, which was conducted between 13th May and 10th June, of nearly 5,000 firms across the UK including those in Norfolk (95% of whom are SMEs – fewer than 250 employees) – also reveals that despite improved trading conditions most firms are still not increasing investment. Improvement in overall business conditions The percentage of respondents reporting increased domestic sales rose noticeably across the UK to 38%, compared with 36% in Q1. In Norfolk meanwhile, this was mirrored at 37% vs 42% of saying sales had remained constant and 21% reported a decrease. There were, as ever, some sectoral differences. In the national data 37% of manufacturers and 40% of business-to-business service companies (such as legal and finance) reporting a boost in sales. By contrast, only 33% business to consumer firms (such as hospitality and retail) saw an increase. In Norfolk, we again see hospitality & tourism businesses showing the most sluggish growth and lowest confidence, added to their long running challenges of recruitment and retention. There has been an uptick in firms experiencing an increase in cash flow in the national data, rising to 28% compared with 26% in Q1. That said, the Norfolk picture is less positive at 20% in Q2 vs 24% in Q1, a slight reduction. 47% report no change in cash flow, while 33% report a decrease. UK Business confidence has increased Nationally 58% of firms expect to see their turnover increase over the next 12 months – an increase from 56% in Q1. 29% expect no change and only 13% expect to see turnover decline. In contrast Norfolk firms have seen barely any movement from Q1 with turnover largely unmoved. This discrepancy is also shown in profitability confidence data which nationally has also increased, but unchanged in Norfolk. UK-wide we see 51% of companies expecting profits to increase in the next year. That compares to 48% in Q1. 32% expect no change and 17% of respondents believe their profits will fall. Fewer firms expecting to increase prices As inflation continues to ease, fewer firms are now expecting to put up their prices. 39% of UK respondents say they are expecting to raise the cost of their goods or services in the next three months, compared with 46% in Q1. 59% think their prices will stay the same, and just 2% are expecting a decrease. Interestingly in Norfolk, those in the professional services sector are bucking that trend with 46% expecting prices to increase compared to 40% last quarter. Labour costs continue to be cited as the main cost pressure across all Norfolk businesses. A startling 82% of respondents say they are facing this pressure compared with 67% nationally. Again, this can be partly explained by our county’s over-exposure to the issues in hospitality and tourism. As reflected in the national data, some sectors are feeling this pressure more than others, with 77% of hospitality firms and 76% of construction or engineering firms citing it as a key driver. Concern about external factors continues to decline While inflation remains the biggest external worry among businesses, the level of concern has fallen significantly. Around half (50%) of Norfolk firms say they are more concerned about inflation than in the last quarter (64%in Q1). That’s returning to levels of concern last seen in 2021 and significantly below the 84% reported in national data in Q2 2022, at the peak of the inflation crisis. 40% of respondents say they are concerned about competition, and 48% tax. With an interest rate cut likely in the coming months – the percentage of firms raising the cost of borrowing as an issue is slightly higher – 36% in Q2 compared with 30% in Q1. Most firms still not increasing investment Despite a modest boost in business confidence and conditions in Norfolk, investment levels continue to struggle. Most firms say they haven’t increased the amount of new plant, machinery and equipment they’ve bought or rented. Only 19% reported an increase in investment, compared with 16% in Q1. 49% said levels had remained the same, 22% reported a decrease. There are large sectoral disparities in investment levels too. Nationally 42% of transport and logistics firms say they have increased investment levels, while the figure for retail companies was just 19%. Jack Weaver, Chief Operating Officer at Norfolk Chambers of Commerce said: “The latest results from our QES show that both business conditions and business confidence have improved, albeit from a relatively low base. And the improvement in Norfolk is certainly more modest than elsewhere in the UK. “The last four years have seen SMEs ride the waves of one crisis after the other, whether it be Covid lockdowns, supply chain breakdowns, energy price shocks, economic turmoil and new trade barriers with the EU. As some of these crises have ebbed, more SMEs are regaining confidence and reporting increased sales and cash flow. But as is so often the case we see Norfolk and other counties in the East lagging behind. “Positively, the data also show that concern about inflation among businesses has dropped to levels last seen in 2021 as fewer firms expect to raise prices. A Bank of England rate cut later this year will help bring down borrowing costs. “However, investment levels remain a long-term concern and significant sectoral divergences remain as sectors such as hospitality and retail continue to report far tougher trading conditions. Norfolk has historically been over-exposed to these disparities and more needs to be done to support them.” “We’re looking forward to working with our colleagues in other Chambers via our Chambers East partnership and the BCC to engage with this new Labour Government to capitalise on the confidence and resilience of local businesses. We need a collective effort to focus on addressing skills shortages, trade barriers and under-investment in regional infrastructure to unlock the potential of our amazing business community.” Shevaun Haviland, Director General of the British Chambers of Commerce said: “It’s really encouraging to see positive shoots of recovery from businesses across the UK. “Confidence has been improving among companies in recent months. Our data show the tangible impact of that positivity, as businesses report improved sales and cashflow. But investment levels remain an area of concern. “Our message to the new Government is clear. We need a long-term economic plan that has the green transition at its heart, with a workforce fit for the future, living in thriving local places and powered by businesses that are globally facing and digitally enabled. “Business stands ready to work in partnership with Government to capitalise on the positive signs our data is showing.”
