Latest Business Survey Shows a Marginal Improvement in Business Prospects

The economic outlook for the current quarter shows a marginal improvement although the medium-term remains weakened, according to the findings of the latest Quarterly Economic Survey (QES) conducted by Greater Manchester Chamber of Commerce (GMCC). The Greater Manchester Index, a composite indicator made of key QES measures, increased by 4.3 points to 17.8. This modest increase comes on the back of a dramatic decline of 18 points in the previous quarter after hovering in the early 30s between spring 2021 and summer 2022. Although this quarterly increase is good news for business prospects, the results from the latest survey show that the regional economy is stalling on the back of uncertainty over consumer spending and high energy prices.

The survey of 324 businesses held between November 7th and November 30th revealed that sales to UK customers increased in the services and construction sectors, while it declined dramatically in the manufacturing sector. Sales in the manufacturing sector remain well below the same period last year, a fact confirmed by other surveys. Within the services sector, B2B businesses report stability while B2C businesses have seen a quarterly increase in sales. The international trade picture is in sharp contrast to the domestic with export sales showing a further decline in this quarter.

Subrahmaniam Krishnan-Harihara, Head of Research at Greater Manchester Chamber of Commerce, said: “Although inflation, higher food prices and mortgage payments have squeezed household budgets, anecdotal evidence supports the main findings of the QES. Spending during Black Friday sales contributed to an uptick in service sector activity. So has increased hospitality spend in the lead up to the festive season. It is also likely that the FIFA World Cup, particularly the progression of the England football team, led to increased patronage at pubs and bars giving a boost to the hospitality sector. However, the post-Christmas period presents some concerns. There are valid questions around the ability of households to sustain consumer spending beyond the festive season, which could affect economic growth and business sentiment.”

The survey results also showed further weakening in other important indicators such as cash positions, investment intentions and business confidence. Business in all three sector groups report diminishing cash positions, which has hampered their ability to invest in new equipment and machinery. Businesses face higher operational costs, but the latest survey results show that businesses are either unwilling or unable to increase their selling prices, which means they are having to absorb more costs and face lower margins.

Subrahmaniam added: “The loss of confidence and weakening in other QES measures does not bode well for business investment in the medium-term. The Chamber of Commerce network’s economic forecast indicates that business investment will continue to lag. Recent changes to the R&D tax credit scheme for SMEs is not going to help. The Autumn Statement has provided some stability and calmed the markets. The next intervention from government must be to come up with measures to trigger business investment and secure sustainable economic growth.”