State of the Region: Price pressure the key concern for 2011

THE key challenges for 2011 highlighted by North West business leaders in TheBusinessDesk.com’s State of the Region Survey are pressure on pricing, increased competition and public spending cuts.

The annual survey, sponsored by law firm DLA Piper, also reveals that a majority of respondents, 66%, expect to grow their business and 42% expecting to take on more staff.

This is good news for the region, which is facing a tough year for jobs losses in the public sector as a result of the Government’s cuts.

It is no surprise that with many businesses supplying publicly funded bodies such as the North West Development Agency – the highest profile casualty of the cuts – that it is one of the chief areas of anxiety.

Mirroring last year’s findings, access to finance and skilled staff were also ranked high on the list of busineses’ concerns.

The survey also explored where businesses see the growth coming from in the next 12 months.

To download a PDF copy of the State of the Region survey, click here 

Surprisingly, given the North West’s strong export credentials in key sectors such as pharmacuticals, chemicals and aerospace, regional markets (50%) and national markets (31%), were seen as providing the best opportunities for respondents’ businesses, compared with just 19% looking to international markets.

Targeting new UK markets was the top response to our question on 2011 business objectives, followed by developing new products and services for existing markets.

The third-most popular response to this question was to up-skill staff, followed by targeting international markets and maintaining the status quo.

With inflation well above target and the cost of living rising as a result of the VAT increase this month, pay was highlighted as the leading employee issue for businesses this year. Recruiting new staff was also seen as an highly important issue.

Philip Rooney, managing partner of DLA Piper’s Liverpool office said: “With Government cuts already starting to bite, the North West is now looking at ways to rebalance its economy, and to do so is focusing on new sectors and markets likely to deliver the highest levels of growth.

“As the UK’s largest manufacturing region, the North West is poised to be at the heart of helping lead the future economic recovery of the UK.

“Our region shows real innovation, talent and passion across a number of sectors including aerospace, energy, science, engineering and automotive all of which are predicted to be this year’s top performers.

“Even with 50% of businesses citing regional and local markets as being key to economic success, it is clear that many companies are looking toward emerging economic powerhouses for investment opportunities. 2011 could be an exciting year for shrewd regional businesses focusing on export led recovery targeted at countries like China and India.”

Mary Clarke, employment, pensions and benefits partner at DLA Piper in Manchester added: “Many firms are entering 2011 with an attitude of cautious optimism. Following a turbulent and difficult time of redundancies in recent years, 2010 saw a stabilisation in the employment market – the good news is firms are once again expecting to expand their payroll.

“However, that is not to say the next 12 months will be plain sailing. It is likely we will see an increase in industrial action and employee unrest, with 46% of North West businesses predicting that they will face employee issues over salary and pay. As staff see companies riding the storm and returning to a semblance of stability, they will be less willing to accept pay freezes or pay cuts.

“Meanwhile, employees will be anxious about the effects of inflation and VAT rises upon their personal finances, which will aggravate any concerns they have over their salaries.

“So while we have come through the worst of the turmoil in terms of large scale job cuts, 2011 could be a fraught time for employer-employee relations.”

 What You Said – some of the comments our readers made when asked which markets provide the best opportunities:

• “It is impossible to ignore the continued rapid growth of the BRIC countries. We must participate in this growth story.”

• “Far east and middle east markets are attractive as they develop airline routes in to Manchester.”

• “Relationships drive the business and therefore needs to be a local/regional approach.”

• “We are competitive on price, both in UK and overseas and have already picked up commissions in Europe. “

• “Middle East and Far East are most attractive due to economic strength there and interest in our products.”

• “We need to control expansion, we understand the local market better than others and have opportunities for deeper penetration of local markets.”

Click Here to read: State of the Region: Growth expected despite public sector cuts