State of the Region: Spending cuts will ‘stabilise economy’
CUTS to public spending by the coalition government were painful but necessary as economic conditions in Yorkshire remain challenging in 2011, TheBusinessDesk.com’s State of the Region Survey has found.
And according to the major survey, sponsored by law firm DLA Piper, confidence levels for the UK economy for the next 12 months among business leaders vary when compared to the start of 2010.
A third are more confident about the state of the economy than was the case 12 months ago, while 48% feel the same and 19% are less confident about its prospects.
Almost half (43%) of those who took the survey think the coalition government will have a positive impact on the UK economy, 12% think it will have a negative impact and 45% believe it is too early to tell.
Click here to download the full report on the State of the Region Survey.
Asked about the prospects for the economy over the next 12 months, 51% think conditions will remain as they are, 28% think there will be an upturn and 21% think economic conditions will get worse.
More than half (65%) of respondents expect bank lending for businesses to remain tight this year and only 24% think it will increase.
Fifty-six per cent think government public sector spending cuts will stabilise the economy despite being painful, while only 3% believe the Government should have maintained public spending until the economy is firmly out of recession.
Business and advisors see refinancing, fundraising and acquisitions as the main areas for transactional activity this year.
Prospects for the property sector are fairly bleak with 41% of respondents envisaging very little activity in the sector over the next 12 months.
Only 11% think there will be a return to speculative development, 12% see an upturn in the market and new developments and 9% think investment groups and funds will make a return. The remainder (27%) think owners will try to dispose of existing assets to recoup funds.
Sarah Day, partner and head of finance and projects for DLA Piper in Leeds, said: “It is understandable that businesses are still concerned about bank lending for 2011. The recession has altered the financial landscape, and the Banks are having to adapt to that as we all are. Banks are responding to different capital and regulatory requirements, political pressures and economic factors, internal and external.
“The result is banks are lending but not all banks are lending to all sectors or in all products: there is more differentiation in the market than there was.
“Moving forward, some larger corporations may benefit from the fact that there is still a lot of money in the capital markets for good credits. Banks and other investors are not only willing, but enthusiastic about delivering quality transactions at the high end of the market.
“The Government’s attempts to encourage lending to SMEs need to recognise that this part of the market has never been easy. Many investors perceive smaller businesses being higher risk, and even where that is not the case the cost of putting a relatively small amount of funding in place is often out of step with the rewards for those providing the funding.
“That said there is a lot of private funding around now looking for the right deals, and a lot of determination from bodies such as the Chamber of Commerce to ensure smaller businesses do get the access to funding they require. How quickly such access improves and which markets benefit remains very much to be seen over the next 12 months.”
Nigel Howard, partner and head of real estate for DLA Piper in Sheffield, said: “Most property industry experts would agree that the earliest we now envisage a real improvement in the market will be 2012.
“By then we will have experienced a five year dip in the market. Banks are supporting sensible propositions, including transactions of some scale, but they are understandably cautious with their lending and this will result in limited speculative development.
“However, 2011 is a year of opportunity for developers who do manage to access finance, as they can still be opportunistic with price. And we are seeing investment cash coming back into the market. Institutional money and pension funds are spending again and although they will be very targeted with their investments, for the right developers they represent excellent joint venture opportunities.
“Also for savvy developers this will be the year to take advantage of refurbishment opportunities before the BPRA tax incentive comes to an end in 2012.”
State of the Region: Your views
Regional, national or international markets – which is best for business?
“Regional markets drive my industry in the SME sector, and this will always remain the case.”
“South America, Canada & Far East will pick up before the EC. UK PLC needs to focus more on business outside the EC if it is to recover from the current climate.”
“We are a niche property practice in Yorkshire acting on behalf of national clients. As the market dries in Yorkshire we will look to expand our work into other sectors to compensate.”
“The UK will remain a slow growth economy over the next few years. Growing overseas markets will drive demand and opportunities for my clients. Whilst I am expecting to see some regional opportunities to take market share, the market growth in the region will be driven by international opportunities.”
“Working in partnership with businesses and people within our local area creates the best way forward for sustainability. If businesses commit to working togetherwithin the region and buy local goods and services where possible it will help to keep local people employed and hopefully create a feeling of well being in Yorkshire and the surrounding areas.”
“Regional and national markets in which we already have a reasonable market share, will be stagnant, we are looking to expand in continental european markets, which whilst they will not be buoyant are large and we have minimal share.”
“As a small business we know there to be a wealth of opportunity in the local and regional markets. Developing what is on our doorstep is the natural choice for our business.”
More on State of the Region Survey:
– Austerity measures won’t stop growth
– Regional markets still key despite challenges
Tomorrow:
– The regions compared
Do you agree with the results? Please leave your comments below.
