EU Referendum is ‘elephant in the room’, says Chamber

The pace of economic growth in the East Midlands picked up in the first three months of 2016, according to the results of a new survey.

East Midlands Chamber has released the results of its Quarterly Economic Survey (QES), for Q1 2016, which found that business activity increased between January and March following a slow end to 2015.

It found that in spite of recent national figures which showed that overall growth in the UK economy slowed in Q1, firms in the East Midlands performed strongly.

The Chamber tracks business performance across a range of key economic indicators – including sales and orders, staffing levels, price expectations, investment intentions and business confidence – to produce a quarterly ‘State of the Economy Index’.

After dropping back to 276 and then 248 in the last two quarters of 2015, it went back up to 279 in the first quarter of this year after respondents reported increasing sales and orders, in both the UK and export markets.

In terms of activity, 46% of firms reported an increase in UK sales in Q1 (up from 38% in Q4 2015), while 19% reported a decrease (down from 20%).

This recovery was felt most acutely by firms in the manufacturing and engineering sectors, 42% of which reported an increase in UK sales in Q1, against the zero overall sales growth reported by the sectors in the fourth quarter of 2015.

Figures for the overseas market activity strengthened slightly quarter-on-quarter, but remained below the performance in UK markets, with 31% of respondents saying they had seen an increase (up from 28% in Q4 2015).

However, the pace of growth in the local labour force dropped for a second consecutive quarter, with 26% of respondents saying they increased the size of their workforces, down from 30% in Q4 2015.

Levels of business confidence for the coming year held steady, with 65% of respondents anticipating an increase in turnover in the next 12 months (up from 64% in Q4 2015), and 54% forecasting an increase in profits (down from 57% in Q4 2015).

Chamber chief executive Scott Knowles said: “While national growth figures released last week showed the pace of growth slowing in the UK in the first three months of the year, firms in the East Midlands fared better, with many reporting an increase in activity in Q1. However, it remains a concern that in many respects we’re still seeing two-tier growth dominated by service sector businesses, with manufacturers lagging behind.

“While it was encouraging to see that the gap between these businesses sectors did not widen in Q1 2016, it is important, as a country, for it to shrink, driven by stronger growth from our manufacturers. Improvements in international markets will be a key component of helping this to happen, but domestic policy can also act to support these businesses, through initiatives such as incentives to invest and greater opportunities for young people to explore careers in the sector.

“The elephant in the room in Q2 is the referendum on the UK’s membership of the EU. Research has shown that many Chamber members do not hold deeply-entrenched positions on either side of the EU debate, but have reported uncertainties regarding the full connotations of leaving the EU and the impacts this may have, along with frustration that the public debate to date has been characterised not by fact, but by spin and rhetoric from both sides.

“The Chamber will continue to support its members with information and briefing sessions on how the UK’s relationship with the EU currently works and the different questions that will have to be answered in the event of a vote to leave.

“Ultimately, it is people on the street, and not businesses themselves, that will have their say on 23 June, so all voters who own or run a business and employ people will need to make their decision based on the trade and economic prospects of staying in, or leaving, the EU.

“Regardless of whether the vote results in the UK staying or leaving the EU, the Chamber will be on the front foot in ensuring its members have access to the right information to support their planning for continued success.”