Service sector weathers economy

SMALL business domestic turnover increased by 3% between the first and second quarters of 2012, according to ABN AMRO Commercial Finance.

Its Cashflow Barometer showed the increase was led by the services and recruitment sectors, which saw turnover grow between quarters one and two, as well as year on year. Conversely, turnover in the manufacturing, engineering and distribution sectors decreased over these periods.

The data echoes recent UK GDP figures from the ONS, which showed that the UK economy has continued to shrink for a third consecutive quarter – weighed down significantly by the construction sector which fell by 5.2% in the second quarter.  

The services sector experienced a rise in turnover of 8% between Q1 and Q2, and 5% year-on-year. Meanwhile, recruitment companies increased turnover by 15% between Q1 and Q2 and 9% against the same period in 2011. 

In contrast, turnover fell in the product-based sectors (manufacturing, engineering and distribution) between quarters and year on year. The largest drop was in manufacturing, which experienced a decrease in turnover of 10% between Q1 and Q2 this year. 

Debbie Bell, sales director for the North West at ABN AMRO Commercial 

Finance, said: “Our latest Cashflow Barometer, though covering the UK as a whole, reflects many of the trends we’re experiencing in the North West. 

“It’s reassuring to see the services and recruitment sectors looking so positive. The growth of recruitment in this difficult economy is no doubt due to the current 

preference for businesses in the North West, and across Britain, to take on more contract candidates rather than permanent staff. Meanwhile, services 

businesses are keeping prices competitive by improving efficiencies and mitigating against overhead increases.

“Despite their relatively low turnover figures, manufacturing businesses shouldn’t despair. We’re finding a lot of potential in the North West among companies that 

are looking to innovate, either with niche products or by widening their scope and looking to export sales outside of Europe.”

The Cashflow Barometer is a quarterly indicator of the financial performance

of UK small businesses, based on analysis of 700 companies.