Greater Manchester economy continues to power forward – but with notes of caution

Greater Manchester Chamber of Commerce has released its latest Quarterly Economic Survey (QES) results and Manchester Index.

The survey had more than 480 responses and showed, for a second quarter in succession, that, despite warnings and increasing indecision about Brexit, the Greater Manchester economy is still powering forward.

The Manchester Index, a composite of seven key indicators drawn from the QES and indicating the strength of the Greater Manchester economy, closed the quarter at 33.6, a full two points up on quarter two and the highest level since quarter four 2014.

Manufacturing and construction businesses reported continuing high levels of domestic sales and orders and high levels of international sales – rebounding from a poor quarter two.

But looking ahead the picture for international orders looked more uncertain, a possible early indicator of hesitation and uncertainty resulting from Brexit.

In contrast service sector businesses have reported a slowdown in growth across all measures in the last quarter with tougher trading conditions and an increased concern about competition, both domestically and overseas.

There was mixed news as regards employment with last quarter showing increases in employee numbers for the construction and service sectors and manufacturing firms expecting a higher level of recruitment in the coming quarter.

Confidence levels for the next 12 months still continue to rise, but the rate of increase has eased considerably.

The chamber, matching recent decisions by other business organisations, has reduced its growth forecast for Greater Manchester to between 2%/2.5% – down 0.25% on quarter two.

Commenting on the results, Chris Fletcher, marketing & campaigns director at Greater Manchester Chamber, said: “Despite what many people may think is going on, the reality is that for the majority of businesses across the three sectors in Greater Manchester, growth is still happening, though we do seem to be moving into a slightly different cycle with more focus on domestic markets than we have previously seen, especially in construction.

“The manufacturing and construction sectors have really kicked on in quarter three, building on quarter two domestic sales and bouncing back from a poor quarter overseas.

“The slower rate of growth in the service sector is clear across most of our indicators and results, but it is still growth.

“How much of this can be attributable to Brexit is a moot point – there’s no doubt it is having an impact, but there are a range of other factors being quoted, too, from the weather to the World Cup.

“International orders are a slight concern with reductions across the board and indicates why a satisfactory resolution, or at least greater clarity to Brexit, is a top demand of business.

“Some of the results and activity mirror that seen pre-Referendum in 2016 from which business soon bounced back, but the lack of clarity is proving a potentially bigger obstacle this time round.”

He added: “Whilst no businesses are overly concerned about the range of other issues we survey them on, such as interest rates and increasing costs, these still need monitoring closely, especially around those impacted by exchange rate fluctuations, and the results over the coming quarter will really help set out what state the UK economy will be in for March 2019 and Brexit.

“With no major concerns across a range of other issues, such as inflation, pay settlements, interest rates and exchange rates, businesses seem settled in where things currently stand, though there are some signs of increasing costs bumping prices higher.”