Business and consumer confidence slowly begins to recover

There are signs of a nascent recovery after the COVID-19 pandemic caused a historic collapse in the local economy, according to the latest GM COVID-19 Recovery Tracker survey conducted by Greater Manchester Chamber of Commerce.

The chamber’s COVID-19 tracker surveys have shown dramatic reductions in customer demand across all sectors.

Liquidity has been a major concern for businesses, resulting in business confidence being at its lowest ever levels.

The latest survey results show that there has been a small improvement in customer demand measures relative to the levels recorded in April and May.

However, the balances relating to customer demand are still negative, which means more businesses reported reductions rather than improvements.

The reduction in sales and revenues remains the primary challenge that businesses have been facing during the pandemic, but compared with historic lows during lockdown, there is continuing improvement.

Subrahmaniam Krishnan-Harihara, head of research at Greater Manchester Chamber of Commerce, said: “The chamber’s COVID-19 tracker surveys show how Greater Manchester’s economy has changed during the COVID-19 pandemic. After the historic economic collapse, things are beginning to look better and there is cautious optimism amongst businesses.”

With the increase in customer demand and revenues, cash flow positions have improved.

Nearly 40% of businesses now report being confident about increasing their turnover and margins in the coming months.

Subrahmaniam added: “The improvement in cash flow positions is particularly encouraging because this could help business investment and preserving jobs.

“In June, the balance relating to cashflow was -53.7. It is now -16, a marked improvement.

“There is a lot of bad news in the survey, but there are signs of some good news coming through as well, especially in the last few days.

“Various factors have contributed to this: With restrictions easing, customers could have resumed operations and paid pending invoices. Moreover, the HMRC has speedily processed most claims relating to furloughed staff.

“The data confirms our view that there will be a ‘tick-shaped’ recovery rather than a rapid ‘V-shaped’ recovery as suggested previously. This means we expect the recovery to be gradual and steady rather than a sharp upturn.

“Although the restrictions imposed recently to lower the infection rate will add to business anxiety, I would expect the short-term outlook to be more or less on target provided there is no second wave of infections that require a full lockdown to be implemented.”

Fieldwork for the second GM COVID-19 Recovery Tracker was conducted between July 16-31, and received 90 responses.

Meanwhile, Deloitte’s latest Consumer Tracker showed that North West consumer confidence is on the rise following record lows in March and April.

Ten of the 16 categories surveyed are expected to see rises in spending, with the region’s leisure sector set to lead the way.

According to the tracker, net 60% of people in the region are looking to spend more in restaurants, with a further 57% looking to spend more on going out over the next three months.

In addition, 29% of respondents have said they would go to a pub, bar or coffee shop within a month of reopening – demonstrating a clear intent to make up for lost time.

Clothing and footwear is another frontrunner for recovery, with a 45% surge in people expected to splash out compared with the previous quarter.

This figure is also 18% greater than at the same time in 2019, highlighting the pent-up demand for retail during lockdown.

Other categories set to see a boost include transport, holidays and hotels, furniture and homeware, electrical equipment, major household appliances and education.

As consumers are provided more freedoms, areas relied upon during lockdown are projected to reduce. Grocery (-22%) and utility bills (-11%) are set to be the hardest hit, as consumers look to spend more time away from home.

The tracker also highlighted spending habits in the North West amidst lockdown, noting a major shift in consumer behaviour.

As spending opportunities were limited, people across the region shifted focus to saving.

In total, a 15% rise in confidence when it comes to debt levels was discovered – far higher than the national benchmark of just five per cent.

David O’Leary, partner and head of retail at Deloitte North West, said: “Whilst the past three months have been undoubtedly difficult for businesses across sectors, these shoots of recovery in consumer confidence are promising.

David O’Leary

“In line with much of the rest of the UK, the majority of consumers in the North West intend to increase their spending, somewhat making up for their lack of expenditure in Q2.

“The rise in consumer confidence will provide great respite for the many businesses that have begun to reopen, particularly those operating in the leisure sector.

“Despite positive signs, it is important to remember we are not out of the woods just yet.

“Even if these intentions are acted upon, there is a lot of lost ground to make up on and we are unlikely to return to 2019 levels anytime soon.

“Returning to normality will be a slow process and is largely reliant on no resurgence of the pandemic.”

Deloitte’s analysis is based on responses of more than 3,000 UK consumers between June 19-23, as some the UK’s lockdown measures were lifted and non-essential shops reopened.