Reports point to booming region
TWO influential reports point to more encouraging news for North West businesses.
Hiring intentions of businesses in the North West are at ‘sky high’ levels with figures stronger than the heady days of the mid-2000s boom, according to the latest Business Trends report published by accountants and business advisers BDO.
Simultaneously, the Lloyds Bank North West Business Activity Index reportied growth among its private sector firms had soared to a six-month high in March.
With BDO’s employment index measuring 113.0 – well above its long-term trend – the suggestion is that UK firms will continue to boost job creation in the coming months.
But there are still big areas of concern for the economy as the UK continues its puzzling failure to increase productivity, despite continuing strong economic expansion.
Workers’ output per hour has been static during the last two years of the recovery. Such a long period of flat productivity is unprecedented in the period since World War II and the trend is unique amongst advanced economies.
Despite this negative trend, BDO’s Output and Optimism Indices, which predict economic growth three and six months ahead respectively, remain significantly above the 100 mark, which indicates growth above the long-term trend.
The Output Index rose to 103.9 in March while the Optimism Index held firm at 104.9, revealing business confidence to be at levels not seen since summer 2014.
Firms have been given an additional boost as input costs continue to fall, with BDO’s Inflation Index sitting at just 93.8 (down from 94.7 last month), indicating deflation.
Tim Entwistle, partner and head of BDO in the North West, said: “While it is encouraging to see strong business confidence, the continuing poor labour productivity performance is a very significant concern.
“Although employment growth in recent years has been strong, much of this has been in part-time jobs.
“Productivity ultimately determines our prosperity so it is a crucial area that must be addressed. Policymakers of all persuasion must take on this productivity puzzle.”
Meanwhile, the Lloyds Bank Nort report said private sector growth in the region was supported by a marked increase in new work intakes and a solid rise in employment.
On the price front, input prices continued to fall for the fourth straight month, while charges increased, albeit at a fractional rate.
At 56.7 in March, the seasonally adjusted index posted its highest reading in since September.
According to panellists, new contract wins, the launching of new products and greater sales led to the latest expansion.
Higher business activity reflected further increases in both the manufacturing and service sectors. However, the recent figure pointed to slower activity growth than the UK average.
Martyn Kendrick, area director for SME banking in the North West, Lloyds Bank Commercial Banking, said: “Several respondents linked a rise in new orders to greater demand from both the domestic and international markets, while others commented on new project developments and improved marketing strategies.
“On the price front, average input costs declined for the fourth straight month, as reports of a favourable euro/pound exchange rate drove down imported raw material costs.”
