Falling exports underline fragile recovery – Chamber

FALLING export sales among Birmingham and Solihull manufacturers underline the fragility of any recovery from recession, a new survey reveals today.

According to the latest quarterly economic survey by Birmingham Chamber of Commerce and Industry (BCI), almost half (49%) of companies reported an increase in overseas sales.

But this figure was only 5% higher than the previous quarter and there was concern that 27% of firms, against 6% in Q1, said their exports had fallen. This gave a disappointing percentage balance of 22%, a fall of 16% on the first three months of 2010.

However, there was encouragement on the home front, with manufacturers recording their best UK sales since the second quarter of 2007. Almost half (49%) said sales had increased compared with 41% in the previous quarter, while 43%, against 38% in Q1, had fuller order books.

Figures for the service sector indicate that any recovery has slowed over the past three months. Home market sales increases were reported by 34% of firms taking part in the survey, a drop of 2% on Q1, and orders were also down at 33% from 34%.

There was better news on the export front for service companies, with 48%, compared to 31% in Q1, reporting increased sales and 40%, against 33%, having boosted orders.

Paul Bassi, president of the BCI, said: “This does underline the uncertainty that prevails not only among manufacturers but in the service sector too.

“With the added pressure of reducing the national deficit, the private sector remains concerned with the long-term effects. The decision by the new government to only partially scrap the reduction in National Insurance contributions next April was met with dismay, particularly when firms were starting to plan for recovery.”

He said that while production remained well below pre-recession levels, some encouragement could be taken from the figures as they showed the sector was starting to recover its losses.

“However, we will continue to urge the government to create the infrastructure to drive growth, creating the best possible conditions for firms to employ people, and having them renew focus on trade,” he added.

There was also encouraging news on the jobs front for Birmingham, where unemployment stands at 11.9%, the highest among the UK core cities.

Of the manufacturers questioned, 28% said they had increased their workforce while only 4% had suffered a drop.

These were the best figures for over 12 months – in the same quarter last year nearly half of the firms were cutting staff levels.

A smaller increase, by 5% to 23%, was reported in service sector staffing levels. About a third of firms in both sectors were expecting to increase recruitment over the next quarter and only four per cent warning of cuts.

Mr Bassi said: “The majority of redundancy programmes appear to have been completed. Increases in demand have been met by the restoration of hours and the use of temporary staff.”

Underlining the unstable economy, investment plans continued to fluctuate, with equipment and training suffering in both sectors, he added.