Concerns for economy as Yorkshire’s recovery ‘loses momentum’

HOPES for a quick economic recovery in Yorkshire have been dealt a blow by figures released by the region’s Chambers of Commerce.

The Yorkshire & Humber Chambers of Commerce’s quarterly economic survey asked 682 businesses in the region about their performance between January and March 2010.

It revealed that UK sales have weakened and business confidence has slipped for the first time since the start of the recession.

The key findings for the region in the first quarter showed that the number of firms reporting increasing UK sales fell for the first time in more than a year from 36% to 31%. Businesses in service sectors, which accounts for around 70% of the Yorkshire economy, were hit hardest.

Only three out of 10 firms are operating at full capacity which suggests it will take some time before they are able to create new jobs – a problem exacerbated by the prospect of the National Insurance rise in 2011, which is predicted to cost the region £340m a year.

Business confidence levels also dropped after rising for the four previous quarters. Forty-six per cent of all Yorkshire & Humber companies now expect profits to grow in the coming months, down 8% from the end of 2009.

There was better news for manufacturing exports with the weak pound boosting the number for firms increasing export sales to 36%, up 6% on the previous quarter and 21% better than a year ago.

The weak recovery is a major concern in the short term because many companies are still vulnerable and reporting tightening cashflow. Thirty-four per cent of businesses said their cashflow position deteriorated this quarter, which is 11% more than the number saying it was improving. This shows that many businesses are still suffering despite the technical end of the recession in the last quarter, the report suggests.

Richard Wightman, president of Yorkshire & Humber Chambers of Commerce said: “There’s no escaping the fact that these results are disappointing. It looks like the fragile recovery has already lost momentum in our region. The service sector figures are particularly worrying because it makes it up a bigger proportion of our economy and should be driving forward growth.

“Manufacturing exports are benefiting from the weakness of the pound which is a bright spot in an otherwise cloudy sky. We remain optimistic about the long term ability of the economy to recover but the short term outlook remains uncertain and the possibility of a double-dip recession cannot yet be ruled out.”

He added: “The results should serve as a reminder that business success should be at the top of the list of priorities for an incoming Government. For all the debate about public spending cuts starting this year or next, the focus should be helping boost private sector growth because this will be the determining factor in whether business can create jobs and rebuild the tax revenues to reduce the deficit.”

The latest results from Hull & Humber Chamber of Commerce’s quarterly economic survey showed that the recovery in the Humber slowed slightly in the last quarter as uncertainty over the national economy continues.

Most key indicators in the region’s largest business survey remained positive despite prolonged bad weather causing productivity to fall, the survey suggests.

Employment indicators recorded further improvements in this year’s first quarter, taking them to their highest levels since the second quarter of 2008.  Forty-five per cent of businesses tried to recruit staff in the last quarter, up from 36% in the previous quarter and 21% a year ago. 

Confidence indicators fell on last quarter’s recent high but remained substantially higher than a year ago.  Forty-four per cent expect their turnover to increase in the next 12 months, down 12% on quarter four of 2009 but 14% higher than a year ago.  Twenty-one per cent expect their turnover to decrease, down from 40% a year ago.

Thirty-nine per cent of companies expect their profitability to improve over the next 12 months, compared to 25% a year ago. Thirty-three expect it to worsen, compared to 51% a year ago.

Richard Kendall, policy executive at Hull & Humber Chamber of Commerce, said: “This quarter’s results show that our region is continuing along the bumpy road to recovery. 

“Outside factors such as the poor weather in January and the prospect of a general election have had an impact on businesses’ performance and ability to plan for the future, but optimism remains.”