“A mixed picture” for Suffolk businesses– but inflation dominates worries
Whilst most of the indices measured by Suffolk Chamber of Commerce’s Quarterly Economic Survey (QES) remained in positive territory, the fourth quarter of 2021 saw declines in activity and confidence, especially for manufacturers, with concerns about inflation reaching an all-time high.
Three-quarters of respondents reported that inflation was their current biggest business worry, with 100% of manufacturers (+26 percentage points) and 59% of service companies (+7 percentage points) also expecting prices to continue rising throughout the first part of 2022. These are the highest figures recorded for this indicator since data on it was collected from 2009 onwards.
Most businesses that were looking to recruit in the last quarter of 2021 also reported difficulties in filling vacancies, with 100% of manufacturers and 86% of service firms struggling to find the right quality of staff.
Confirming the trend that manufacturing firms were bearing the brunt of the overall economic headwinds, these companies reported declines in key indicators such as domestic sales (- 9 percentage points) and orders (- 5 five percentage points), export sales (-12% percentage points) and orders (- 3 percentage points), confidence in future improvements in turnover (-11 percentage points) and profitability (- 35% percentage points). Most worryingly, firms reporting positive cashflow fell into negative territory at -11% (-22 percentage points).
The situation was a little better for service companies with lower overall falls across these criteria and indeed increases in export orders (+12 percentage points) and confidence in improving profitability (+16 percentage points).
Paul Simon, head of policy & communications at Suffolk Chamber commented: “Our latest QES data shows a mixed picture for the Suffolk economy. At one level, in spite of numerous quarter-on-quarter declines, most indicators remain in positive territory which is certainly encouraging.
“However, Suffolk Chamber continues to be significantly worried about the growing depth and likely length of the current period of high inflation.
“Although impacting most noticeably at the moment among manufacturers, we believe that ongoing raw material and component price hikes when allied with the forthcoming increases in energy prices and NI employer contributions, plus recruitment and wage cost pressures threatens to choke the county’s wider recovery, unless political and economic leaders intervene.”
Suffolk Chamber is calling for the Government to delay the implementation of the NI employer contribution increases scheduled for April this year, to help SMEs reduce the immediate impact of likely energy hikes throughout 2022 through a three-month moratorium on VAT payments on energy bills, and tighten up on monetary policies through pragmatic short-term interest rate increases.
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Suffolk Chamber is grateful to Suffolk Knowledge, part of Suffolk County Council, for providing the analysis of this QES.