Suffolk Chamber of Commerce’s Quarterly Economic Survey (QES) for April to June has shown a worrying further decline in a batch of key business performance indicators, although there is also continued evidence of a longer-term resilience.
Significantly, manufacturers and service companies recorded declines in both projected turnover and profitability for the next 12 months compared with the first quarter of 2022.
Manufacturing firms saw a six percentage point reduction in future turnover projections, with service companies showing a 20 percentage point fall. However, the balances for both remain in positive territory with more expecting an improvement than those anticipating a decline.
Manufacturers reported a 35 percentage point fall in their future profitability projections, whilst there was an 18 percentage fall among service firms. The balance for manufacturers is now -20% (ie by a 20 percentage point difference, more are expecting a fall than an improvement in profitability), although service companies are still in positive territory – albeit by only three percentage points.
The overwhelming majority (91%) of firms reported that inflation was a concern, with a net balance of 88% of manufacturers and 71% of service companies suggesting that they, in turn, planned to raise their own prices rather than keep them unchanged or reduce them.
Corporate taxation remained the second biggest worry for respondents with a third of them identifying that as an issue.
There was a continuation of a number of key trends over the last year, including further declines in domestic sales and orders and export sales for manufacturers and in domestic and export sales and export orders for service companies.
Recruitment demand remains strong, particularly in the manufacturing sector, although almost all firms who tried to recruit still experienced difficulties in doing so. There are indications that the recent record high vacancy levels may be about to fall away, with the future employment expectation showing initial signs of decline.
The second quarter saw something of a bounce back for the cashflow situation for all firms, although there was a further fall (10 percentage points) in the amount of money manufacturers were spending on training staff.
Paul Simon, head of public affairs & strategic communications at Suffolk Chamber commented: “These latest figures continue to evidence the slow and steady decline in business activity and sentiment that we have witnessed over the last 18 months or so. At one level it is a testimony to the resilience and fortitude of the county’s business communities that most of the measures recorded in our Quarterly Economic Surveys remain in positive territory.
“That said, the declines in expected profitability and turnover and the weaknesses in orders and sales, especially in export markets, does show that a pro-business programme of temporary tax reductions could provide the breathing space businesses need to ride out the challenges of the next year.
“We must do everything we can to avoid even the hint of a recession. Whilst businesses will drive our recovery, Government has a part to play in lifting some of the burdens it has imposed upon companies through its taxation system”
Suffolk Chamber is continuing to call for the Government to implement a pro-business programme aimed at lightening both the fiscal burdens on businesses and through short-term support for SMEs to offset the rising cost of energy and fuel.
Suffolk Chamber is grateful to Suffolk Knowledge, part of Suffolk County Council, for providing the analysis of this QES.