Q1 Economic Survey Highlights Potential Two-Speed Economy Amidst Rising Sector Optimism

The beginning of the end for the business doldrums?

Suffolk Chamber of Commerce’s Quarterly Economic Survey (QES) for the first three months of 2024 suggested that whilst manufacturers showed further slippage in a number of key activity indices, the service sector experienced a pronounced surge, albeit with a sting in the investment tail.

Companies in the manufacturing sector recorded steep declines in export sales (down 34 percentage points compared with the last three months of 2023), export orders (down 41 percentage points and both current and future job hiring intentions (down 28 and 19 percentage points respectively). This resulted in all these indicators sitting firmly in negative territory, meaning that more were reporting declines than increases.

Cashflow among manufacturers continues to face increasing pressure with a fall of eight percentage points taking this measure further into negative territory (-33%). There was a slight dip in how many manufacturers were operating at full capacity, although the numbers doing so still outweighed those underperforming by 32%.

However, domestic sales and orders saw strong returns to positive numbers, with the former showing an increase of 31 percentage points and the latter up by 32 percentage points.

By contrast, Suffolk’s service companies had a – maybe surprisingly – strong first quarter. There were consistent improvements across all the activity indices: domestic sales (nine percentage points up), domestic orders (five percentage points up), export sales (10 percentage points up) and export orders (25 percentage points up), meaning that all – part from export sales now reside in positive territory.

The only disappointment for the service sector was the decline in investment levels with that in plant and machinery down by four percentage points and in training off the pace by a further six percentage points. Indeed, investment intentions remain very weak when considered in their historic context. No Suffolk balances in this area are in positive territory in the first quarter of 2024.

However, there is emerging a growing consensus across the whole of Suffolk’s business community that their prospects may be looking up overall.

There was a 10 percentage point increase in both the manufacturers and service companies that are expecting improvements in their turnover (to +37% and + 38% respectively) and ones of 14 percentage points (to +24%) and 11 percentage points (to +11%).

In terms of main worries, inflation remains the primary concern for Suffolk businesses. That said, concern over inflation among Suffolk respondents eased again to its lowest level since the second quarter of 2021, but half of firms still see this as a worry. Around half of respondents also reported intentions to raise prices. Corporate taxation was identified as a concern for 44% of Suffolk respondents. The total level of concern over these factors is also at its lowest point for more than two years.

Matt Moss, Suffolk Chamber’s Economy Group chair, said: “these are certainly encouraging figures, although there is a danger that we might be seeing a two-speed economy opening up unless the needs of manufacturers – not least regarding price pressures – are addressed.

“Suffolk Chamber is using the evidence from this and other Quarterly Economic Surveys to launch a manifesto ahead of the General Election aimed at identifying the pro-business commitments of both sitting MPs and all other Parliamentary candidates.”

Paul Simon, Suffolk Chamber’s head of public affairs added: “After many quarters of anaemic business activity and sentiment, there is certainly some optimism to be had from these survey results. Suffolk businesses are clearly hauling themselves out of a long period of challenge.

“This could be the point at which we start to leave the business doldrums behind us, but this can only be accelerated by the implementation of more pro-growth policies from Government.”

Find out more about the Suffolk Chamber of Commerce’s Quarterly Economic Survey

Suffolk Chamber is grateful to Suffolk Knowledge, part of Suffolk County Council, for providing the analysis of this QES.