Chamber Economic Survey Shows Drop in Business Confidence but Increased Investment and Long-Term Improvements in Business Health
Date published:
Economic survey results released today (13 July 2023) by the North East England Chamber of Commerce show a significant quarterly increase in a range of business concerns.
After improving in all areas last quarter, this survey saw a widespread drop in business confidence with increasing numbers of businesses concerned about all indicators except energy prices, exchange rates and congestion. This broadly negative shift shows regional businesses feeling less confident about their trading environment.
Concerns about inflation, staff costs, and energy prices remained high among businesses, with 84%, 73%, and 64% of respondents expressing worry about these issues, respectively. Rising interest rates have also become a significant concern for 57% of organisations, ranking it fourth among the top concerns.
After an especially optimistic Q1, responses to this survey can be understood as a readjustment to the reality of the longer-term challenges organisations face. Inflationary pressures have continued to cause problems for businesses, contrary to what earlier forecasts suggested. Sentiment around both domestic and international trade has also decreased, and recruitment challenges persist. As a result of these combined challenges, less than half of firms are operating at full capacity.
Chamber chief executive John McCabe said: “At the Chamber, communicating with businesses across the North East is the foundation of all our work. From these conversations, we know we have all the resources we need in our region to overcome the challenges we face, but also that they can only be overcome through collaboration and unity.
“By coming together, sharing insights, and supporting one another, we can navigate the current difficulties and emerge stronger than ever. Let us harness the power of collaboration to secure a brighter future for our organisations and the whole of the North East.”
Recruitment indicators suggest that the labour market is a particular challenge for organisations in the North East and, over the past year, fewer businesses have been able to get the workforce they need. The two indicators with the most significant annual decreases in business sentiment are the current workforce and future workforce indicators. This means fewer organisations are able to grow their workforce now or in the future.
Despite this quarter’s downturn in business sentiment, the overall trend over the past year tends towards greater confidence among North East organisations. Nine of the twelve indicators of concern measured by the survey have decreased since Q2 2022, and there has been an average -5.3% reduction across all levels of concern over this year. This is a result of continued resilience and innovation throughout the regional business environment.
This survey also shows more businesses investing in this future resilience and growth, with increases across investment indicators. There has been an especially healthy improvement in the proportion of organisations investing in their people and energy efficiency.
Andrew Haigh, Chamber president and chief executive of Newcastle Building Society, said: “North East businesses continue to come together and prove that they can respond to challenging conditions with resilience, resourcefulness, and creativity.
“More businesses are preparing for future growth and ensuring that they continue to thrive through challenging circumstances. Improvements around investment this quarter reflect this.
“This investment in longer term resilience means that as conditions improve, local businesses have the foundations to capitalise on growth opportunities. We will ensure as your Chamber that we continue to monitor these opportunities and ensure that as a regional business community we are proactive in securing the future of our organisations and the health of our business environment.”