Economic Survey a barometer in uncertain times
Date published:
Jonathan Walker, North East England Chamber of Commerce’s policy director is responsible for its highly-regarded Quarterly Economic Survey which is used widely by MPs, opinion-formers and business leaders to campaign for what the North East needs to succeed.
When the Chamber’s Quarterly Economic Survey (QES) started in 1995 no-one would have anticipated it would have tracked such dramatic fluctuations in the region’s fortunes such as the 2008 crash, the failure of Northern Rock through to the current pandemic.
The results, taken from employers’ own views, offer an important barometer of experiences on issues from financial forecasting to investment and job creation.
This data and historical context of how businesses tackled past substantial challenges and why quick recovery came about, gives some useful context to the possible turnaround scenario post Covid.
The QES survey findings are based on a range of indicators which we have found give the most useful insights.
Sales and orders
Unsurprisingly the sales and order figures are important signposts to business buoyancy or challenges holding growth back.
For a long period the results were relatively stable and positive, at least compared to what we eventually saw in the financial crisis of . What was interesting about the reports at the time was the fall in sales took a whole year to play out.
Covid, by comparison, has impacted companies’ sales and orders at a far greater speed, with many in difficult territory in just one quarter. The figures also show the fall was twice as deep as the 2008 crash.
Recruitment and training
Right from the start of the survey until the financial crisis, North East figures for recruitment and training were always in positive territory. However, the crash, as expected, resulted in significant redundancies.
The recovery in job numbers was slow but steady until the Government’s austerity policy. Compared to the rest of the country, the region had a higher proportion of employees in the public sector which suffered a substantial cut in jobs over a number of the austerity years, primarily among local councils. The cuts to local authority funding resulted in 1,000s of jobs being lost in the region.
The demise of Northern Rock and Lehman Brothers also took their toll in 2007 and 2008 respectively.
There was job creation following the austerity impacts but it was through the private sector’s growth in particular in offshore, digital and life sciences.
With regard to the current impact of Covid on employment figures the Government’s furlough scheme has provided a huge protective shield around many jobs. The QES statistics represent this clearly, with no reporting of major job losses during the pandemic, so far.
Business Concerns
The changing face of business owners’ concerns over the past two and a half decades is very marked with totally different issues dominating their thoughts in the 1990s to the present day.
At the start of 2008 the main issues facing companies were rising energy prices and inflation. Concern was so great in the second quarter of that year 62% of respondents were worried about it compared to the current survey results where just 20% saw it as an issue in the first quarter of 2021.
Today’s areas of concern are related to the business cost base in particular inflation due to rising staff costs, raw material prices and other overheads.
Exports
The QES statistics on international trade have tended to be more volatile and are felt disproportionately in the North East given our exposure to export markets.
Brexit was always going to bring disruption and the move from a tariff free system to more red tape and regulations. However, contrary to expectations, in the immediate years after the EU referendum, export sales didn’t fall drastically (although they were definitely less predictable). This was due mainly to the actual trade circumstances remaining the same until the UK formally left the EU in December 2020.
Our recent Brexit survey showed 75% of members were already reporting leaving the EU had a negative impact on their business.
Confidence
One of the more effective indicators in the survey of what our regional economic growth will look like are statements on business confidence.
Covid’s understandable impact on this followed a similar pattern to the financial crash, with a severe dip in expectations and a rising number of concerns. Confidence was also reduced in the current 2021 Q1 survey as a reaction to the volatility around the whole country’s economy as well as micro concerns particular to individual businesses.
Confidence during the pandemic improved substantially, understandably, once Government produced the roadmap out of restrictions as businesses had the certainty they required to plan their finances and response to Covid.
Turnover
Companies’ turnover was particularly positive in the years leading up to the 2008 crash. The whole financial market collapse was due to structural problemsand happened over a longer period of time than the pandemic, around two years.
However, once those severe economic circumstances had been stabilised it took the North economy six years to back to the pre-crash levels.
Business turnover after the pandemic’s impact is expected to be returned to positive territory much more quickly as the Covid impact to date has been quicker, albeit sharper.
Conclusion
Covid’s devastating impact on the North East’s economy has been brutal due to its speed, (almost overnight) and the inability for certain sectors like hospitality to operate their business for many months at a time.
However, there are green shoots and based on the previous QES trends, the recovery is likely to be at the similar pace of previous challenging times echoing the speed of fall with a comparative bounce back.
Durham University Business School is the associate sponsor of the Chamber’s QES.