Downturn fails to dent confidence rise in North East

BUSINESS confidence is on the increase in the North East, despite the downturn in the economy in the first quarter of the year.

NECC chief executive, James Ramsbotham

BUSINESS confidence is on the increase in the North East, despite the downturn in the economy in the first quarter of the year.

The first of a raft of economic surveys this week show that companies are undeterred by predictions of a double-dip recession and expect to grow and recruit more staff this year.

The North East Chamber of Commerce’s (NECC) Quarterly Economic Survey released on Friday found that firms have seen increases in both UK and export sales and orders, business investment, workforce levels and future profitability.

It also shows once again that the region continues to perform well in overseas markets, but that UK sales are improving and there is a significant improvement in performance from the service sector.

NECC’s Quarterly Economic Survey (QES), produced in partnership with Barclays, is the region’s largest survey of its kind, based on responses from 386 companies.

It found that the gap between growth in manufacturing and service sectors has started to close and that sales and orders are up on the last quarter of 2011 and the same period a year ago.

NECC chief executive, James Ramsbotham, said: “This survey has provided us with a welcome dose of positivity and optimism for the year ahead.

“This is the first time we have seen such positive indicators in the QES since before the recession took hold in 2008, and show a marked upturn on the weak and imbalanced growth seen throughout 2010 and 2011.

“While the continued excellent performance of the region’s manufacturers and exporters must be applauded, it’s reassuring to see our service sector coming back strongly after a tough 12 months. At a time when the Government is revising down its growth forecast, this survey indicates that, while the region is still to fully recover from the economic downturn, our businesses have experienced a positive start to 2012.

“It would be naïve to suggest these figures signal the beginning of a significant upturn.”

And the CBI/PWC Financial Services Survey, also out on Friday, said the volume of business in the sector grew in the first three months of 2012 at well above the average for the eighth quarter running.

This growth is reflected in the first rise in optimism among financial services firms in a year, and an unexpected increase in employment in the sector. Companies also plan to invest more in IT over the next year.

The growth in income more than offset the impact of the sharp increase in total costs, allowing profitability to rise more rapidly than in the previous three quarters.

Sarah Green, regional director of CBI North East, said: “Financial services sales volumes and income continued to rise this quarter, putting the sector’s recovery on a firmer footing.

“Optimism levels and business investment intentions have also improved, in contrast to last quarter, as some of the worst risks around the euro area crisis have eased.

“The unexpected rise in employment is a further encouraging sign for the sector. But, with the current level of business regarded as below normal, conditions still remain challenging for financial firms.”

Later this week, several surveys from Markit/CIPS purchasing managers are expected to show rising confidence, despite the Organisation for Economic Co-operation and Development saying our economy shrank in the first three months of the year, following a 0.3% contraction in the final quarter of 2011. And the Deloitte CFO Survey of the UK’s largest companies shows that, while business confidence has improved significantly since the start of 2012, corporate strategies remain cautious.

Optimism among chief financial officers (CFOs) about their companies’ finances has risen at the fastest rate since the CFO survey began in 2007, taking it close to levels seen in late 2010. However, while business confidence is higher now than in Q1 2011, corporates are less likely to be raising capital spending, undertaking M&A or introducing new products than 12 months ago.

 
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