North East firms remain positive despite eurozone crisis

BUSINESSES across the North East are staying positive about the region’s economy despite the economic slowdown and eurozone crisis.

European Union

BUSINESSES across the North East are staying positive about the region’s economy despite the economic slowdown and eurozone crisis.

The region was unable to sustain the strong growth levels achieved during the first half of the year, according to the North East Chamber of Commerce’s (NECC) quarterly economic survey (QES).

The first half of the year saw the largest increase in business positivity since 2008, but a slowdown in manufacturing growth and export orders in quarter three appears to have hit regional business optimism.

Despite this slowdown, North East firms are increasing their workforces at the highest rate since the onset of the recession. NECC director of policy Ross Smith said: “Although we are seeing the most positive workforce figures we have seen in over four years, this is largely firms rebuilding their workforces that were lost at the onset of the recession. Instead of large-scale recruitment drives, we’re seeing people employed two or three at a time.

“In the first couple of quarters this year, growth figures were the best they’ve ever been since 2008, which is why businesses have felt confident to invest in their business and hire more staff.

“However, there’s been a bit of softening in overseas markets during the third quarter which has been driving growth in the region for the last few years. Manufacturing is our biggest growth sector, but this quarter it has slipped back a bit. Construction is very tough all over.

“However, 2012 has been better than 2011 and we’re still performing exceptionally well in overseas markets outside the struggling eurozone.”

The latest QES shows North East regional service sector growth continues to outpace the region’s manufacturers, who again reported disappointing sales in the UK.

Investment continues to be weak, with plant investment once again negative after creeping into positive territory for the past two quarters.

The QES, produced in partnership with Barclays, also reveals that businesses in the south of the region, including areas covered by the Teesside Local Enterprise Partnership are stronger in several respects than those further north, including in areas covered by the North East Local Enterprise Partnership.

The strength of the oil, gas, offshore and automotive markets are driving the success of many firms in the region including Gateshead-based TDR whose revenues are up 50% over two years.

But its chairman Bill McGawley said: “It is the uncertainty of planning ahead that really impacts on productivity and headcount, which impacts on small firms. The consequences of making over-optimistic best-guess decisions can be catastrophic. In the past, bankers would be tolerant and supportive with some form of manageable short-term overdraft assistance, but in the current climate an over optimistic planning error can be terminal, as support is not often forthcoming.

“Until the global economic uncertainty and this state of unpredictability has stabilised, business will continue to be caught in the crossfire between over-committing and under-investing.

“ I don’t expect this to change in the foreseeable future.”

Another major survey out today said business volumes and income fell in the three months to September, driving the first fall in profitability since June 2009.

Of the 104 companies that responded to the CBI/PwC survey, 30% saw business volumes rise and 49% reported a fall.

 
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