Doncaster Chamber – Quarterly Economic Survey: Results of the 4th Quarter 2007
Background
The Quarterly Economic Survey was distributed to all businesses in Chamber membership with 70 members, 7%, responding. The results are compiled through the British Chamber network and used by the Treasury Committee of the Bank of England to help determine interest rates. Consequently the results of the survey are of key importance to all members.
Key Points
The key points arising from the Quarterly Economic Survey for Doncaster are as follows:
- Interest rates are continuing to put intensive pressure on Doncaster businesses; this follows a spate of recent rises at the back end of 2007 and the Bank of England’s recent decision not to cut interest rates. The Chamber would now urge a modest interest rate cut to alleviate threats to the banking system and help restore the smooth flow of credit in the economy. Sterling’s recent weakness poses inflationary risks but delaying a modest, and much needed, interest rate cut could worsen the downturn of the economy.
- Unsurprisingly, business confidence is also down, with 66% businesses, compared with 76% in the third quarter of 2007, expecting profitability to increase in the next three months. Doncaster businesses had previously remained bullish in the faces of the floods, but other pressures, including interest rates, are now taking their toll on local businesses; however, for the time being, sales are remaining healthy with 42% of businesses reporting an increase in the last 3 months.
- The manufacturing industry has reported a mixed bag; only 33% of businesses in the sector are operating at capacity compared with 63% in quarter three of 2007; 17% of businesses in the sector are also expecting to lose staff in the next three months. However, domestic sales are still comparatively good within the sector with 42% of manufacturing businesses reporting an increase in the last three months; additionally export sales have risen for 25% of manufacturing businesses compared with 8% in the third quarter of 2007.
UK Sales
In the last three months sales have increased for 50% of all businesses, remained constant for 39% of businesses and decreased for 11% of businesses. Advanced orders have increased for 50% of businesses, remained constant for 37% and dipped for the remaining 13% of businesses. This demonstrates a slight improvement from the third quarter of 2007 when 48% of businesses reported an increase in sales.
The manufacturing sector has shown an improvement on the third quarter of 2007 with 44% reporting an increase in sales, 44% remaining constant and 16% reporting a decrease. This compares with 31% of manufacturing businesses that reported an increase in sales in the third quarter of 2007.
Export Sales
Export sales have increased in the last three months for only 7% of businesses, remained constant for 89% of businesses, and decreased for 4%. Advanced export orders are similar, increasing for 4% of businesses, remaining constant for 90% of businesses and decreasing for 6% of businesses. These results are broadly consistent with the third quarter results for 2007.
Export sales within the manufacturing sector are encouraging with 25% of businesses reporting an increase and 75% reporting that sales have remained constant in overseas markets. This compares with only 8% of manufacturing businesses reporting an increase in overseas sales in the third quarter of 2007. 8% of manufacturing businesses reported an increase in advance orders with 84% remaining constant and 8% decreasing.
Employment
Over the last three months 23% of businesses have increased their workforce, for 73% it has remained constant, with 4% of businesses reducing their workforce. In the next three months 25% of businesses expect to take on more staff, 71% of businesses expect their workforce to remain constant and 4% expect to lose staff. This demonstrates a reduction in the number of businesses either taking on, or expecting to take on, more staff compared with the third quarter of 2007 when 30% of businesses had taken on more staff and 35% were confident that they would do so in the near future.
8% of manufacturing businesses have increased their workforce in the last three months with 8% expecting to recruit staff in the next three months. Whilst employment in the manufacturing sector has remained consistent in the last three months, 17% of manufacturing businesses are concerned that they will lose staff in the next three months.
51% of businesses have tried to recruit staff in the last three months, 25% for the manufacturing sector. 64% of these were full time posts and 82% were for permanent positions.
71% of those businesses trying to recruit staff encountered difficulties when doing so. This figure is very similar to quarter three of 2007 and reflects the long terms concerns of Doncaster businesses about the local workforce being equipped with the skills they need. These difficulties occurred in relation to the following types of jobs overall: Skilled Manual/Technical – 29%, Professional/Managerial – 29%, Clerical – 11% and Semi/Unskilled – 20%. The breakdown was as follows for the manufacturing sector: Skilled Manual/Technical – 67%, Professional/Managerial – 0%, Clerical – 0% and Semi/Unskilled – 33%.
Cashflow
Over the last three months cashflow improved for 40% of businesses, remained the same 43% of businesses and worsened for 16% of businesses, thus demonstrating a slight improvement from the third quarter of 2007. For the manufacturing sector 25% of businesses had experienced an improvement in cashflow this last three months, 19% experiencing a worsening.
Investment
In the last three months 16% of businesses increased their investment in new machinery/equipment, for 73% this has remained constant, whilst 11% have decreased their investment in machinery/equipment. Within the manufacturing industry only 9% of businesses plan to increase their investment in machinery with 27% expecting to reduce their investment.
Investment plans for training have improved in the last three months for 25% of businesses, remained the same for 64% and decreased for 10%. This reflects a similar commitment to training as was shown by Doncaster businesses in the third quarter of 2007.
Business Confidence
Business confidence is significantly down from quarter three of 2007 with 66% of businesses expecting turnover to improve compared with 76% in the last survey, 12% expect it to remain the same and 14% expecting it to worsen. 66% expect profitability to improve, 19% expect it to remain the same and 14% expect it to worsen. Confidence in the manufacturing sector is lower with 55% of businesses expecting turnover to increase and 64% expecting profitability to improve.
Capacity
39% of businesses are operating at full capacity with 61% operating below capacity. 33% of manufacturing businesses are operating at capacity; this is down significantly from the 63% of manufacturers who stated that they were operating at capacity in the third quarter of 2007.
Prices
37% of businesses expect their prices to increase in the next three months, 57% expect them to remain constant and 6% are predicting a decrease in prices. Within the manufacturing industry 25% of businesses expect prices to increase with 8% expecting them to decrease.
Businesses are currently experiencing the following price pressures, businesses could respond to more than one option: Pay Settlements – 20%, Raw Material Prices – 36%, Finance Costs – 23% and Other Overheads – 36%. These figures are broadly consistent with the third quarter of 2007.
For the manufacturing industry figures were as follows: Pay Settlements – 17%, Raw Material Prices – 67%, Financial Costs – 25%, and Other Overheads – 17%.
External Pressures
Businesses were asked to identify what external factors were of concern to them, 37% cited interest rates, 20% cited exchange rates, 23% cited business rates, 26% cited inflation, 31% cited competition and 40% cited corporate taxation as the biggest concern.
For the manufacturing sector the breakdown was as follows: Interest Rates – 44%, Exchange Rates – 25%, Business Rates – 25%, Inflation – 25%, Competition – 31%, and Corporate Taxation – 38%.