Doncaster Chamber – Quarterly Economic Survey: Results of the 2nd Quarter 2008
Doncaster Chamber – Quarterly Economic Survey: Results of the 2nd Quarter 2008
Background
The Quarterly Economic Survey was distributed to all businesses in Chamber membership with 96 members, 9%, 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:
Business confidence in Doncaster is continuing to sink with only 44% of businesses now expecting profitability to improve in the next three months compared with 53% in the first quarter of 2008, 66% in the last quarter of 2007 and 68% in the quarter prior to that. Similarly, 35% of businesses reported a decrease in sales during the last three months compared with 18% in the previous quarter and only 11% in the final quarter of 2007. Furthermore, 20% of Doncaster businesses reported that they had been forced to lay off staff in the second quarter of 2007 compared with 11% in the previous quarter and only 4% if the final quarter of 2007.
It is evident that the current economic downturn is now starting to hit Doncaster businesses hard with only 26% of Doncaster businesses reporting an improvement in cashflow, compared with 34% in the previous quarter and 40% in the final quarter of 2007. The downturn is also taking its toll on investment with 34% of businesses now decreasing their investment in plant/machinery and 26% of businesses slashing their training budgets compared with only 6% of businesses doing so in the first quarter of 2008.
51% of businesses are also expecting their prices to increase in the next three months; this is up from 42% in the previous quarter. This expectation is particularly pronounced within the manufacturing sector where 68% of businesses expect prices to go up in the near future.
UK Sales
In the last three months sales have increased for 42% of all businesses, remained constant for 26% of businesses and decreased for 35% of businesses; this compares with 18% reporting a decrease in sales in the first quarter of 2008 and only 11% in the last quarter of 2007. Advanced orders have increased for 30% of businesses, remained constant for 31%, and dipped for the remaining 39% of businesses compared with only 11% of businesses reporting a decrease in advance sales in the first quarter of 2008. This demonstrates a significant downturn even in the last three months, thus illustrating the pressures now being created by the credit crunch as it becomes an increasingly pressing reality for Doncaster businesses.
32% of manufacturers reported an increase in sales, 32% reported that sales had remained constant, and quite alarmingly, 36% reported a decrease in sales compared with almost 0% of manufacturers in the first quarter of 2008.
Export Sales
Export sales have increased in the last three months for only 18% of businesses compared with 36% in the first quarter of 2008; export sales remained constant for 63% of businesses with 18% businesses reporting a decrease in export sales. These figures were broadly similar within both the manufacturing and service sectors. This compares poorly with the first quarter of 2008 when no businesses reported a decrease in export sales. Advanced export orders have increased for 14% of businesses, remained constant for 69% and decreased for 17% of businesses; this compares with a decrease for only 5% of businesses in the first quarter of 2008.
Employment
Over the last three months 22% of businesses have increased their workforce, for 58% it has remained constant, with 20% of businesses reducing their workforce, this compares with 13% in the first quarter of 2008 and only 4% of businesses laying off staff in the last quarter of 2007. In the next three months only 17% of businesses expect to take on staff compared with 38% in the first quarter of 2008; 66% of businesses expect their workforce to remain constant and 16% expect to lose staff compared with only 3% in the first quarter of 2008.
No manufacturing businesses are expecting to take on more staff in the next three months and 17% are expecting to lose staff.
40% of businesses have tried to recruit staff in the last three months compared with 47% in the previous quarter and 51% in the last quarter of 2007. 77% of these were full time posts and 60% were for permanent positions.
26% of those businesses trying to recruit staff encountered difficulties when doing so; this contrasts sharply with 61% in the previous quarter suggesting that the economic downturn is creating a pool of potential employees for business as more people have entered the job market. Where difficulties did occur it was in relation to the following types of jobs: Skilled Manual/Technical – 43%, Professional/Managerial – 46%, Clerical – 8% and Semi/Unskilled – 19%.
Cashflow
Over the last three months cashflow improved for 26% of businesses, down from 34% in the first quarter of 2008 and 40% in the final quarter of 2007, remained the same 41% of businesses and worsened for 33% of businesses. For the manufacturing sector 22% of businesses had experienced an improvement in cashflow this last three months and 33% experiencing a worsening compared with only 14% in the previous quarter.
Investment
In the last three months 15% of businesses increased their investment in new machinery/equipment, for 51% this has remained constant, whilst 34% have decreased their investment in machinery/equipment compared with only 16% in the previous quarter.
Investment plans for training have improved in the last three months for only 18% of businesses, remained the same for 55% and decreased for 26% compared with 6% in the previous quarter. This reflects a demonstrable reduction in training spend for Doncaster businesses compared with the previous quarter and the last two quarters of 2007.
Business Confidence
Business confidence is down again with only 44% of businesses expecting profitability to increase compared with 53% in the previous quarter, 66% in the final quarter of 2007 and 68% in the quarter preceding that. 34% of businesses expect profitability to fall. 56% of business expect turnover to improve, 19% expect it to stay the same and 24% expect it to worsen. Confidence in the manufacturing sector is marginally higher but broadly similar to the over all figures cited above.
Capacity
36% of businesses are operating at full capacity with 64% operating below capacity, this is consistent with the last two quarters. 50% of manufacturing businesses are operating at capacity.
Prices
51% of businesses expect their prices to increase in the next three months, up from 42% in the previous quarter, 43% expect them to remain constant and 6% of businesses are predicting a decrease in prices. Within the manufacturing industry 68% of businesses expect prices to increase with 21% expecting them to remain constant and 11% expecting them to decrease.
Businesses are currently experiencing the following price pressures, (businesses could respond to more than one option): Pay Settlements –19%, Raw Material Prices – 48%, Finance Costs – 22% and Other Overheads – 57%. These figures are broadly consistent with recent results.
For the manufacturing industry figures were as follows: Pay Settlements – 32%, Raw Material Prices – 95%, Financial Costs – 32%, and Other Overheads – 53%.
External Pressures Businesses were asked to identify what external factors were of concern to them, 33% cited interest rates, 16% cited exchange rates, 19% cited business rates, 25% cited inflation, 38% cited competition and 64% cited corporate taxation as the biggest concern; corporate taxation demonstrated a big jump from 35% in the first quarter of 2008.
For the manufacturing sector the breakdown was as follows: Interest Rates – 37%, Exchange Rates – 11%, Business Rates – 21%, Inflation – 32%, Competition – 26%, and Corporate Taxation – 63%.
For further information on the Quarterly Economic Survey please contact Daniel Fell, Head of Policy, on 01302 640113 or dfell@doncaster-chamber.co.uk