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Business Warns of Fragile State of Economy

A report released today by Doncaster Chamber of Commerce, highlights the challenges facing the economy as we move into 2011.

Doncaster Chamber’s “Doncaster Economic Review” details data collected during the fourth quarter of the year and paints a picture of uncertainty for the economy.

Sales grew by 1% in the last quarter of 2010, continuing the sluggish growth experienced since the economy left recession at the end of 2009. Employment expectations also fell in the last quarter, 21% of businesses interviewed expect to recruit over the next three months, while 11% actually expect their workforce to decrease in the next three months.

Commenting, Daniel Fell, Head of Policy at Doncaster Chamber of Commerce, said:

“In uncertain economic times, Doncaster is not ideally placed to witness a business-led recovery. Though November represented the ninth successive month in Doncaster that unemployment has fallen and while the labour market has demonstrated a fantastic degree of strength, by keeping more workers in employment than comparable recessions of the last century, a disproportionate number of jobs in Doncaster are in the public sector, leaving the area vulnerable to Government austerity measures that could see over a million workers in the public sector made redundant.

Despite the Government’s austerity measures, weak growth and an overdependence on the public sector, the Chamber strongly believes that the greatest threat to economic stability in the short to medium term, comes from inflation. With fuel rising by an incredible 10% in the last three months alone, falling wages, the rising cost of food and with businesses facing pressure to increase their prices from the high cost of raw materials and low margins, both business cash-flow and consumer disposable income are already greatly reduced. 53% of businesses reported pressure from the high cost of raw materials in quarter four, a rise from 22% in the previous quarter. 28% of businesses are reporting price rises in the coming quarter, an increase of 9% from the previous quarter.

In this light, an immediate VAT increase was an incredible gamble to take with a fragile economy. The Chamber have long argued that this risk was unnecessary and that the VAT rise should have been delayed by a year or so, in order to relieve business cash-flow and consumer disposable income from further pressures.

While the Chamber still supports the need to enforce a degree of austerity, given the weakness in the economy, we are forced to question the fact that given that the UK has consistently reported budget deficits for 28 of the last 37 years, why is there a sudden and urgent need to eliminate the deficit completely, and within such a short timeframe as four years?”

If you would like to read the full report, please click here.