Monthly Business News Updates
This month (March 2023) we have updates on the following topics:
- National outlook and trading environment
- The impact of Brexit
- Cost of living and doing business
- Labour markets
- Property markets
National outlook and trading environment
UK economy is entering a recession:
- While stark challenges remain in the current business environment – high energy costs, industrial action, labour and skills shortages, material costs and supply, and investment pressures – elements of confidence and success do exist.
- This has been highlighted in recent barometers such as NatWest's Purchasing Managers Index – reporting a slowing of the economic downturn across the East Midlands and West Midlands – as well as Lloyds Bank’s Business Barometer, which showed business confidence across the UK at a 6-month high in January and a further high in February across some regions.
- According to latest Lloyds’ Barometer, business confidence in the West Midlands surged during February, by 30 points to 48% - making it the most positive of all UK regions.
- East Midlands businesses’ identified their top target areas for growth in the next 6 months as diversifying into new markets (33%) and evolving their product and service offering (31%) and investing in their team (29%).
- A clear message coming from the Midlands business community is now shifting the narrative from ‘challenge’ to opportunity this year.
The impact of Brexit: 3 years after leaving the EU
- Approximately two in five (43%) businesses reported that importing goods from the EU was more difficult as a result of Brexit, with one in five (23%) reporting significant difficulty
- The majority of respondents stated that there had been no change in their ability to export goods to the EU (64%), move goods between Northern Ireland and Great Britain (69%), and provide services to or purchase services from the EU (71%)
- The most commonly encountered issue by businesses were increased costs (50%), supply chain issues (34%) and delays at the border (27%)
- Microbusinesses (labelled as having one to nine employees) were more intensely impacted than their larger counterparts.
Survey done by West Midlands Combine Authority
Cost of living and doing business
- However, local businesses are still facing huge pressures, particularly from soaring energy costs, supply chain disruption and ongoing recruitment challenges. Growth Hubs and other business support organisations are having repeated conversations with businesses facing increases in energy costs; with further examples of businesses experiences 6 fold increases in energy bills
- Where possible, these additional costs are being passed on or absorbed, but this is not always possible if businesses are going to remain competitive and viable. The worst impact of this is company closures, and corporate insolvencies are continuing to hit a year-on-year high, with a perfect storm of economic turmoil and increasing numbers of creditors pursuing debts pressurising company directors into closing their businesses voluntarily
- Analysis by law firm Shakespeare Martineau shows that the Midlands regions accounted for 14% of company administrations in 2022. 101 West Midlands firms and 76 East Midlands firms filed for administration last year, with construction, manufacturing and retail the worst hit
- Less severe but still important is the impact of rising costs on cashflow and investment. Examples from Midlands businesses state that they are actively delaying investments to protect cashflow, and also some experiencing a slowdown in demand / orders which stems from a general customer nervousness to commit to purchases, or even to plan future demand
- There is a common sentiment that Midlands businesses have been very resilient throughout the current costs' crisis, but while inflation looks to be coming down, the issue is far from over.
- The latest labour market statistics show a continued trend of gradual improvement, with employment edging up and economic inactivity edging down
- There are further signs that demand is starting to weaken, with vacancies falling, redundancies edging up and short-term unemployment rising. This points to some of the tightness in the labour market starting to ease but as a worst case this could be the early signs of a wider slowdown in the labour market
- We are see more headlines about the number of the over-50s leaving the labour market, it should be recognised that this was always going to happen as it is a normal part of life. ONS numbers show that of those leaving the workforce, one-third are aged 55 to 59 years, and only 1 in 10 are aged 50 to 54 years. The issue with this cohort is its high volume in the labour market relative to previous cohorts means it has a bigger impact
- The reason why they are leaving is mostly due to stress and not feeling supported in their job, they are also more likely to have lost their job and many have less reliance on state pensions so can afford to leave earlier
- Although the UK economy is facing a recession in 2023, an extra 225,000 construction workers may be needed by 2027, according to the latest Construction Skills Network (CSN) report. The report provides insights into the UK construction economy and its future labour needs
- In Ashfield the latest unemployment figures show that we have 2910 people seeking work, this equates to 73% of our working population. This is higher than the regional average of 3.20% and national average of 3.6%.
Tim Gilbertson, Director at FHP reports that the impact of the current energy crisis and inflationary pressures is certainly starting to be felt in the commercial property market but it’s not all ‘doom and gloom’. The underlying trend in terms of industrial and distribution space throughout the region shows that there is still good demand and a lack of space, with demand still strong at the top end of the market from major distribution and manufacturing companies.
- For the smaller, local companies, we are still seeing activity but undoubtedly committing to leases or buying premises is a difficult decision to make at present and there is certainly some nervousness in this sector
- The office market in the region is still stable although there is stock available, and retail and leisure continues to be challenged by the impact that all individuals and businesses are feeling due to the general increases in costs of living.
In this sort of market, it is the proactive local authorities who can offer support both financially and otherwise to local businesses that will “win” and help their communities benefit. Certainly, the commercial property world would love to see planning departments within local authorities be as proactive as possible, to reduce time and costs in terms of submitting and having decided planning applications which would 'speed up development', this in itself would bring increased life and vitality to the region and hopefully prosperity too.
- website: FHP property search
- email: firstname.lastname@example.org
You can find more information about the latest economic situation and sector forecasts on the following websites:
Key sector updates: Trade associations
- website: Federation for Small Businesses
- website: Logistics UK - research reports
- website: MAKE UK - Manufacturing reports
- website: Medilink – Health & Life Sciences industry magazine
Regional economic updates
- website: D2N2 Dashboard
- website: Nottinghamshire County Council employment bulletin
- website: Midlands Engine Observatory - Latest reports
- website: Midlands Engine Intelligence Hub
National economic updates
- website: Nomis – Official labour market statistics
- website: Varbes – Statistics and trends for UK and Local areas
- website: NatWest Monthly Economic Outlook
- website: The Office for Budget Responsibility
- website: CHAPS card data
Global economic updates
- website: Global & regional outlooks
- website: IMF reports
- website: Trading economics
- website: Weekly economic update from Deloitte
- website: United Nations briefing reports