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Introduction


The following report uses data taken from the Quarterly Economic Survey carried out by the Chamber from 13/05/24 and 10/06/24 in the second quarter (Q2) of 2024. This regular survey asks businesses a series of questions on key economic indicators.

Summary


In total, there were 322 responses. Of these, 36.0% can be broadly classified as Manufacturers and 64.0% as Service Sector businesses.

Out of 322, 36.0% of respondents were micro, 34.0% were small and 23.0% were medium-sized businesses. 7.0% of respondents were large businesses.

42.0% of respondent businesses were active in international markets.

Wider Economic Context


The unemployment rate for East Midlands reported by the Office for National Statistics (ONS) increased by 0.1% compared to the previous three-month (October to December 2023) period to 5.4% in the February to April 2024 period. Youth (16-17 years) unemployment increased from 20.8% to 26% over same time period of February to April 2024. Nationally, the number of job vacancies for the period of March to May 2024 was 904,000 showing a further fall in the number of vacancies by 12,000 from December 2023 to February 2024. This was 23rd consecutive decline in number of job vacancies with number decreasing in 9 out of 18 industry sectors.

According to Bank of England’s latest Monetary Policy report, higher interest rates are reducing inflation. The Bank of England is not at the stage of cutting interest rates and expects inflation to come down to 2%. Looking at the exchange rates, the GBP stands at €1.17 in June’24 – €0.01 higher than in March’24. The latest data from Department for International Trade (Q4 2023) show exports valuing £7.28 billion from the East Midlands region.

Region at a Glance


*Net Value = Increase - Decrease

State of Economy Index


Compared to previous quarter, the current quarter saw slight growth in the state of economy index. The value for second quarter of 2024 is 178.

Results


For businesses involved in the UK market, looking at the past 3 months (excluding seasonal variations), has your activity/sales/custom: (trend over 4 quarters)

For businesses involved in the UK market, for the next 3 months (excluding seasonal variations), have orders/advanced custom/bookings: (trend over 4 quarters)

For businesses involved in overseas markets, over the past 3 months (excluding seasonal variations), has your activity/sales/custom: (trend over 4 quarters)

For businesses involved in overseas markets, for the next 3 months (excluding seasonal variations) have orders/advanced custom/bookings: (trend over 4 quarters)

During the last 3 months, has your labour force: (trend over 4 quarters)

Over the next 3 months, do you expect your workforce to: (trend over 4 quarters)

Have you attempted to recruit within the past three months? (trend over 4 quarters)

If you have recruited over the past 3 months, did you experience any problems in finding suitable staff? (trend over 4 quarters)?

For which job types did you experience a problem: (latest quarter Q2 2024)

If you have recruited over the past 3 months, what type of positions were they: (latest quarter Q2 2024)

During the last 3 months, has your cash-flow: (trend over 4 quarters)

Are you currently operating at: (trend over 4 quarters)

Over the next 3 months, do you expect your prices to: (trend over 4 quarters)

Is your business currently suffering pressures to raise its prices as a result of any of the following: (trend over 4 quarters)

What changes have you made to your investment plans for plant / machinery / equipment: (trend over 4 quarters)

Over the past 3 months, what changes have you made to your investment plans for training: (trend over 4 quarters)

Over the next 12 months do you expect your turnover to: (trend over 4 quarters)

Over the next 12 months do you expect your profitability to: (trend over 4 quarters)

Which of the following are more of a concern to your business than 3 months ago: (latest quarter Q2 2024)

Chamber Commentary


East Midlands economy demonstrates increasing strength as year progresses

The Chamber’s economic survey results for the second quarter of the year make for positive reading, with one small blemish with regards to workforce numbers in businesses. Of particular encouragement are results relating to sales and orders – both in the UK and overseas – which saw strong gains from the start of the year, demonstrating a growing demand from businesses and customers for the products and services coming out of the region. This was accompanied by strong upturns in investment intentions, particularly so when respondents were asked to consider investment in plant and machinery, demonstrating a growing confidence about future prospects, a confidence that was further underlined when businesses were asked about prospects for turnover and profit over the coming year, with a net 50% expecting turnover to improve (up from 47% last quarter) and 30% profitability (up from 23%).

After two consecutive quarters of businesses planning to increase prices, there was a noted drop in businesses reporting pressures on prices, down from 40% at the start of the year expecting to increase prices in coming months to one-third. When considering specific drivers of price increases – fuel, staffing costs, energy prices and raw materials – all of these fell quarter-on-quarter.

The only data bucking the positive trend relates to the labour market where, mirroring national employment figures, there was a quarter-on-quarter decrease in those that saw their labour force grow over the past few months or expect to see it grow in the coming quarter. While 55% of businesses attempted to recruit in the quarter (an increase on last quarter), two-thirds of those struggled to find the right candidates.

In other areas, there was an improvement in cashflow, with the net score for those reporting changes in cashflow almost back into positive territory after a year of a deteriorating situation, and a continued trend of reduced capacity in businesses as they get busier – although with enough headroom remaining to avoid any potential inflationary pressures from continued demand.

Finally, in a sign that health is continuing to return after a difficult two-years, when asked to report on growing concerns almost an identical number of respondents cited ‘competition’ as those that cited ‘inflation’ – competition being a sign of a well-functioning economy.

Taken together the results suggests that the resilience demonstrated by the regional economy over what has been a disruptive two-years is now morphing into growth, with a good level of confidence for continued growth over the remainder of the year.