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Quarterly Economic Survey - Q3 2024

Introduction

The following report uses data taken from the Quarterly Economic Survey carried out by the Chamber from 19/08/24 and 16/09/24 in the third quarter (Q3) of 2024. This regular survey asks businesses a series of questions on key economic indicators.

Summary

In total, there were 279 responses. Of these, 39.0% can be broadly classified as Manufacturers and 61.0% as Service Sector businesses.

Out of 279, 41.0% of respondents were micro, 30.0% were small and 22.0% were medium-sized businesses. 6.0% of respondents were large businesses.

46.0% 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) decreased by 0.5% compared to the previous three-month (February to April 2023) period to 4.9% in the May to July 2024 period. Youth (16-17 years) unemployment decreased from 26% to 16.1% over same time period of February to April 2024. Nationally, the number of job vacancies for the period of June to August 2024 was 857,000 showing a further fall in the number of vacancies by 42,000 from March to May 2024 peiod. This was 26th consecutive decline in number of job vacancies with number decreasing in all 18 industry sectors.

According to Bank of England’s latest Monetary Policy report, inflation is likely to rise temporarily with interest rate cut to 5%. Looking at the exchange rates, the GBP stands at €1.17 in September’24 – constant as compared to March’24. The latest data from Department for International Trade (Q2 2024) show exports valuing £6.46 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 fall in the state of economy index. The value for third quarter of 2024 is 143.

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 Q3 2024)

If you have recruited over the past 3 months, what type of positions were they: (latest quarter Q3 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 Q3 2024)

Chamber Commentary

East Midlands economy demonstrates a landscape of cautious optimism tempered by significant challenges

The Q3 2024 business indicators reveal a mixed economic landscape, showcasing both areas of growth and signs of caution. This summary captures the key trends across domestic and overseas markets, employment, investment, and business confidence to provide a comprehensive understanding of the current environment.

Starting with the UK market, the data shows contrasting trends between sales and orders. UK Sales have experienced a 5% decline from 13% in Q2 to 8% in Q3, indicating a slowdown in domestic demand, possibly due to consumer caution or inflationary pressures. This decline, marked with a red indicator, suggests that businesses may need to adjust their strategies to maintain sales in the coming months. In contrast, UK Orders have increased by 3%, reaching 13% in Q3 from 10% in Q2, indicating potential future growth. This positive trend, marked green, suggests that there is still optimism among domestic clients, providing a potential avenue for businesses to capitalize on upcoming sales opportunities.

In terms of overseas performance, the indicators highlight more significant challenges. Overseas Sales have seen a substantial drop of 10%, falling from 13% to 3%, which could be due to a variety of factors such as exchange rate fluctuations, global economic uncertainties, or geopolitical issues. This red-marked decline suggests that export-oriented businesses might face difficulties in maintaining their international market share. Similarly, Overseas Orders have fallen by 3%, moving into negative territory at -1%, pointing to potential challenges in securing future international sales. These trends emphasize the need for businesses to diversify their export strategies and adapt to changing global market conditions.

The employment and labor force data present a nuanced picture. The Labour Force (Past 3 Months) has increased by 2%, from 7% to 9%, suggesting that companies are still actively hiring, indicating a degree of resilience and ongoing economic activity. However, expectations for the Workforce (Next 3 months) show a slight decline, dipping by 2% from 20% to 18%. This decrease, marked with a red indicator, signals growing caution among businesses regarding future hiring, likely due to uncertainties about future demand and the broader economic environment.

When examining investment and cash flow, the data reflects a trend toward reduced spending. Investment in Machinery has dropped sharply by 13%, from 16% in Q2 to just 3% in Q3, while Investment in Training also decreased by 5%, from 19% to 14%. These red indicators suggest that businesses are tightening their budgets, likely in response to economic uncertainties or to conserve cash flow amid concerns about profitability. Meanwhile, Cash Flow remains unchanged at -2%, highlighting ongoing liquidity challenges and limited improvements in financial flexibility.

Lastly, business confidence indicators provide insights into the overall sentiment. Confidence in Turnover has decreased by 3%, from 50% to 47%, reflecting concerns about revenue prospects and market conditions. However, Confidence in Profitability has shown a slight increase, up by 1% to 31%, indicating that some businesses remain optimistic about maintaining their profit margins despite external pressures. Additionally, Future Prices have seen a modest decrease from 32% to 29%, suggesting businesses may anticipate a more stable pricing environment or are adjusting their pricing strategies to remain competitive.

In conclusion, the Q3 2024 data presents a landscape of cautious optimism tempered by significant challenges, particularly in the overseas market and investment activities. While there are positive signs such as increased UK orders and stable profitability confidence, businesses face headwinds in terms of international sales and investment restraint. As they navigate this uncertain economic environment, companies will need to remain agile, focus on domestic opportunities, and manage cash flow carefully to sustain growth.