East Midlands growth slows in Q3

October 26, 2015 2:04 pm

EMC

The pace of economic growth in the East Midlands stalled in the third quarter of the year, according to the results of a new survey.

East Midlands Chamber has released the results of its Quarterly Economic Survey (QES), for Q3 2015, which found that the rate of business growth fell between July and September, following a strong start to the year.

The Chamber tracks business performance across a range of key economic indicators – including sales and orders, staffing levels, price expectations, investment intentions and business confidence – to produce a quarterly ‘State of the Economy Index’.

After levelling out in the first two quarters of the year – at 386 and 383 respectively – it dropped back to 276, its lowest point in two years, after respondents reported falls in sales and orders, investment plans and confidence.

In terms of activity, 46 per cent of firms reported an increase in UK sales in Q3 (down from 49 per cent in Q2), while 14 per cent reported a decrease in domestic sales. Manufacturing and engineering firms were weaker, with 31 per cent seeing an increase against 25 per cent that saw a decline.

The tightening trading conditions were felt more markedly in overseas markets with 29 per cent of respondents reporting an increase in international sales (down from 40 per cent in Q2) and 23 per cent reporting a decrease.

Despite slowdowns in sales activity, the pace of workforce growth showed no signs of letting up in Q3, with 34 per cent of firms reporting an increase in employee numbers, against 10 per cent reporting a decrease – both of which were broadly in line with figures reported in Q1 and Q2. Looking ahead, 31 per cent plan to recruit in Q4.

However, reflecting the tougher picture overall, the levels of business confidence for the coming year fell in Q3, with 69 per cent anticipating an increase in turnover (down from 71 per cent in Q2) and 54 per cent predicting an increase in profits (down from 61%).

Q3 also saw a significant drop in the number of firms changing their business plans, with 20 per cent revising these upwards for plant/machinery/equipment (down from 34 per cent in Q2) and 22 per cent revising these upwards for training (33 per cent in Q2).

Chamber chief executive Scott Knowles said: “Over the past two years the East Midlands has experienced almost constant quarter-on-quarter economic growth, so it is tempting to look upon the slowdown in Q3 with disappointment.

“However, it is important that we focus on understanding the reasons behind the slowdown, rather than focus on the slowdown itself.

“There has definitely been an influence from overseas markets, such as the slowing of China’s economy. Many businesses will be keeping a watchful eye on how these influences develop.

“Given these challenges, it becomes ever more critical that Government policy gives businesses a solid foundation at home. This entails, for example, an ambitious approach to infrastructure development, a sensible approach to employment legislation, a consistent approach to energy policy and a coherent approach to our relationship with the EU.

“It’s also important to remember that a slowdown in growth is still growth. The UK market, in particular, remains robust as we enter the final quarter of 2015 and the run up to Christmas, traditionally a strong period for many businesses.

“When it comes to analysing the responses for the end of 2015 it will be interesting to see how this, alongside other factors mentioned, plays out in terms of the experiences of business on the ground.”

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