The latest Quarterly Economic Survey from the West and North Yorkshire Chamber of Commerce presents a nuanced picture of the regional economy, highlighting significant growth in manufacturing exports alongside persistent challenges in investment and business confidence.
Manufacturing Gains and Service Sector Struggles
Manufacturers in West and North Yorkshire experienced the highest rate of export growth since late 2021, complemented by a 17% surge in domestic sales, the strongest performance since the end of 2022. Despite this, the service sector reported only a modest 2% increase in UK sales, with order books shrinking after two consecutive quarters of growth.
Profit Expectations and Investment Stability
While 41% of businesses across all sectors anticipate profit growth in the coming months, this optimism has plateaued compared to previous surveys. Investment intentions remain largely unchanged, with the region’s confidence levels trailing behind the national average.
Employment Trends and Labour Costs
Approximately one in four regional employers plan to expand their workforce within the next three months, although the pace of hiring is decelerating, with service firms showing a 7% decline and manufacturers an 8% drop in hiring intent. Labour costs continue to pose a significant burden, tempering enthusiasm for increasing staff numbers. Notably, there was a 12% uptick in manufacturers aiming to grow their workforce.
Training and Capital Investment Dynamics
Investment in training saw a 12% rise among manufacturers, marking the highest level in nearly a year, whereas service sector firms reported a 9% decline in upskilling initiatives. Capital investment intentions dropped by 6% among manufacturers, with a slight 1% decrease in the service sector.
External Economic Pressures
Inflation remains the primary external cost pressure, despite recent declines in the headline rate from the highs of late 2022. Businesses in the region continue to grapple with high day-to-day costs. Additionally, interest rates and taxation are significant concerns for local firms.
Capacity Utilization and Cashflow Challenges
Only 29% of manufacturers are operating at full capacity, compared to 41% of service sector firms. Cashflow issues persist, affecting 26% of service firms and 31% of manufacturers, who reported decreases.
Profit and Turnover Expectations
After a period of optimism, expectations for profit growth have either stagnated or declined. Service sector firms anticipating increased profits fell by 17 points, while manufacturing expectations remained steady compared to the first quarter. Turnover expectations also declined across both sectors.
Conclusion
The latest survey from the West and North Yorkshire Chamber of Commerce underscores a complex economic landscape. While manufacturing shows robust growth in exports and domestic sales, investment and confidence remain subdued, with businesses facing ongoing external pressures and operational challenges.