Uncertain times ahead as region sees fragile growth

The latest Quarterly Economic Survey (QES) by Leeds, York and North Yorkshire Chambers, conducted in partnership with Leeds University Business School, continues to support the notion of a manufacturing-export led recovery with around two-thirds reporting an increase in overseas trade. However, the sector reported disappointing UK sales and orders and a sharp decline in profit expectations on the previous quarter.

The service sector shows mixed results following last quarter’s poor performance. There has been slight improvements in domestic sales and orders, but the survey indicates sluggish growth in the sector with the majority of businesses experiencing either a decrease or no change in domestic and overseas trade.

The survey, which was completed by business owners and senior managers, shows that despite the fragile sales, both sectors remain confident that their turnover will improve over the next 12 months.

Of the 48 per cent of businesses that attempted to recruit in the previous quarter, 90 per cent of those were looking to take on permanent – rather than temporary – staff. This is compared to 75 per cent of businesses looking to take on permanent staff in the previous quarter.

Mark Goldstone, head of corporate relations at the chamber, said: “These results are not as strong as previously hoped, particularly after the UK economy contracted by 0.5 per cent in the last quarter of 2010, much of which was attributed to the bad weather. The mixed results for domestic sales and orders suggest that the economy is still in a fragile condition and that growth in the home market is broadly stagnant.

“It is encouraging to see confidence over turnover expectations remaining strong, demonstrating the resilience of local businesses despite the turbulent economy.

“However, the expected decline in profitability amongst manufacturers is of concern and could be attributed to increasing cost pressures.

“Similarly, the mixed results in terms of employment are of concern and support the Chamber’s calls for the Government to make it easier for businesses to recruit new employees by removing burdensome red tape.

“This quarter’s QES reaffirms the need for growth-enhancing policies. The austerity measures, VAT and rising cost of raw materials place new pressures on business at a time when they should be concentrating on growth. The recent Budget outlined a number of pro-business policies. The challenge for ministers is to translate this rhetoric into real action that can deliver a sustainable recovery and make 2011 a year for growth.”