Over the last couple of weeks, the regular release of macroeconomic data, regional surveys and business reports has painted a mixed picture of the current state of the Yorkshire economy.
Unemployment in the region remains high, particularly amongst young workers. Rising costs of raw materials and overheads are exerting a heavy impact on local companies’ cost bases. In contrast, other surveys in the region have pointed to some signs of rising sales, particularly for those in export markets, and in some cases, even employment growth. This suggests that for some firms at least, prospects for the immediate future are looking better. Can these different pictures of the state of the regional economy be reconciled?
Some answers can be found in the Leeds, York and North Yorkshire Chamber of Commerce Quarterly Economic Survey (QES). We have been working in partnership with the Leeds Chamber on the QES for the last year, to help produce robust quantitative data on the state of the regional economy, and also to gather more qualitative evidence, from interviews with businesses in the region. Together, the results highlight the significant challenges that businesses continue to face, and suggest that long-term solutions rather than short-term fixes are required to encourage growth in the region.
Two results are worth highlighting. Firstly, confidence amongst businesses has indeed improved over the first few months, with the QES showing that more firms expect turnover and profitability to increase over the next year, than those expecting decreases.
However, this comes after a year in which confidence was very low, and most firms are not yet able to translate this confidence into increasing employment or investment. For most businesses in the region, employment figures have been flat. The latest QES showed that only one in five had increased their workforce over the last three months. What is interesting is that nearly half of the firms surveyed were experiencing acute skills shortages.
Secondly, the idea of export-led recovery in the region is not straightforward. In high profile visits to the region by coalition Government ministers, the benefits of exporting has been continually emphasized, highlighted as a panacea to the economic challenges in the region.
The QES does suggest that firms in the region who are operating in export markets have been able to weather the stormy economic conditions of the last few years more effectively than non-exporters. But the reality is that only one in three businesses in the region are operating in export markets, a figure which falls to one in four for service sector firms. Our work with the Chamber indicates that 90 per cent of these non-exporters would not even consider a move into overseas markets, since it is not appropriate for their product or service.