Bernard Ginns: Mixed picture shows little to encourage a sunny outlook

Prospects for the really important part of the economy, manufacturing, appear to be improving if you believe the latest survey of factory orders.

The purchasing managers’ index shows that domestic clients placed more orders in August, raising hopes that Great Britain could be returning to growth.

The survey shows an easing of the downturn in manufacturing, which in turn might persuade the Bank of England against another bout of quantitative easing.

“It’s less negative, not more positive,” said Scotiabank. “It reassures us that we are stagnating and not slumping.”

On the less positive side, the prospects for the real estate market appear to be darkening in the short term, according to Ian Marcus, the new managing director for Evans Property Group.

The family-owned Leeds business famously called the top of the market right and sold half of its property portfolio prior to the crash in 2007.

As of May, it controlled property assets worth around £600m, including Yorkshire interests of between £350m and £400m.

Mr Marcus replaced John Bell as MD three months ago and is the former head of European real estate investment banking at Credit Suisse.

He told me: “The macro-economic situation and therefore the real estate market is still under enormous pressure and more likely to deteriorate before it gets better.

“Running a family business like this, you have to protect your downside, be very conservative, be very considered because if the market is going to deteriorate further you have to recognise that asset values are continuing to fall.

“Other than prime-prime real estate and other areas of growth essentially central London and Aberdeen and property with long leases to undoubted covenants, the rest of real estate is deteriorating further in value.

“My concern is that it is not just values falling, income is coming under pressure too because of the broader economic situation.

“My priority here is to protect the downside, look after existing customers and make sure we manage the cash-flow well and protect the name and reputation of the family.

“If we get these things right, we will look at opportunities in areas like student accommodation, healthcare and leisure.”

Mr Marcus currently chairs the Bank of England’s commercial property forum.

He added: “The bank situation is deteriorating further in terms of provision of finance to the sector.

“That’s partly because of market conditions and partly because of regulatory environment.

“If you can borrow, it’s likely to be lower loan to value and higher margin. Anyone relying solely on bank finance needs to think very carefully about managing their business and the exposures they have.”

He said: “There will be opportunities; I’m just not sure when.

“Cheap does not necessarily mean fair value at the moment.”

There’s a problem when buyers think prices will fall further. They don’t buy.

NG Bailey is another large Yorkshire company with a sizeable interest in property, in particular, the electrical and mechanical infrastructure of buildings old and new.

It too is predicting tough times ahead, at least in the short term. “The public sector spending cuts are really biting now and we are not seeing private sector picking up the slack,” said David Hurcomb, chief executive of the Ilkley-based business.

He added: “I think we are in for a couple more painful years before the private sector starts to come back.”

Mr Hurcomb, in the post for the last two years, has successfully refocused the business to concentrate on growth areas like rail, facilities management and IT services.

He has steered NG Bailey back into the black, reversing last year’s pre-tax loss to a pre-tax profit of £7.2m, and bringing some leadership and vision to bear on the family-owned company.

The last chief executive, Mark Andrews, left abruptly at the end of 2009 and it was left to the chief financial officer Chris Newton to become acting CEO and hold the fort.

He lost out to Mr Hurcomb, a former board director at Carillion who was appointed in June 2010.

Nimble Thompson, the chairman of NG Bailey, said: “The near future will be difficult for the industry but we are confident about the future and as a well-led, securely funded family business we intend to remain a leader in our sector.”

Family-owned businesses are vitally important to Yorkshire.

It is therefore heartening to see those at the larger end of the scale, like NG Bailey, successfully adapting to these difficult circumstances.

@bernardginns