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Lancashire Times
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3:00 AM 26th May 2022
business

Business Confidence In Northern England Weakens As Companies Face Challenges

 
Business confidence in Northern England has weakened considerably as economic conditions tighten, a new survey of chartered accountants has found.

ICAEW’s Business Confidence Monitor (BCM) for Q2 2022 for Northern England, published today (Thursday 26 May 2022), found that sentiment among businesses was lower only in Scotland. Confidence in the UK has declined in the past three quarters.

Businesses in Northern England, as elsewhere in the UK, are facing a number of difficulties, particularly in terms of rising input costs and staff shortages.

Sales growth, both domestically and for exports, was strong year-on-year, with further growth predicted for the year ahead, but companies were aware of the challenges that could alter this outlook.

Amid the increase in the cost of living, and last week’s announcement that inflation had hit 9%, ICAEW said the survey suggested that targeted, strategic financial measures were needed, to relieve households and stop issues spilling further into the economy.

Cost pressures

Cost pressures are likely to be affecting business confidence, the BCM found. Supply-chain disruptions and increased commodity prices had contributed to annual input price inflation reaching 4.5% in the quarter, with growth of 5% expected in the next year. Northern England’s motor manufacturing and chemicals sectors were particularly exposed to global cost rises, ICAEW said.

To offset these rises, companies in Northern England have raised the prices they charge to customers. Prices grew 2.6% year-on-year with a further 3.1% rise planned.

Labour costs have also increased, with a 3.1% rise in salaries over the past year. These higher salaries were likely an attempt by the region’s businesses to tackle labour market difficulties. Companies have been competing to recruit, with fewer workers to employ because of post-Brexit limits on EU staff and a smaller workforce post-pandemic.

Staff turnover has continued to be a growing challenge, affecting two in five businesses, while the availability of non-management skills was identified as a growing challenge by 45% of companies.

The proportion of companies being increasingly challenged by transport problems remains high by historical standards. And the tax burden has become a much more widespread issue in the region.

Dr James Callaghan
Dr James Callaghan
Dr James Callaghan, ICAEW Regional Director for Northern England, said:

“Companies in Northern England have told us that their confidence has declined. Businesses face growing difficulties from rising costs and staff turnover, and are aware of the challenges that could hinder their growth.

“While none of these problems are of the government’s making, they must understand the emotional and financial toll on people and families. The Chancellor should address the high cost of living with targeted, strategic financial measures to prevent disastrous consequences for people’s standard of living and the amount of spending in the economy, which could result in real pressure on businesses.”

Nationally, business confidence fell for a third quarter in a row, amid concerns on the tightening of the economy and rising inflation. Confidence for the quarter was at 18.6 on the index, down from its peak of 47 three quarters ago. Cost pressures and staff shortages were hampering expectations of a more positive outlook, ICAEW said.