QUARTERLY ECONOMIC REPORTQUARTERLY ECONOMIC REPORT. Q. IN PARTNERSHIP WITH. West & North Yorkshire...

3QUARTERLY ECONOMIC REPORT

QIN PARTNERSHIP WITH

West & North Yorkshire Chamber of CommerceBritish Chambers of CommerceAccredited

2020

Welcome once again to the West & North Yorkshire Chamber quarterly economic report. The impacts of COVID continue to batter the regional economy, however there are some small signs that things may be slowly starting to improve. We are still in unprecedented times however, and with further restrictions placed on the economy in response to rapidly evolving threats from increased infection rates across parts of our region it is important that we see agility in policy making also. There is clearly a need for a new generation of support to help protect livelihoods and ease the cash pressures faced by firms as they head into a challenging and uncertain winter.

The furlough scheme, which has been a massive success in retaining jobs, closes at the end of October and the Chancellor has responded to our consistent feedback and concerns with substantial steps that will help companies preserve jobs and navigate through the coming months. The new Jobs Support Scheme we hope will help many companies hold on to valued and skilled employees.

Extension of business lending schemes announced by the Chancellor along with more flexible repayment terms for loans, and tax forbearance measures were also welcome. It was also good to hear about an extension of support for our beleaguered hospitality sector. We know from our own research that almost 40% of firms say they have 3 months cash in reserve or less, so recent announcements should lessen the immediate pressure and provide reassurance for many affected firms in these challenging times.

I want to thank West Yorkshire Combined Authority and the Leeds City Region Enterprise Partnership for their ongoing support for this report. I would also like to thank them for the collaborative approach in working with the Chamber to support our regional business community throughout the crisis.

3Q Nick Garthwaite Chair

West & North Yorkshire Chamber of Commerce

CONTENTS 3 Introduction 4 Foreword5 Message from LCR LEP6 Methodology 7 Executive summary8 At a glance12 Domestic & international performance14 Employment & cashflow16 Capacity & prices18 Investment & confidence20 Post furlough labour market21 Returning to the work place22 British Chambers of Commerce26 National and regional comparisons29 Chamber contacts

3

3QQUARTERLY ECONOMIC REPORT

2

QUARTERLY ECONOMIC REPORTQ3

INTRODUCTION

Results this quarter show marked improvements on Q2 and, notwithstanding the impact of further local restrictions, firms are indicating the pace of decline may now be slowing. Business confidence in our region is looking stronger than the rest of the UK although still low by historical standards not unsurprisingly.

This quarter we wanted to try and understand what plans companies were preparing for their workforce as the furlough scheme tapers off. In this report we indicate that 1 in 4 employers has already had to make redundancies and that 1 in 5 were preparing to reduce their headcount as the scheme ends. It will be important that Government invests in retraining and upskilling to ensure those affected are able to find employment as quickly as possible.

Whilst the impact of COVID19 continues to dominate Chamber activities, increasingly we are starting to hear from companies about the future trade arrangements with customers in the EU. We are hopeful that a free trade deal can be struck with the EU before the end of the year but whatever the outcome companies will need to prepare for new border arrangements as we leave the single market and the customs union. Things will be different and we strongly urge companies who are not used to moving their goods beyond the EU to take time to review their processes and procedures, and to contact the Chamber if they need support or assistance.

Mark Goldstone Head of Policy and

Representation

West & North Yorkshire Chamber of Commerce

Roger Marsh OBE DL Chair

Leeds City Region Enterprise Partnership

and NP11

Businesses can access support through the LEP’s Business Support Service by calling the

helpline on 0113 348 1818, by emailing [email protected] or by using the

online business support enquiry form. For more information on the business support available across Leeds City Region, including Barnsley,

Bradford, Calderdale, Craven, Harrogate, Kirklees, Leeds, Selby, Wakefield or York, contact 0114 448 1818 or [email protected].

As always your views are important so please do get in

touch with comments or issues at [email protected]

The COVID-19 pandemic has had an unprecedented economic impact on our region. In this quarter we can see that businesses are still feeling the reverberations of the economic downturn in quarter two. While economic activity remains low in quarter 3, in both export and domestic activity, there are signs of improvement from the previous quarter.

It’s great to see business confidence close to pre-COVID levels in some areas of the economy - this speaks to the great resilience of our region as well as the hard work the Leeds City Region Enterprise Partnership, West Yorkshire Combined Authority and other partners have put in to support businesses through this difficult period.

The Combined Authority and LEP, in partnership with businesses, all five West Yorkshire Leaders, council Chief Executives and unions, have also developed the West Yorkshire Economic Recovery Plan which was published earlier this year and sets out robust plans for the region’s economic recovery and to help build an inclusive sustainable economy for the future.

With the government’s furlough scheme due to end in October there are still question marks over the number of redundancies that will be made in the coming weeks and months. While figures in this report show that the majority of businesses do not plan to make any redundancies once the furlough scheme ends, we know that many businesses have needed to make significant reductions in headcounts and the road to recovery for many businesses will take time.

It is positive to see an increasing number of companies, in both the services and manufacturing sectors, planning to invest in staff training. While investment in skills has not returned to pre-COVID levels it is important that this upward trend continues to ensure the resilience of our future workforce and economy.

5


4


4 FOREWORD MESSAGE FROM LCR LEP

3QMETHODOLOGYThis quarter there were 387 respondents of business owner / senior manager / director / partner status. 49% of the sample was actively trading internationally. Businesses were surveyed by telephone or by online questionnaire between the periods 24 August and 14 September 2020.

Net balance figures referred to throughout this report and represented in the graphs are determined by subtracting the percentage of companies reporting decreases in a factor from the percentage of companies reporting increases.

The Chambers that conducted the survey are:

West and North Yorkshire Chamber of Commerce.

Mid-Yorkshire Chamber of Commerce. The remit of the above Chambers does not extend to Barnsley and therefore findings reflect the position in most but not all of the Leeds City Region economy.

BUSINESS SIZE CLASSIFICATIONThroughout the document we refer to the European standard definition of company size as follows:

MICRO-BUSINESSES

0 – 9 employees

SMALL BUSINESS

10 – 49 employees

MEDIUM BUSINESS

50 – 249 employees

LARGE BUSINESS

250+ employees

EXECUTIVE SUMMARYDOMESTIC SALES AND ORDERS – Net balance for both services and manufacturing improved on the last quarter, however both remain negative, meaning the pace of declining sales maybe slowing.

EXPORT SALES AND ORDERS – As with UK sales, companies reported improvements in net balance but sales and orders both remain negative.

EMPLOYMENT – More companies reported reductions in headcounts than increases in the last quarter. This trend looks set to continue into the next quarter for manufacturers, however B2B service sector businesses reported a positive net balance meaning more firms will look to increase headcounts rather than continue to decrease.

INVESTMENT – Investment for plant & machinery improved in the last quarter across both services and manufacturing, however net balance remains below zero. An increasing number of companies are looking to invest in staff training, as companies get used to new working practices and increasing use of technology. As workforce changes remain subdued it may be that some companies are looking to automate processes and services through increasing use of technology.

BUSINESS CONFIDENCE – Despite all of the negative net balances, business confidence has rebounded back to pre-crisis levels. Barring future lockdowns and restrictions this may be a source of comfort as businesses look to the future and prepare for recovery.

7


6


METHODOLOGY EXECUTIVE SUMMARY

MANUFACTURINGSERVICES


0%

+30%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-40%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+40%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-40%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+40%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+30%-40%

+10%-10%

+20%-20%

+50%-50%

+40%-40%

0%

+40%-30%

+10%-10%

+20%-20%

+50%-50%

+40%-40%




THIS QUARTER PREVIOUS QUARTER

+60%-60%+60%-60%

SERVICES MANUFACTURING

-22% -18%

UK SALES

OVERSEAS SALES

CONFIDENCE

WORKFORCE LAST QUARTER

INVESTMENT - CAPITAL

INVESTMENT - TRAINING

-24% -37%

15% 18%

-11% -18%

-2% -10%

3% -4%

98

3Q QUARTERLY ECONOMIC REPORT


AT A GLANCE

3 QThe service sector accounts for around 80% of businesses in West & North Yorkshire and contributes significantly to employment and the economy. The sector has significant clusters including professional & financial services, banking, legal and digital & creative across the region. Retail and tourism also play a leading role in parts of our region. This survey includes results from a cross-section of sub-sectors.

Manufacturing (including construction) represents approximately 19% of the companies in the West & North Yorkshire region. Manufacturing is still a major employer in our region with over 140,000 people employed here. Analysis of sub-sectors shows that the region has above-average representation in more advanced sectors such as chemicals and chemical production, medical technology, electrical equipment and machinery. Survey results include responses from all major sub-sectors. The sample used in this survey includes a high proportion of manufacturing exporters.

PERFORMANCEWhilst COVID challenges continue to dominate, we would encourage all businesses which trade with the EU to prepare for new arrangements which will be in place from January 1st.

Mark Goldstone, Head of Policy West & North Yorkshire Chamber

1110

QUARTERLY ECONOMIC REPORTQ3 2QQUARTERLY

ECONOMIC REPORT

CHAMBER COMMENTARY10

QUARTERLY ECONOMIC REPORTQ

-24%-37%

EXPORT ORDERS

-80

-60

-40

-20

0

20

40

60

Q1

12

Q3

12

Q1

13

Q3

13

Q1

14

Q3

14

Q1

15

Q3

15

Q1

16

Q3

16

Q1

17

Q3

17

Q1

18

Q3

18

Q1

19

Q3

19

Q1

20

Q3

20

Net

ba

lanc

e (%

)

Export orders

Service Manufacturing

EXPORT SALES BY SECTOR

-80%

-60%

-40%

-20%

0%

20%

40%

60%

Q1

12

Q3

12

Q1

13

Q3

13

Q1

14

Q3

14

Q1

15

Q3

15

Q1

16

Q3

16

Q1

17

Q3

17

Q1

18

Q3

18

Q1

19

Q3

19

Q1

20

Q3

20

Net

ba

lanc

e (%

)

Export sales

Services Manufacturing

DOMESTIC ORDERS

DOMESTIC SALES

-80

-60

-40

-20

0

20

40

60

Q3

12

Q1

13

Q3

13

Q1

14

Q3

14

Q1

15

Q3

15

Q1

16

Q3

16

Q1

17

Q3

17

Q1

18

Q3

18

Q1

19

Q3

18

Q1

19

Q3

19

Q1

20

Q3

20

Net

ba

lanc

e (%

)

Domestic orders


-80

-60

-40

-20

0

20

40

60

Q1

10

Q3

10

Q1

11

Q3

11

Q1

12

Q3

12

Q1

13

Q3

13

Q1

14

Q3

14

Q1

15

Q3

15

Q1

16

Q3

16

Q1

17

Q3

17

Q1

18

Q3

18

Q1

19

Q3

19

Q1

20

Q3

20

Net

ba

lanc

e (%

)

Domestic sales


-22%-18%DOMESTIC SALES AND ORDERSFollowing the most dramatic drop in sales in this survey’s 31 year history last quarter, businesses showed small signs of recovery. Whilst any net balance below zero says more companies are seeing reductions than increases the number is not quite as stark as in Q2.

Forward orders also looked less awful than we reported in July with most sectors reporting in the pace of declining orders on the previous quarter.

OVERSEAS SALES AND ORDERSInternational sales also saw slowing in the pace of decline as markets begin to reopen around the world. Nevertheless challenges will remain as countries impose further restrictions on the movement of people and the operations of businesses in order to contain further spreading of the disease and this may be reflected in forward orders.

Importers and exporters have all faced mounting costs for international shipments due to constraints in seaborne capacity. The grounding of many passenger flights too has also not helped, given nearly 50% of airborne cargo is carried via these routes.

SERVICES EXPORTS

SERVICES SALES

MANUFACTURING EXPORTS

MANUFACTURING SALES



1312 OVERSEAS SALESUK SALES

CASHFLOWSince the end of March the Chamber network has been tracking the cashflow challenges faced by companies. The number of companies reporting less than three months cash reserves was a stark warning to government that many may not survive. This quarter it does not come as a surprise to report the steepest drop in net balance in the survey’s 30 year history.

The introduction of financial support including the Coronavirus Job Retention Scheme (CJRS or furlough scheme), the Coronavirus Business Interruption Loan Scheme (CBILS) and later the Bounce Back Loan Scheme (BBLS) has undoubtedly helped many get through the crisis but now we are preparing for recovery, cash flow will be critical.

Our tracker highlighted the variations between business sectors with B2C businesses more likely to be facing cash flow challenges given they were most impacted by lockdown and many have not been able to transition to an online business model. B2b service sectors have largely been able to adjust for remote working and

manufacturers have been able to operate with a mix of remote working and onsite social distancing.

CASHFLOW

-50

-40

-30

-20

-10

0

10

20

30

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

bal

ance

(%)

Cashflow


-11%-18%EMPLOYMENTWorkforce changes last quarter were firmly in one direction as companies sought to manage costs and retain cash in their business. Next quarter however looks a little more positive for the services sector, in part down to workers returning from furlough and in some case companies seeking to hire new staff as business picks up. It might also be the case that as business models change to cope with new working conditions that new skill sets are needed.

SERVICES WORKFORCE

MANUFACTURING WORKFORCE

WORKFORCE CHANGES - LAST QUARTER

-30

-20

-10

0

10

20

30

40

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

ba

lanc

e (%

)

Workforce changes in the last quarter


WORKFORCE CHANGES - NEXT QUARTER

-30

-20

-10

0

10

20

30

40

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

ba

lanc

e (%

)

Workforce changes next quarter


-18% -15%MANUFACTURING SERVICES



1514 CASHFLOWEMPLOYMENT

20% 15%EXPECTATION OF PRICE RISES

0

10

20

30

40

50

60

Q2

11

Q4

11

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

ba

lanc

e (%

)

Expectation of price rises


COST PRESSURES, EXTERNAL FACTORS The cost and availability of raw materials remains the stand out factor for manufacturers but with weakened demand this measure remains low compared to pre-crisis levels.

CAPACITYFULL

CAPACITYBELOW

CAPACITY

Service 37% 63%

Manufacturing 29% 71%

EXTERNAL FACTORS

0%

5%

10%

15%

20%

25%

30%

35%

40%

Interest rates Exchangerates

Businessrates

Inflation Competition Taxation

Net

ba

lanc

e (%

)

External factors

Manufacturing Service

MANUFACTURERS CONCERNS OVER RAW MATERIAL PRICES

0%

10%

20%

30%

40%

50%

60%

70%

80%

Q212

Q412

Q213

Q413

Q214

Q414

Q215

Q415

Q216

Q416

Q217

Q417

Q218

Q418

Q219

Q419

Q220

Net

ba

lanc

e (%

)

Concerns over raw material prices

Raw material prices

COST PRESSURES

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Paysettlements

Raw materialprices

Finance costs Fuel / Utilities Otheroverheads

Net

ba

lanc

e (%

)

Cost pressures

Manufacturing Service

PRICESFor many companies cash reserves have taken a pounding over the last 6 months so as demand starts to improve we anticipate companies will be looking to recover costs largely by making savings to their overheads but some report passing on additional costs incurred through making their product or services COVID secure. Having noted the likelihood of redundancies earlier in the report, we also understand that companies are looking to limit pay increases and in some cases reduce hours worked / salaries paid in order to retain skilled staff.

An added concern for many of our manufacturers will be preparing for changes to trade with the EU in 2021, and whether they will need to stockpile ahead of a potential no-deal outcome. As we saw in 2019 this tied up significant sums of cash in additional warehouse space and inventory. This time round companies may not have the cash reserves to do this.

37%29% SERVICES PRICE RISES

SERVICES FULL CAPACITY

MANUFACTURING PRICE RISES

MANUFACTURING FULL CAPACITY



1716 PRICESCAPACITY

-15%-18%PROFITABILITY EXPECTATIONS

-20-10

010203040506070

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

ba

lanc

e (%

)

Profitability expectations


TURNOVER EXPECTATIONS

-20-10

01020304050607080

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

ba

lanc

e (%

)

Turnover expectations


TRAINING INVESTMENT BY SECTOR

-30

-20

-10

0

10

20

30

40

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

ba

lanc

e (%

)

Training investment


CAPITAL INVESTMENT BY SECTOR

-40

-30

-20

-10

0

10

20

30

40

Q2

12

Q4

12

Q2

13

Q4

13

Q2

14

Q4

14

Q2

15

Q4

15

Q2

16

Q4

16

Q2

17

Q4

17

Q2

18

Q4

18

Q2

19

Q4

19

Q2

20

Net

ba

lanc

e (%

)

Capital investment


BUSINESS CONFIDENCEDespite all of the drama of the last six months, this quarter we see a return in business confidence back close to pre-crisis levels for manufacturing although service sector companies are a little less optimistic. Clearly some sub-sectors have been hit harder and will take longer to recover but for many, to have got this far shows the resilience which exists across our region.

-2%-10%INVESTMENTInvestment intentions for both plant & machinery and training recovered from Q2, although still extremely low by historic standards. Investment in training by the service sector was the most positive as companies prepare for new ways of working and greater use of technology.

Many companies have worked with reduced staff capacity over the last 6 months and we hear that some are investing in automating processes and production capabilities which may explain why headcounts might not be increasing at the same rate as other measures.

SERVICES PROFITABILITY

SERVICES CAPITAL INVESTMENT

MANUFACTURING PROFITABILITY

MANUFACTURING CAPITAL INVESTMENT



1918 CONFIDENCEINVESTMENT

RETURN OF FURLOUGHED WORKERS

4%12%

31%

53%

Return of furloughed workers

Before the end of August

Before the end ofSeptember

Before the end ofOctober (when thefurlough scheme ends)Most are already back

RETURN OF FURLOUGHED WORKERS

6%

10%

8%

8%

10%

59%

Workspace currently being used

Zero

1 - 25%

26-50%

51-75%

75-99%

All

FUTURE WORK SPACE NEEDS8%

7%

68%

12%

6%

Future work space needs

We will need a lot lessphysical space

We will need a little lessphysical space

The amount of space weneed is unchanged

We will need a little morephysical space

We will need a lot morephysical space

WHAT % OF JOBS HAVE YOU MADE REDUNDANT SINCE THE START OF THE PANDEMIC?

74.9%

14.5%

9.7% 0.3%0.3% 0.3%

What % of jobs have you made redundant since the start of the pandemic?

Zero

1 to 10

10 to 50

50 to 75

75-99

All

AS THE FURLOUGH SCHEME ENDS WHAT % OF JOBS WILL BE MADE REDUNDANT?

79.0%

11.8%

8.1% 0.0%0.0%0.0% 1.2%

As furlough scheme ends what % of jobs will be made redundant?

Zero

1 to 10

10 to 50

50 to 75

75-99

All

Don't know


20


21RETURNING TO THE WORK PLACEPOST FURLOUGH LABOUR MARKET

RETURNING FROM FURLOUGHThe majority of companies reported that most of their workers are now back from furlough although roughly a third report that they will make full use of the scheme until it closes at the end of October.

Whilst the majority of companies have not reported any planned redundancies, for those who have around 14% have already made up to 10% of their jobs redundant and a further 12% of firms plan to make similar reductions in jobs as the furlough scheme ends. There is likely to be an element of positivity bias in our data and the real numbers may be worse than we report here.

At the time of writing it is still too early to say whether recent announcements relating to the Job Support Scheme mentioned in the Chancellor’s Winter Economy Plan will reduce future redundancies planned by companies. The Chamber is calling for funding to be directed towards those at risk of redundancy with a view to retraining and upskilling.

This quarter we asked firms what their plans were for staff returning to workplaces. The majority of firms have reopened some or all of their work space with just 6% saying they were yet to do so. Looking forward, again the majority said they had no plans to change the amount of workspace they would need, with 15% saying they would need less space and 18% saying they would look to expand.

Companies said that they had put in measures to ensure safe working practices, including the instigation of staggered opening times, rota systems and a mix of home and remote working, for those that are able to do so. Clearly the myth that working from home means not working has been dispelled and we are likely to see more flexible working policies retained moving forward.

Firms clearly recognise what we have lost whilst working from home, especially around the development and mentoring of our younger employees and the lost opportunities to collaborate, innovate and communicate with colleagues and clients. Whilst we still face the prospect of further restrictions, firms will want to retain human interactions as soon as it is safe to do so.

23

QUARTERLY ECONOMIC REPORT


BRITISH CHAMBERS OF COMMERCEBRITISH CHAMBERS OF COMMERCE22

3Q

British Chambers of Commerce

The British Chambers of Commerce’s Quarterly Economic Survey (QES) – the UK’s largest independent survey of business sentiment and a leading indicator of UK GDP growth – found that business conditions remained weak in the third quarter of 2020, despite much of the economy reopening.

The bellwether survey of 6,410 firms, employing over 580,000 people across the UK, revealed that, while key indicators have improved from historic lows in Q2, they remain significantly lower than before the pandemic struck. Business to consumer firms, including hospitality, fared worst.

KEY FINDINGS:

• Almost half (46%) of firms reported a decrease in domestic sales, while just 27% reported an increase on the previous quarter

• Two-thirds (66%) of respondents in hospitality and catering saw decreases in sales and bookings

• Indicators, including cash flow, remain at levels comparable to the 2008-09 recession for firms in the services sector

BUSINESS CONDITIONS

Overall, while this quarter has seen an improvement compared to the unprecedented percentage of firms reporting decreases in domestic and export sales in Q2, the majority of firms continue to report decreases or no change in sales in Q3.

• Nearly half of firms (46%) reported decreases in domestic sales, down from 73% in Q2.

• 27% of firms reported an increase in domestic sales. 27% reported no change

• 47% of firms reported decreases in export sales, down from 72% in Q2 but still substantially worse than Q1, where only 21% of firms reported a decrease

• Nearly a quarter (24%) of firms reported increases in export sales, up from 9% in Q2

Business to consumer (B2C) firms, particularly those from the hospitality and catering sectors, saw the weakest performance, with two-thirds (66%) of respondents in hospitality and catering reporting decreases in sales and bookings in the last three months, compared with 46% overall.

In the services sector, the balance of firms

reporting increased domestic sales increased to -25% in Q3 2020, up from -64% in Q2. The balance of firms reporting increased export sales increased to -31% in Q3 from -55% in Q2.

In the manufacturing sector, the balance of firms reporting increased domestic sales increased to -15% in Q3 2020, up from -59% in Q2 2020. The balance of firms reporting increased export sales increased to -26% from -52% in Q2.

CASH FLOW

Cash flow, a key indicator of business health, continued to deteriorate for almost half of firms. In Q3, 21% of firms reported an improvement in cash flow, 34% reported no change and 45% reported a deterioration. In Q2, 11% of firms reported an improvement, 25% no change, and 64% a deterioration.

Micro firms were more likely to report worsening cash flow, with 51% of these firms reporting a deterioration.

In the services sector the balance of firms reporting improved cashflow increased to -30% from -56%. After the lowest level on record in Q2, this balance is the lowest level since Q4 2008.

In the manufacturing sector, the balance of firms reporting improved cashflow increased to -18% from -47% in Q2.

INVESTMENT AND CONFIDENCE

Over a third of firms (37%) continue to report decreased investment in plant, machinery and equipment, highlighting longer-term concerns for the economy as many businesses look to downsize. This follows Q2, which had the largest proportion of firms revising down

investment in the history of the QES dataset.

Nearly half (46%) expected no change in plant, machinery and equipment investment, up slightly from 39% in Q2. Just 17% of firms plan to invest, up slightly from 9% in Q2 but remaining historically low.

41% of firms said they expected their turnover to increase over the next 12 months, while a third (35%) still expected it to decrease. Nearly a quarter (24%) expected that it would stay the same.

In the services sector, the balance of firms looking to increase investment in training increased from -32% in Q2 to -17% in Q3. The balance of firms confident that turnover will improve over the next year increased from -36% in Q2 to +1% in Q3.

In the manufacturing sector, the balance of firms looking to increase investment in training increased to -19% in Q2 from -38% in Q3. The balance of firms confident that turnover will improve over the next year increased to +7% in Q2 up from -31% in Q3.

LOOKING AHEAD

Despite improvements in some indicators compared to Q2, business conditions remain close to historic lows.

Most of the survey fieldwork took place before the Prime Minister’s announcement that a ‘second spike’ of Coronavirus had hit the UK on 18 September.

The rise in Coronavirus cases from 7 September, the subsequent introduction of new national restrictions and tightening local restrictions paint a concerning picture for business conditions in Q4.

2524



BRITISH CHAMBERS OF COMMERCE

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:

“Our latest survey indicates that underlying economic conditions remained exceptionally weak in the third quarter. While the declines in indicators of activity slowed as the UK economy gradually reopened, they remain well short of pre-pandemic levels with little sign of a swift ‘V’-shaped recovery.

“The manufacturing sector recorded the strongest improvements in the quarter, while consumer-focused services firms, where social distancing restricts activity, saw more limited gains. The persistent weakness in cash flow is concerning as it leaves firms more vulnerable to external shocks, including further restrictions.

“While the government’s Winter Economy Plan may provide a short-term boost, with restrictions tightening and the economic scarring already caused by the pandemic starting to crystallise, the resulting gains in economic output are likely to fade over the coming months.”

Responding to the findings, Director General of the British Chambers of Commerce, Dr Adam Marshall, said:

“Our findings clearly demonstrate that business conditions remain fragile in the face of uncertainty, with the prospect of a difficult winter to come.

“It is time to be direct.

“The economy will need more support, over and above the Chancellor’s welcome recent efforts. Ministers must stand ready to provide that support, and to strengthen measures to underpin business cash flow and jobs.

“The disappointing Test and Trace system must be improved to ensure as many businesses as possible can function through the winter and beyond.

“A Brexit deal must be reached to avoid yet more disruption.

“And above all, businesses need confidence and calm, clear communication to successfully navigate a tricky period ahead.”

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To access this exclusive offer visit: www.chamber-international.com

REGIONAL COMPARISONSSales across UK firms remains challenging but, as in our region, have improved since Q2. However the stand out feature is that of business confidence, which appears to be much higher in Yorkshire than elsewhere.

3Q 45%YORKSHIRE SERVICE SECTOR CONFIDENCE

REGIONAL COMPARISON - MANUFACTURING

-35

-30

-25

-20

-15

-10

-5

0

Domestic Sales Export Sales

Net

ba

lanc

e (%

)

Sales comparisons - Service

West & North Yorkshire Yorks & Humber

Northern Powerhouse National

-40

-35

-30

-25

-20

-15

-10

-5

0

Domestic Sales Export Sales

Net

bal

ance

(%)

Sales comparisons - Manufacturing



REGIONAL COMPARISON - SERVICES

The British Chambers of Commerce Quarterly Economic Survey (QES) is the largest and most representative independent business survey of its kind in the UK. Each quarter over 6,000 businesses complete the QES, making it the largest business survey in the UK.

The QES is the first economic indicator of the quarter, published in advance of official figures and other private surveys, and it consistently mirrors trends in official data. For this reason, the survey is closely watched by policy-makers such as the Treasury, the Bank of England, the Office for Budget Responsibility, the EU Commission and the International Monetary Fund.

REGIONAL & NATIONAL COMPARISONS


27NATIONAL & REGIONAL COMPARISONS


REGIONAL INVESTMENT TRAINING

-25

-20

-15

-10

-5

0

5

Investment - training (Manufacturing) Investment - training (Services)

Net

ba

lanc

e (%

)

Regional investment (Training)



REGIONAL INVESTMENT CAPITAL

-30

-25

-20

-15

-10

-5

0

Capital Investment (Manufacturing) Capital Investment (Services)

Net

ba

lanc

e (%

)

Regional investment (Capital)



27% NATIONAL SERVICE SECTOR CONFIDENCE

REGIONAL BUSINESS CONFIDENCE

REGIONAL CASHFLOW

-10

-5

0

5

10

15

20

Confidence - profitability (Manufacturing) Confidence - profitability (Services)

Net

ba

lanc

e (%

)

Regional business confidence

West & North Yorkshire Yorks & Humber Northern Powerhouse National

-35

-30

-25

-20

-15

-10

-5

0

Cashflow (Manufacturing) Cashflow (Services)

Net

ba

lanc

e (%

)

Cashflow comparisons



Bradford Chamber of Commerce

DEVERE HOUSE VICAR LANE LITTLE GERMANY BRADFORD BD1 5AH

Suzanne WatsonAPPROACH PR

President Bradford Chamber

Leeds Chamber of Commerce

CARLTON TOWERS5TH FLOOR44 ST. PAUL’S STREETLEEDS LS1 2QB

Amanda Beresford SHULMANS LLP

President Leeds Chamber

York & North Yorkshire Chamber of CommerceINNOVATION CENTRE YORK SCIENCE PARK INNOVATION WAY YORK YO10 5DG

Andrew Digwood ROLLITS SOLICITORS

President York & North Yorkshire Chamber

PRESIDENTS

Nick Garthwaite CHRISTEYNS

Chair of the Board

Sandy Needham WEST AND NORTH YORKSHIRE CHAMBER

Chief Executive

CHAIR CHIEF EXECUTIVE

29



28 NATIONAL & REGIONAL COMPARISONS CHAMBER CONTACTS

West & North Yorkshire Chamber of CommerceBritish Chambers of CommerceAccredited

IN PARTNERSHIP WITH

CONTACT US

08455 240 240

[email protected]

www.wnychamber.co.uk

@WNYChamber

QUARTERLY ECONOMIC REPORTQUARTERLY ECONOMIC REPORT. Q. IN PARTNERSHIP WITH. West & North Yorkshire...

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