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UK BUSINESS CONFIDENCE MONITOR REPORT
Q2 2011 NORTHERN ENGLAND
BUSINESS WITH confidence
icaew.com/bcm
CONFIDENCE BOUNCES BACK
IN NORTHERN ENGLAND
Seventy senior business professionals in
Northern England were interviewed and record
a Confidence Index score of 16.9 in the Q2 2011 ICAEW/Grant Thornton UK Business
Confidence Monitor (BCM). The Confidence
Index for the region stands at its highest level
since Q2 2010.
Export growth shows
signs of cooling
Rising input prices a
threat to profits
Firms in Northern England report
key financial performance indicators
broadly unchanged this quarter
compared to last. Average turnover
expanded by 2.3% over the last 12 months, while gross profits grew
by 1.9%. These rates of growth are
modest compared to what was
typical in the region before the
recession. However, reflecting more
robust levels of confidence, turnover
and gross profit are expected to
expand more significantly over the
year ahead, with 5.0% and 4.8%
growth forecast respectively.
Firms in Northern England report
that input prices this quarter are
3.3% higher than 12 months ago.
This is the highest annual rate of
growth in input prices since Q4
2008. Since the second half of 2010,
global commodity prices have
soared. The price of Brent crude oil
broke the psychologically important
$100-per-barrel mark earlier this year
as political unrest escalated in North
Africa and the Middle East. The Bank
of England has recently warned that
rising utility prices will lead to
further inflationary pressures over
the coming months.
Annual export growth fell notably
this quarter – from 3.5% in Q1 2011
to 1.3% in Q2 2011, and over the
next 12 months only modest growth
in exports of 2.1% is expected. This
is likely to be a response to ongoing
concerns about the world economy
in 2011, as many countries across the
developed world rein in government
spending to address high levels of
sovereign debt, and emerging
market economies tighten monetary
policy to curb inflation.
At the same time, businesses in the
region report selling prices have
risen by only 0.9% over the last 12 months. This implies a
considerable squeeze on business
profit margins for firms in the region
and may go some way to explaining
the weakening outlook for gross
profit growth reported this quarter.
icaew.com/bcm
Fig. 1 Bcm confidence index trend in NORTHERN ENGLAND
Modest GROWTH IN JOBS expected
40
30
20
10
0
-10
-20
-30
Northern England
-40
UK Average
-50
-60
Q2
Q3
Q4
2007
Q1
Q2
Q3
2008
Q4
Q1
Q2
2009
Q3
Q4
Q1
Q2
Q3
2010
Q4
Q1
Q2
2011
Fig. 2 Q2 2011 – NORTHERN ENGLAND Average % change in...
% 8
Change
7
6
5
4
Versus last 12 months
3
2
Expected next
12 months
1
0
Turnover
icaew.com/bcm
Gross profits
Domestic Sales
Exports
This quarter’s BCM provides some
encouraging news for job seekers in
the region. Firms report a 0.7%
reduction in headcount over the last
12 months. This is the eighth quarter
in nine that firms in Northern
England have reported a reduction in
number of employees. However, they
do expect to increase headcount by
1.5% over the year ahead.
Various announcements signal extra jobs being created in Northern
England. Having secured £20m of
private investment, TAG Energy
Solutions is currently building a new
factory in the region to manufacture
steel components for offshore wind
turbines which will create up to 400
jobs, while Hitachi is building its new
rolling stock in Newton Aycliffe and
later in the year the Corus Steel
Plant, bought in February by Thai
firm SSI, should be producing again.
However, about 300 jobs are
expected to be lost in the region’s
steel industry with the
announcement by Indian-owned
steelmaker Tata that it plans to
restructure operations as the
construction industry continues to struggle.
ICAEW
Northern Region
PO Box 417
Newcastle Upon Tyne NE3 9AS
T +44 (0)191 300 0531
icaew.com/northern
© ICAEW 2011 MKTPLM10322