In the Q1 2012 ICAEW/Grant Thornton UK Business Confidence Monitor (BCM), 100 senior business professionals in the North West were interviewed and record a Confidence Index score of -11.0. Confidence in the region followed a general downward trend throughout 2011 to a low in Q4, and remains subdued this quarter.
Growth performance falls back
Businesses in the North West report annual turnover increased by an average of 2.0% over the year to Q1 2012, the weakest level of annual growth recorded in the region since Q3 2010. Firms report gross profits and sales volumes growing over the year to Q1 2012 by an average of just 0.4% and 0.9% respectively. This quarter’s findings continue a downward trend for growth which began in the middle of last year. Further, these findings are lower than most other regions in the UK and are the lowest growth rates seen in the North West since Q2 2010.
However, annual export growth in the region is holding up comparatively well, expanding over the year to Q1 2012 by 2.8% and broadly unchanged from the 3.2% reported in Q1 2011. The North West is an important region for exports of goods from the UK: almost 10% of all goods exports are from the region. This quarter, local manufacturer EDM won the UKTI’s China Business Award for the North West in recognition of its increased exports to China, amounting to an annual total of £4.5m.
Employment growth remains weak
This quarter, businesses in the North West report keeping headcounts broadly flat over the past year. Firms increased their number of employees by just 0.1%, following a period of weak employment conditions, during which annual headcount growth has not stood at robust positive levels since Q2 2008.
Reflecting weak confidence in the region, expectations of increased headcount remain subdued, with firms anticipating an increase in number of employees of just 0.2% on average. This follows a trend of weak expectations over much of the past year.
Labour market conditions in the North West remain tough, with the latest official data showing unemployment of 8.9% in the three months to November 2011. This is higher than the national rate of 8.4% and up by 0.7 percentage points over the previous quarter. Unemployment is expected to rise over 2012 as the North West remains exposed to government cutbacks – the region has the third highest share of public sector employment, at 21.5% of all jobs in the region.
Customer demand poses a challenge
More than half of businesses in the North West (54%) report finding levels of customer demand a greater challenge this quarter than 12 months ago. This reflects ongoing tough trading conditions being faced by firms in the region.
A further sign of the challenging economic climate in the North West is the proportion of firms reporting late payment by customers to be an issue. In Q1 2012 more than one in three businesses (35%) report this to be a greater challenge than a year ago, continuing an upward trend in late payments which began at the start of 2011.
Tough business conditions are reflected on the ground by the number of firms becoming insolvent in the North West. The latest findings from Experian’s Insolvency Index show the region had one of the highest business failure rates in 2011, with 1.4% of firms becoming insolvent, compared to the national average of 1.1%. This amounts to more than 2,500 North West companies failing last year – more than 12% of all failures in the country.