Greater Manchester’s economy continued to “rebound strongly” in the second quarter of 2021, despite the continuing challenges of Brexit and Covid.
The latest economic survey from the Greater Manchester Chamber of Commerce in the past three months shows that the success of the vaccination program and the easing of Covid-19 restrictions have contributed to a substantial increase in customer demand.
The QES-based composite indicator for the urban area, the Greater Manchester Index, improved by 24 points as all three industry groups – services, manufacturing and construction show signs of rebounding from the economic shock of 2020.
The survey of more than 300 companies also reveals that sales to domestic and foreign customers increased during the quarter.
The Greater Manchester Index now stands at 30.4, an increase of 24 points from the previous quarter’s results.
Driven by activity in the construction sector, open sales and advance orders from domestic customers increased compared to the first quarter of 2021.
The divergence observed in the first quarter in the performance of the various sectors has eased. While 60% of respondents in the construction sector reported improved sales, just over half of companies in the manufacturing and services sector said their sales to UK customers increased in this quarter.
Since the services group accounts for well over 80% of the city region’s economy, a sustained economic recovery depends on the growth of services.
International trade balances improved this quarter and are above zero for the first time since April 2020.
More and more companies engaged in international trade are slowly getting used to the new regulations and requirements of the EU-UK trade and cooperation agreement, but trade with EU partners has been affected.
Subrahmaniam Krishnan-Harihara, head of research at the Greater Manchester Chamber of Commerce, said: “It will be a relief to the Greater Manchester business community and political leaders that there is now a strong rebound in the economy of the city region.
“After a long period of restrictions related to Covid-19, the Greater Manchester business community appears to be supported by the relaxation of restrictions.
“While the postponement of the last phase of restrictions has raised some concern, this quarter’s results show robust growth as consumer spending increased.
“The service sector, which includes the worst affected sectors of retail, hospitality and entertainment, has now started to grow again.”
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“The survey results also showed that cash positions improved in line with improving customer demand.
“Capacity utilization remains modest, with just 40% of companies saying they are operating near full capacity. Without sustained improvement in customer demand, companies will not be able to generate enough revenue to invest in expanding production capacity.
“The results reveal that there are concerns about rising operating costs, possibly due to concerns about facing deferred tax on debt repayment incurred during the pandemic. As a result, discretionary corporate spending is still low.
“It is particularly worrying that some age-old problems have resurfaced: As companies try to recruit staff, recruitment difficulties have increased. In recent days, we have seen numerous reports of labor shortages in disparate occupations such as chefs and truck drivers.
“To ensure that labor shortages do not cause wage inflation and present a bottleneck to economic growth, it is the government’s responsibility to help businesses and educational institutions Greater Manchester with the support and funding they need to deliver the training and development that meets the needs of employers.
“We must look beyond this immediate optimism to set the fundamentals to ensure the opportunity to rebuild and renew our economy.”