Greater Manchester’s economy plummeted in the last quarter

Hospitality and small businesses face particular challenges.

The Greater Manchester Index used to gauge the health of Greater Manchester’s economy has seen a significant decline and there are also concerns about falling sales, export figures, cash flow and investment.

This in turn has significantly shaken business confidence, the House warned, and so far the first days of the new government have done little to allay business concerns.

The House said it was vital ministers in Prime Minister Liz Truss’ office now act quickly to deal with the uncertainty and volatility that is rampant.

What do the latest figures show for Greater Manchester’s economy?

The House index registered a significant drop in the third quarter of the year, down 18 points to 13.5 after being just above 30. The fall marked the end of five quarters more or less stable for Greater Manchester’s economy.

Domestic demand in services and construction fell, while international sales fell across the board. Overall, the export balance fell below zero, which the Chamber called “worrying” as it had not happened since the Covid-19 pandemic.

The drop in domestic orders was particularly steep, falling to around zero.

The only improvement in sales was in manufacturing, but the Chamber said that could be due to it recovering from a weaker base after a significant drop in the second quarter of 2022.

The cash position of companies has further weakened and recruitment difficulties have increased, although the overall employment situation remains relatively stable and 84% of companies hiring are looking to fill full-time positions.

However, business confidence has taken a hit and business investment in areas such as staff training and new equipment has declined. The Chamber said 65% of businesses expect to have to raise prices, a figure that shows no improvement from the previous quarter.

And the impact of a difficult economic climate is not felt in the same way by businesses in Greater Manchester.

The Chamber said small businesses, those employing less than 50 people, struggled the most, while medium-sized businesses employing between 50 and 249 people fared the best.

The business-to-business (B2B) sector has been particularly hard hit, which the Chamber says means companies are cutting back on discretionary spending.

Likewise, a decline in business-to-consumer (B2C) spending was likely evidence that residents are moderating their spending, the Chamber said.

The figures come from the Quarterly Economic Survey (EQE), for which nearly 300 companies were questioned between August 22 and September 12.

What did the Chamber say about the numbers?

The Chamber said there was no way to hide the rather bleak picture of Greater Manchester’s economy and the challenges facing businesses.

While some of the numbers relate to issues that have been causing concern for some time, others are the result of issues that are now coming to the surface.

Subrahmaniam Krishnan-Harihara, head of research at the Chamber, said: “Things are moving fast and not in the right direction. I said things were piling up and all of a sudden we might have an index finger crash, and that’s exactly what we got.

“Cash is a major concern and has been for some time. Cash positions have never recovered as much as demand and its further weakening this quarter will put a lot of pressure on businesses.

“Energy prices are going up, fuel prices are still high and there are all the other issues as well, so it’s no surprise. Small businesses with less than 50 employees are the most stressed.

“Our members in the hospitality industry have told us that their energy costs have doubled or even tripled over the past few months. This will put additional pressure.

“Job prospects remain fairly stable, but labor shortages and wage inflation are both serious concerns.

“In Greater Manchester there has been a sharp drop in domestic orders and there is a lot of uncertainty. Retail has fallen and exports are facing a lot of pressure.

“The classic theory would say that the fall in the value of the pound would have a positive impact on exports, but we import a lot of raw materials into the UK. We bring things to the country, add value to them and then they are exported, which incurs costs.There are also supply chain issues and shipping costs.

“Uncertainty in the economy has severely affected business investment. This concerns us because we would like companies to invest in training and development to alleviate some of the pressures of the labor market.

“They’re not to blame for not wanting to invest in training right now, but it’s an indication of the current macro climate.”

What impact has the new government’s mini-budget had?

Since the quarterly figures were compiled, the UK economy has seen more volatility following Chancellor Kwasi Kwarteng’s mini-budget, which received an overwhelmingly negative reaction and caused the value of the pound to fall.

Mr Krishnan-Harihara said that the new administration of Ms Truss had so far done nothing to reassure companies of their worries for the future, and in fact the opposite had happened after the presentation of the government’s economic platform.

He also warned of the repercussions struggling businesses can have on other sectors of the economy.

He said: ‘We’ve had companies importing goods saying there’s absolutely no way to make things work on that trajectory. with the drop in the value of the pound which was already weak. They will have a hard time covering their costs.

“We import a huge amount into this country, which is going to affect household budgets, then consumer spending, then the economy. The Chancellor might have triggered a vicious circle instead of what he claimed was a virtuous cycle of growth.

“In the short term, there will be a lot of instability and volatility in the markets.”

Mr Krishnan-Harihara said the government needed to deal with business uncertainty and said one area that would help would be policies on energy prices and bills. He said the measures outlined had flaws and were not as generous to businesses as the support promised to households.

He also said companies needed incentives to invest in staff, saying it was important for companies to continue to upskill and retrain their workers.

He said: ‘Any action the government can take to provide certainty for businesses is what we need because we are not in the best of times, economically speaking.

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