The SCR Chambers: East Midlands
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An economy treading water
Since the pandemic began, the Chamber’s Quarterly Economic Survey has offered a valuable insight into the health of the East Midlands economy. The results of the Q4 2020 study showed the summer recovery had stalled by winter – but there was tentative optimism ahead of 2021, explains Chris Hobson (pictured), Director of Policy and External Affairs.
“Unprecedented”. “Uncertain”. “Unpredictable”. The adjectives that characterised the vast majority of 2020 for businesses were again at play in the final quarter of the year covered by the Quarterly Economic Survey. There were hopes heading into late autumn
and early winter that news of a vaccine would support planning to reopen to economy more fully. Businesses were also told by politicians to finally expect some answers and clarity on our post-transition trading arrangements with the EU. As it transpired, neither of these things came
to pass. Instead, businesses were faced with further restrictions to trading and continued uncertainty as to the future rules – both domestically and international – by which they would be running their operations. Despite this, the results in the Q4 survey were
not wholly negative. Reflecting the innovation and ingenuity shown by businesses throughout the year, many saw small improvements in their activity levels. A number still made plans for investment – in both people (a net 10% increased training spending budgets compared to Q3) and equipment (a net 2% increase) – and a small, but significant number were planning on future
recruitment, with a net 16% expecting to grow their workforce over the next three months. There were still disappointments. Cashflow
remains a crippling problem for many – it worsened for a net 15% of companies – undermining both resilience to future shocks and the ability to respond to opportunities when they present themselves. Future pricing intentions started to creep up
as increases in raw material costs – along with access difficulties – began to impact on manufacturers. Advanced orders and bookings were down for many (a net 14% of businesses involved in the domestic market and a net 21% for overseas operators) as the national lockdown in November caused some to pause their plans and a general sentiment of “wait and see” started to pervade the conversations of some. In conversation with businesses, many spoke
of a “weariness” and “fatigue” at navigating themselves and their staff through the difficulties of the past 10 months. However, there was still an undercurrent of tentative optimism for the coming year, as reflected in the confidence indicators for future turnover and profitability (a net 35% and 20% of respondents, respectively, expected these to improve over the
next three months), perhaps acknowledging that the current predicament can’t last forever. Overall, when looking at the State of the Economy
Index, the flatlining figure from Q3 to Q4 doesn’t represent a total disaster for businesses in the region, but instead a stalling of the recovery seen in the summer after the spring’s historic falls. The economy, as a whole, hasn’t slipped back
to the place it was in during May and June, nor has it continued its rebound from that position. Instead, it can best be described as “treading water”, waiting to see whether the final days of a year that asked more questions than anyone would have anticipated finally delivered some answers. Despite all the challenges of the past year, the
vast majority of businesses have made it through – with some even finding opportunities to excel. If the first half of 2021 follows a similar pattern to the past six months, then more of those currently treading water may sadly slip under.
The Quarterly Economic Survey for Q1 2021 will be open to responses from 15 February to 8 March. To take part, visit
bit.ly/QEStakepart
STATE OF THE ECONOMY INDEX
500 400 300 200 100 0
-100
-200 -300 -400 -500
42 CHAMBERconnect Winter 2021 386 383 276 248 279 293 238 204 375 320 375 360 392 355 362 290 215 254 174 199 17 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 Q2 Q3 Q4 Q1 2016 2016 2016 2016 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3
20 Q4
2019 2019 2019 2019 2020 2020 2020 2020 241
-411
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