North East economic growth continues

Positive start to 2011, spare capacity delays new investment and staffing increases

 BUSINESSES across the North East continued to fight their way back to full health in the first quarter of 2011, an influential report has shown.

 The North East Chamber of Commerce’s flagship quarterly economic survey demonstrated that fortunes continued to be on the up in the region from January to March 2011. The quarter mirrored the improving picture at the end of 2010.

 NECC’s North East Business Barometer, produced in partnership with Barclays, is a trends survey that shows the health and direction of the North East economy measured across 11 separate indicators. A score above zero indicates trading conditions are improving.

 The majority (eight) of the 11 indicators showed growth, including sales and orders for both domestic and export trade. The survey also showed business confidence on the rise with expectations for employment, profit and turnover in the coming months all in the black.

 The biggest change since the last quarter has been a jump in prices which can partly be put down to the January VAT rise. Given that two of the most pressing concerns for respondents were inflation and interest rates, it demonstrates the difficulties the Bank of England’s Monetary Policy Committee faces in its monthly rate-setting meetings.

 Martyn Pellew, NECC president, said: “Growth at the end of 2010 was driven almost entirely by manufacturers while we are seeing the service sector begin to rally in 2011. More businesses are looking to recruit than over the previous year and a greater number of companies are operating at full capacity which is a positive sign. Overall, this is an extremely pleasing picture.

 “We cannot avoid the fact that there is still underlying caution among businesses and this will undoubtedly take time to dissipate. However, we broadly saw a positive Budget statement in March with a number of initiatives announced that reflected NECC’s calls for more policies focused on inspiring business growth.

 “Positive recent announcements by SSI and Hitachi are a tremendous morale boost and the decision by the Government to base two enterprise zones in the region is to be welcomed.  The Government still has more to do to ensure that the private sector grows strongly and that we see confidence seeping through to investment in plant, training and employment over the coming months.”

 David Brind, Corporate Director, Barclays Corporate, North East said: “Overall, the Barometer shows that the North East has made a positive start to 2011. Business investment however will be one of the key factors in how much economic growth the North East can achieve this year. Although a degree of caution in the market remains, we are starting to see some movement as companies look to invest to maintain a competitive edge with some businesses unable to defer investments any longer whether it is in jobs, new premises or exploring new markets. As companies get more comfortable about the future and concerns about financing abate confidence in their own ability to grow proactively will return.”

 Here is a summary of the NEBB indicators. The balances column is highlighted in green where the indicator is in growth and red to denote contraction:

Indicator Balance (all companies) Balance Q1 2011  Change on last Quarter  Change on last Year 
UK Sales  16.0   

+8.2

 

 

+17.6 

UK Orders  14.7   

+2.2

 

 

+12.4 

Export Sales  5.7   

-0.6

 

 

+4.1 

Export Orders  4.5   

-1.9

 

 

-1.2 

Plant Investment Plans  -6.2   

-3.4

 

 

+4.2 

Training Investment Plans  -0.9   

+6.1

 

 

+3.5 

Prices  18.8 

+24.8

 

 

+20.4

Current Workforce -4.6

-4.6

 

-4.6

Future Workforce 15.5

+8.0

 

+3.6

Future Profitability 19.4

-3.5

 

-2.1

Future Turnover 33.3

+3.0

 

-3.1

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