Businesses report that continued Brexit uncertainty is now having real impact
As the Conservative Party gathers in Manchester for its Annual Conference, the Greater Manchester Chamber’s latest Quarterly Economic Survey, completed by over 500 businesses, could make for uneasy reading as the results show significant slowdowns in sales and orders and reduced business confidence with overall activity levels showing a marked decline for the second time this year.
Greater Manchester Chamber’s key economic indicator for Greater Manchester, the Greater Manchester Index™, which combines seven key indicators taken from the QES, declined to 12.1 in Q3 – a significant drop from 26.7 in the second quarter (Q2) 2019. The GM Index is now at the lowest level since Q3 2012.
The survey of over 500 businesses in Greater Manchester reveals a fall in both domestic and overseas demand for all three sector groups – construction, services and manufacturing – in Q3. Further uncertainty and lack of clarity around Brexit and the future UK-EU trade arrangements could lead to an additional loss of momentum.
The other key findings of the QES show:
• More manufacturing and construction businesses reported falling sales and advance orders than those who reported that sales had increased or remained constant.
• Due to reduced demand, fewer businesses increased their employee headcount this quarter and fewer are planning to recruit new staff in Q4.
• Capacity utilisation in the manufacturing sector had remained steady in 2018 but has declined steadily in 2019 with only a quarter of manufacturing businesses now operating at full capacity.
• Businesses in all sectors are facing severe cash flow pressures as a result of which further capital investment seems to be on hold.
Subrahmaniam Krishnan-Harihara, head of research at Greater Manchester Chamber of Commerce, said: “The postponement of the Brexit deadline from March 31st brought short term relief to businesses in Q2. With an October deadline fast approaching and no resolution in sight, the short-term outlook is negative. The heightened risk of a cliff edge in the event of a no-deal Brexit and sustained general uncertainty surrounding Brexit will continue to be a drag on investment and trade. It is hardly surprising that business have chosen to hold back on investment and recruitment because they are seeing both domestic and overseas demand falling.
“Exchange rates continue to fluctuate and sterling touched very low levels relative to the US dollar and euro in August. A falling Sterling may put further pressure on businesses and consumers because of possible increases in the value of imported raw materials.
“Despite continuing fears over Brexit, the fundamental conditions for trade and investment have not changed and Greater Manchester remains a very attractive destination for business investment. Long-term confidence in Greater Manchester remains stable and both employment and wages have grown in the last few quarters. If the current impasse over Brexit is broken and the Government provides a clear way forward for a robust trading partnership with the EU, there is likely to be quick turnaround to a growth trajectory.”
Chris Fletcher, campaigns & marketing director at the Chamber, added: “These results coming as they do at this time show the impact and damage that continued Brexit uncertainty is having. Clarity over what happens after 31st October is what our members are after.
“The worrying thing is that Brexit has probably been masking very serious deep-rooted economic issues for the last 3 years. We will shortly be releasing our Skills Ambition Statement for Greater Manchester that highlights fundamental solutions wanted by business to tackle long standing skills issues in Greater Manchester – many of the issues identified existed long before Brexit and have been put on the back-burner the last few years.
“In what is rapidly becoming a busy Autumn period we will also be launching our Brexit Hub to help businesses ensure that they are as prepared as they can be for whatever happens at the end of next month. Whatever the latest political shenanigans businesses feel ignored and vulnerable, our job is to support and help them through something no-one has been through before. These are tough and challenging times but our job is to help as best we can.”
