doncaster economic review q1 2010

Q1 2010Economic Review Doncaster Chamber

Toward a Profitable, Productive Doncaster

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The first quarter of 2010 has seen weak growth, in line with the national expectation of a 0.4% rise in UK GDP. The balance of businesses reporting an increase/decrease in sales now sits at only +4% compared with +26% in the previous quarter, a 22% reduction in growth. Indeed, business expectations for profitability to increase for the remainder of the year have also fallen by some 10% but remain above regional and national averages. 75% of businesses are now fearful of a secondary recession and are deeply concerned of the effects of an ill-timed withdrawal of public sector stimulus.

The employment statistics offer some comfort however and reveal an increase in recruitment of 6% (to a +24% balance of employers recruiting/losing staff) and a forecasted increase of 9% in the coming quarter. This reflects the lower levels of unemployment seen nationally and again advocates the role of a flexible workforce in maintaining employment during a recession. The figures also offer some comfort that the recovery can be sustained in the medium and long term.

While the headline figures look troubling, these numbers are exactly what we were expecting to see. Low levels of growth during 2010 have been forecast for months and these figures send a clear message to the political parties in the run up to the election – the economy is still too fragile to be thinking about irresponsible budget cuts that may impact on business performance. The employment figures for the first quarter of the year follow the monthly trends issued nationally. Most encouraging however, are the predictions that this trend is set to continue into the summer at least. The prospects for long term growth remain good, however, monetary policy must remain expansionary in the short-term, if this prediction is to be realised.

In the run up to the election the Chamber is calling on all parties to remember the importance of business in getting UK plc moving again. Whilst accepting that in a bid to reduce the deficit most individuals, organisations and businesses will be affected, political parties of all colours must avoid the temptation to unnecessarily penalise wealth creators in the private sector until every step to drive public sector efficiency has been taken.

There is currently much debate concerning National Insurance contributions; a tax on jobs during an economic recovery is obviously troubling for business but we must acknowledge that the economy is still too fragile to risk immediate Government spending cuts and that money has to come from somewhere. The Chamber would therefore call for the start date of the NI rise to be reviewed in six months time in line with current employment projections; a view on scrapping, continuing or deferring the rise should then be taken together with a strong commitment by Government to reduce the rate of employer contributions again at the earliest opportunity should the rise be necessary. Doncaster is still continuing to demonstrate a stronger recovery than most towns across the UK. Business confidence in the borough has remained well ahead of national averages in 2010.

Business Confidence (Profitability Expectations)

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Doncaster Yorkshire and the Humber UK A hung parliament at the General Election in May would serve only to increase the levels of uncertainty amongst businesses, something that is already causing business confidence to waver. Business wants to hear a credible deficit reduction scheme that will place it at the centre of the economy to drive growth throughout 2011 and beyond.

Summary Doncaster Economic Review

“24% of Doncaster firms will be recruitingin the next quarter” Daniel Fell, Head of Policy

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Doncaster Economic ReviewContents

Summary P2 Contents P3 About Doncaster Chamber P4 The Headlines P5

Gross Domestic Product Business Confidence

Sector Breakdown P7

Manufacturing Services

Key Dates for the Next Quarter P9 Useful References P10 About the Quarterly Economic Survey P11 Press Release P12

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The Voice of Doncaster Business Doncaster Chamber is “the voice of Doncaster business”, the Chamber has a membership base of some 1,200 local businesses who collectively employ some 47,000 people in the borough. The Chamber’s aim is to help create a profitable, productive Doncaster for the benefit of businesses and residents alike, and works to achieve this by proactively addressing the issues that affect the success of the local economy. The Chamber believes that Doncaster is a great town but wants to make it an even better place for local companies and investors alike to do business. Businesses typically join the Chamber because they want to create and access more commercial opportunities. The Chamber can facilitate this, by helping businesses raise their profile and by brokering new business contacts through events and networking. There are, however, many other barriers to further business growth, such as access to procurement opportunities, difficulties in the transport system or skills shortages in the local area. The Chamber’s role is to identify such issues and work with key stakeholders and partners to remove them, thus engendering a more favourable business climate in the borough. In order for the Chamber to accurately reflect business opinion, the Chamber delivers a range of Focus Groups which are open to all Chamber members. These groups offer an excellent forum for Doncaster businesses to address the issues, concerns and opportunities pertinent to them, as well as offering the opportunity to network and share best practice. The Chamber offers groups in sectors such as Construction, Professional Services, Transport and Logistics, Retail, and Creative and Digital Industries. The Chamber also runs a Knowledge and Enterprise Focus Group which addresses skills issues and an Employment and Training Focus Group to tackle HR related issues. Each Focus Group is represented at the Chamber’s Policy Council, whose task is to set the direction of policy work at the Chamber.

This level of engagement with local businesses, combined with regular research work such as this publication, ensures that the Chamber can talk with authority on issues affecting local business and can represent business when working with partner organisations. The Chamber is committed to working with local stakeholders to deliver the borough’s Economic Strategy for the benefit of the town’s businesses and communities alike. To this end the Chamber publishes a Policy Manifesto each year to outline local business priorities and to identify ways in which Doncaster’s economic regeneration can continue apace. The Policy Manifesto details the key issues affecting business, under four key themes of Business Climate, Business Skills, Business Infrastructure, and Business Opportunities, and suggests a suitable course of action in each case. A full copy of the Policy manifesto is available via the Chamber’s website. Doncaster faces some serious challenges in the coming years. The town has a productivity gap of some £830m; meaning that Doncaster adds £830m less value to the economy each year than it should for a town of its size. Work is well underway to tackle this headline issue by a number of key organisations, including Doncaster MBC. Nonetheless, the town still has a number of challenges relating to education, health, housing, transport and other issues that must be met if Doncaster is nurture a profitable, productive business climate. This economic review has been developed in order to provide businesses and partners across the borough with a detailed, accurate, economic assessment of Doncaster – the foundation with which to deliver on the recommendations of the Chamber’s Policy Manifesto and Doncaster’s Economic Strategy alike. If you have any questions regarding the content of this review, or would like more information regarding the benefits of Chamber Membership, please contact the Chamber on 01302 341000 or at [email protected].

Doncaster Economic ReviewAbout Doncaster Chamber“The Chamber’s aim is to help create a profitable, productive Doncaster” Nigel Brewster, President Howard Gannaway, Chief Executive

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The first quarter of 2010 has seen weak growth, in line with the national expectation of a 0.4% rise in UK GDP. While long term growth prospects remain strong, short-term economic policy must appreciate current fragility.

Sales The balance of businesses reporting an increase/decrease in sales in Doncaster now sits at just +4%, compared with a +26% balance in the previous quarter, a 22% reduction in growth. This highlights the fragility of the economy and the urgent need to maintain Government spending at current levels, well into 2010, particularly when considering the advanced sales figure, which suggests a modest balance of +6% in the next quarter.

Sales (Last Quarter) - Doncaster - All Sectors

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Doncaster - All Sectors Export The balance in export sales has also dropped from +22% in the previous quarter to +8% in this, a 14% reduction in growth. More worrying, is the predicted reduction in growth for the next quarter to a balance of just +2%. This is particularly troubling when set against a background of a weak pound, conditions that, historically, have always favoured exports. Interestingly, the number of exporters and number of transactions has increased in comparison to the first quarter of 2009, by 14% and 9% respectively. The range of destinations exported to has also increased by 7%. This suggests that the weak pound is, in fact, encouraging more export activity; the significant dip in sales figures for

exports can however be explained by the fact that the value of exports for the first quarter of 2010 has fallen by a staggering 47% in comparison to the first quarter of 2009. This represents a loss to the Doncaster economy of over £5million.

Export Sales (Last Quarter) - Doncaster - All Sectors

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Doncaster - All Sectors

Capacity The number of businesses reporting a reduction in their capacity to take on new work has risen by 6%. This goes some way to explain the increasingly lively labour market and the expectation of a 9% increase in the number of new jobs being created over the next quarter.

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The Headlines Gross Domestic Product

“The balance of businesses reporting an increase/decrease in sales is now +4% compared with +22% in the previous quarter”

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Business ConfidenceThe Headlines

“Business confidence now sits at a balance of +35%, a 10% reduction from the last quarter of 2009”

Business confidence in Doncaster remains ahead of national averages by some margin and, despite troubling cash-flow figures, most indicators reveal underlying strength in the economy. Profitability Business confidence, the profitability expectation, now sits at a balance of +35%, a 10% reduction from the last quarter of 2009, but still well above national averages. Business remains cautious over prospects for the remainder of 2010, particularly in light of the forthcoming General Election and the division of political opinion over national insurance increases and public spending cuts.

Business Confidence (Next Three Months) - All Sectors

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Turnover Turnover levels in Doncaster remained strong at a balance of +55%, only a slight (3%) reduction on the previous quarter. This again serves to demonstrate the underlying strength in the local economy that will be a medium-long term asset.

Cash Flow An increasing number of businesses are again reporting cash flow troubles with the overall balance of businesses saying if cash flow has improved/worsened sitting at -2%. This is a key indicator with which to measure the state of the economy. During the recession, cash flow fell

dramatically to -54% in the final quarter of 2008 and has yet to recover.

Cash Flow (Last Three Months) - All Sectors

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Investment In an obvious reflection of many firm’s precarious cash flow positions, investment provision for the coming months has fallen. Business has reported a 17% fall in investment in plant/machinery and a 15% fall in training provision. While this reduction is understandable, the obvious concern would be for the effect of such cuts on future competitiveness.

Investment in Training - Doncaster - All Sectors

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Sector BreakdownManufacturing “The last quarter saw a 27% increase in the number of firmstaking on new employees”

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Manufacturing Sector (Donc) Manufacturing Sector (SY)Manufacturing Sector (UK)

Confidence in Doncaster’s manufacturing sector remains ahead of national averages by some margin. Exceptional employment figures suggest that the recovery might be beginning to take root but this contradicted by falling sales. Sales Manufacturing sales fell by some 13% in the last quarter. Once again, this highlights the fragility of the economy, particularly in light of the fact that advanced orders have also fallen by 13%. Export sales now sit at a balance of +6%, though that is still down 11% on the previous quarter. Interestingly, advanced export orders have increased by 4% to +13% this quarter. Turnover Turnover levels in Doncaster remained strong at 53%, a slight (3%) increase on the previous quarter. This again serves to demonstrate the underlying strength in the economy in the long-term.

Employment There was a hugely encouraging 27% increase in the number of firms taking on new employees in the last quarter, a graphic illustration of the recovery beginning to take root despite worries over sales. More encouraging still, is the expectation that there will be a similar 24%

increase over the next quarter. While the proposed National Insurance rises will not help this figure, there is underlying strength in these numbers that suggests the economy might be able to bear the brunt of the NI rise; this does however require debate about if and when the rise is implemented and, if not, what measures can be put in place to claw back the deficit that do not hurt economic recovery.

Employment Expectations (Next Quarter) - Manufacturing

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Profitability Business confidence, the profitability expectation, now sits at +27%, a 3% increase on the last quarter of 2009 and still comfortably higher than national averages.

Profitability Expectations (Next Quarter) - Manufacturing

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Sector BreakdownServices “Business reported a 17% reduction in the budget for training provision in the last quarter”

Sales fell dramatically in the last quarter and while employment figures illustrate underlying strength in the recovery, a lack of investment in training illustrates an uncertainty over prospects for the remainder of 2010. Investment A warning sign for the services sector comes in the form of a 17% reduction in the balance of businesses reporting increased in their budget for training provision in Doncaster. When coupled with an 8% balance of businesses reporting a worsening cash-flow position, this again illustrates the overall fragility of the economy in the borough. The balance of businesses reporting a fixed cost investment increase is also set to fall by 23%.

Investment in Training (Next Quarter) - Service Sector

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Service Sector (Donc) Service Sector (SY) Service Sector (UK)

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Employment Employment expectations remained static, with a balance of +17% of firms actively recruiting in the last quarter, reflecting the 13% increase in the balance of firms reaching capacity in the last quarter.

Profitability Business confidence, the profitability expectation, now sits at a balance of +37%, representing a 14% decrease on the last quarter of 2009. This is still higher than national averages, but the decline in confidence probably recognises the weakness in the economy, still evident from the cash-flow positions of many firms in the borough.

Profitability Expectations (Next Quarter) - Service Sector

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Sales The balance of businesses reporting a sales increase in Doncaster has fallen by 24% from the last quarter and now rests at +5%. This, once again, reflects the UK GDP expectations for the first quarter of 2010 that are expected to sit in the region of 0.4%, thus reinforcing the view that the recovery, while appearing to be fundamentally established, remains fragile. The balance of businesses reporting an increase in export sales has dropped by 21% in the last quarter and is expected to fall again in the next quarter by a troubling 31%, with more firms now expecting exports to fall than rise.

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Doncaster Economic Review - Quarter 1 2010Key dates for the next quarter

Budget 2010 24/03/10 Bank of England Credit Conditions Survey 01/04/10 Bank of England MPC Announcement 08/04/10 UK General Election Date 06/05/10 Bank of England MPC Announcement 06/05/10 Bank of England Inflation Report 12/05/10 Bank of England Quarterly Report 14/06/10

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Success Doncaster Success Doncaster is a programme run by Doncaster Council, working collaboratively with the public, private, voluntary and community sector across the borough. It is the brand name for Doncaster Council’s Work Skills and Enterprise Programme and this investment offers our businesses, communities and individuals support to develop their employment, skills and entrepreneurial potential. A diverse range of specialist providers have been contracted by the Council, to deliver bespoke initiatives tailored to the needs of residents and employers. Visit: http://www.successdoncaster.co.uk/ to find out more. Invest in Doncaster Invest in Doncaster is the first point of contact for investors. Our team of specialists provides information to both existing and potential businesses on a wide range of issues including the availability of land and premises, business development, financial benefits, HR consultancy, and information on the local economy. Visit: http://www.investindoncaster.co.uk/ to find out more. Business Link Business Link helps your business save time and money by giving you instant access to clear, simple, and trustworthy information. Whether you're starting up, already running a business, or looking to grow and develop, we can help you to:

manage your finances employ people find and keep customers pay the correct tax comply with environmental legislation understand regulations in your sector find events and support near you

Visit: http://www.businesslink.gov.uk to find out more.

SYITC (South Yorkshire International Trade Centre) The SYITC is a partnership of Barnsley & Rotherham, Doncaster and Sheffield Chambers of Commerce, delivering international trade services throughout the South Yorkshire region. Visit: http://www.syitc.com/home to find out more. JobCentre Plus JobCentre Plus is an executive agency of the Department for Work and Pensions. It provides services that support people of working age from welfare into work and helps employers to fill their vacancies. Visit: http://www.jobcentreplus.gov.uk/JCP/index.html to find out more.

“Doncaster Chamber is ‘the voice’ of Doncaster business”

Doncaster Economic ReviewUseful References

National Data Sources:

ONS – Office of National Statistics

UK TRADE

PUBLIC SECTOR

NOMIS – Official Labour Market Statistics

HM Treasury

Bank of England

INFLATION REPORT

MPC MINUTES

QUANTITATIVE EASING EXPLAINED

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The Quarterly Economic Survey (QES) is the UK’s largest private quarterly survey of business. Each quarter, over 5,500 businesses – belonging to Chambers of Commerce in every region of the country – participate in the QES. Businesses are questioned on a wide range of issues, including home sales and orders, export sales and orders, employment prospects, investment, recruitment difficulties, cash-flow, confidence and price pressures. The QES is the first economic indicator of the quarter, published in advance of official figures and other private surveys, and it consistently mirrors trends in the national economy; for this reason the survey is closely watched by policymakers at the Treasury and Bank of England and also by the media.

Locally, the survey is distributed, via post and email to all businesses in Chamber membership. We can expect a typical response rate of 500 businesses – 41% of all Chamber members – making this research the most credible economic indicator available to Doncaster.

“The Quarterly Economic Survey is the largest and most representative independent business survey of its kind in the UK”

Doncaster Economic ReviewAbout the Quarterly Economic Survey

National Headlines this quarter: Results from the Quarter 1 2010 British Chambers of Commerce Economic Survey, show that the UK’s upturn is still on course and the economy has not slipped back into recession. However, the recovery is weak and serious risks of a setback remain. Data from over 5,500 businesses show that the service sector’s performance is improving, with most indicators now positive and making gains on the previous quarter. The results in manufacturing are disappointing with too many key measures worsening, and several still in negative territory. • Confidence, although weak by pre-recession

standards, is firmly in positive territory confirming businesses’ resilience in the aftermath of the recession.

National Headlines this quarter continued:

• Exports have mostly improved and remain strong

for manufacturing. Export orders grew from +17 in Q4 to +21 in Q1 – a highlight of this quarter’s survey.

• Worryingly, critical indicators such as investment in plant and machinery and cash flow are still negative across both sectors.

• In manufacturing, the key domestic measures point to stagnation in Q1 - with sales barely positive and orders still negative. In services, both sales and orders have turned positive.

• Employment over the last three months in manufacturing has recorded a large decline. It has moved back into negative territory from +3 in the fourth quarter to -16 in Q1.

Commenting on the results, David Frost, Director General of the British Chambers of Commerce, said: “Although these results are mixed, they contain some positive features - most notably the service sector’s improvement and relatively strong export balances for manufacturers. “Businesses are showing resilience despite difficult and uncertain trading conditions. Confidence is building, and the Government must nurture this with well-thought out policies that support business growth and job creation. Special attention must be paid to bolstering our exports in goods and services, which will help rebalance the economy away from an over-reliance on debt and the public sector.”

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EMPLOYMENT GROWTH MASKING SLOW ECONOMY

A report released today by Doncaster Chamber of

Commerce, highlights the challenges facing the economy

during 2010. The Doncaster Economic Review details data

collected during the first three months of the year and

reveals a worrying fall in both domestic (22pc) and

overseas trade (18pc). Indeed businesses expectations of

profitability for the remainder of the year have also fallen by

some 10pc. 75% of businesses are now fearful of a

secondary recession and are deeply concerned of the

effects of an ill-timed withdrawal of public sector stimulus.

As this is to be a key battle in the upcoming election, the

political parties must consider the effect of budget cuts on

what is clearly still a fragile economy, whilst outlining for the

benefit of tax payers and businesses alike just how the

deficit will be managed.

Of comfort, are the employment statistics that reveal an

increase in recruitment of 6pc and a forecasted increase of

9pc in the coming quarter. This reflects the lower levels of

unemployment seen nationally and again advocates the

role of a flexible workforce in maintaining employment

during a recession. The figures also offer some comfort that

the recovery can be sustained in the medium and long term,

provided that the Government continue to show the

responsibility evident in the recent budget.

Commenting, Daniel Fell, Head of Policy at Doncaster

Chamber, said:

“While the headline figures look troubling, these numbers

are exactly what we were expecting to see. Low levels of

growth during 2010 have been forecast for months and

these figures send a clear message to the political parties in

the run up to the election - the economy is still too fragile to

be thinking about irresponsible budget cuts that may impact

on business performance.

The employment figures for the first quarter of the year

follow the monthly trends issued nationally. Most

encouraging however, are the predictions that this trend is

set to continue into the summer at least. The prospects for

long term growth remain good, however, monetary policy

must remain expansionary in the short-term, if this

prediction is to be realised.”

END

Doncaster Economic Review - Quarter 1 2010Press Release “The prospects for long term growth remain good, but at present,we must safeguard our fragile economy” Daniel Fell, Head of Policy