YHCC: Economic risks lurk beneath brighter outlook
Wednesday, 20 Jan 2010
YHCC President Richard Wightman gives his assessment of the Yorkshire & Humber economy following publication of the latest Chamber Quarterly Economic Survey figures.
The Yorkshire & Humber business community enters 2010 in much better heart than this time a year ago.
The figures reported in this survey a year ago were record lows across all key indicators. The steady recovery, first of confidence and latterly of sales, has been strong and will almost certainly mean the UK economy technically came out of recession in the fourth quarter of the year.
Many indicators such as investment and employment remain fragile, whilst others such as cashflow are still very worrying. However, business confidence has been the most volatile indicator through the past year. A year ago, only 23% of Yorkshire & Humber businesses were confident that their profitability would increase in the proceeding months. A year on, the figure has more than doubled to 54%. Only two in ten firms expect profits to fall compared to nearly six out of ten just 12 months ago.
Jobs have been lost, but not in the numbers expected at the start of 2009. The number of firms reducing the size of their workforce has fallen consistently throughout the year, although there hasn’t yet been a significant uplift in those looking to take new people on. The willingness of employers and employees to come together and get through the toughest of times by cutting hours or pay has been a real feature of this recession and has helped preserve thousands of jobs that would otherwise have been lost.
Sales and order books are now recovering for many businesses but it will take some time before this feeds through to increased levels of investment and the all important easing of cashflow which still leaves many firms vulnerable. The bounce back in exports during this quarter has been particularly welcome as this is a key to a sustained improvement in the economy.
Despite the more positive outlook, the recovery remains far from assured. The economy still faces very substantial risks as the massive stimulus measures ranging from quantatitive easing, car scrappage scheme, deferred tax payments and the VAT cut are withdrawn one by one. Unemployment and insolvencies will continue to characterise the first half of the year at least. As the country emerges from the private sector recession, a public sector recession is likely to begin which could have a significant impact on those places and sectors heavily reliant on taxpayers money.
An agenda focused on fighting recession will need to be replaced by one which promotes business growth, although the ability of many firms to grow will be compromised by tight cashflow and damaged balance sheets. Nonetheless, there is a more optimistic feel about 2010 for many in business and that is more than we might have hoped for 12 long months ago.
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