Yorkshire remains strong, despite confidence dip

Business confidence in the region may be on the decrease, according to a recent survey, but the outlook for Yorkshire and Humber’s economy remains a positive one

Business optimism in Yorkshire and Humber has dipped slightly in the last six months but economic chiefs at Yorkshire Forward are confident that the region’s trading position is still strong.

After the balance of respondents to the Yorkshire Forward and CBI survey of regional economic trends who were optimistic about the business outlook reached +18 percent in April (the most positive in the UK), business confidence in the region dipped to +11 percent in September 2006.

However, the main drivers of confidence identified by the business community six months ago – predictions of strong domestic and export orders and output growth – have come to fruition with a balance of +14 percent of businesses reporting an increase in domestic orders in the past 12 months.

A further balance of 25 percent of companies expect their orders to increase further in the coming year. This is an increase on the prediction made by industry six months ago when a balance of only +17 percent of companies expected their domestic orders to rise.

Therefore, whilst the dip in confidence, most likely attributed to fluctuations in profit margins and increased staff costs, is noteworthy, the bedrock of trading stability in the region remains strong.

Export orders have also risen to a greater degree than anticipated with a balance of 4 percent of companies reporting an upturn compared to a balance of 2 percent predicted 6 months ago.

This is positive news considering the difficult global trading conditions experienced in the first half of 2006.
And businesses are more optimistic about the state of their profit margins for the coming six months, possibly due to a growing trend of businesses passing on their increased costs to their customers. There has been a 10 percent drop in the number of businesses avoiding this action since April 2006.

Financial and business services continue to drive economic growth across Yorkshire and Humber and show the highest increases in domestic orders and business optimism – balances of 27 and 18 percent respectively. This is encouraging as this sector, along with construction, played a significant role in the region’s economic boom of 2004.
Yet, despite increasing recognition that UK manufacturers are not able to compete with emerging global markets on costs alone, companies in Yorkshire and Humber are still among the least likely in the UK to invest in developing new ideas.

Although companies recognise the importance of innovation to their competitiveness, a balance of just 4 percent feel that investing in research and development will contribute to their growth, with the majority citing constraints on costs and time as the main factor inhibiting their investment in this area.

8 percent of companies in the region have links to universities – just behind the national average of 9 percent. 34 percent belong to special industrial networks, with those working in the construction industry the most likely to have such links.

And, whilst a high level of workforce skills continue to be identified as one of the biggest factors driving competitiveness, Yorkshire and Humber companies are still among the least likely in the UK to fund staff training.
Terry Hodgkinson, Chair of Yorkshire Forward commented:

“Although on the surface this recent dip in business confidence indicates cause for concern, our regional trading position is actually very strong.

“Whilst the labour market is not growing to the degree seen in previous years and profit margins are being squeezed, the foundations of trading stability in the region are strong – employment growth is good, domestic orders are up, exports are good and predictions for outputs are strong.

“The recently published competitiveness index ranks Yorkshire and Humber second only to Northern Ireland in terms of competitiveness growth – a real indication of the great strides being made by our region in the global marketplace.