The success of the vaccination programme and relaxation of Covid-19 restrictions have contributed to a substantial increase in customer demand, according to the findings of this quarter's Economic Survey (QES) conducted by Greater Manchester Chamber of Commerce.
The QES based composite indicator for our city region, the Greater Manchester Index™, improved by 24 points as all three sector groups – services, manufacturing and construction show signs of a rebound after the economic shock of 2020. The survey of over 300 businesses reveals that sales to both domestic and overseas customers increased in this quarter.
The Greater Manchester Index™ now stands at 30.4, an increase of 24 points from the previous quarter’s results. Led by construction sector activity, current sales and advance orders from domestic customers increased relative to Q1 2021. The divergence seen in Q1 in the performance of different sectors has narrowed down. Whilst 60% of construction sector respondents reported improved sales, just over half of manufacturing and service sector businesses reported that their sales to UK customers had increased in this quarter. Since the services group accounts for well over 80% of the city region’s economy, sustained economic recovery depends on growth in services.
The balances relating to international trade have improved this quarter and are above zero for the first time since April 2020. More businesses engaged in international trade are slowly getting used to the new regulations and requirements under the EU-UK Trade and Cooperation Agreement but trade with EU partners has been impacted.
Subrahmaniam Krishnan-Harihara (pictured), Head of Research at Greater Manchester Chamber of Commerce, said: “It will be a relief to both Greater Manchester’s business community and political leadership that there is now a strong rebound in the city region’s economy. After a long period of Covid-19 related restrictions, Greater Manchester’s business community seems buoyed by relaxation of restrictions. Although the postponement of the last phase of restrictions has caused some concern, this quarter’s results reveal robust growth as consumer spending has increased. The services sector, which includes the worst affected sectors of retail, hospitality and leisure has now started to grow again.”
“The survey results also showed that cash flow positions have improved in line the improvement in customer demand. Capacity utilisation remains modest with only 40% of businesses reporting that they are operating near full capacity. Without sustained improvement in customer demand, businesses will not be able to raise enough revenues to invest in expanding productive capacity. The results reveal that there are concerns around rising operational costs, probably as a result of anxiety around having to meet deferred tax liability on repay debt taken on during the pandemic. As a result, discretionary business spending is still low.
“Of particular concern is that some age-old problems have resurfaced: as businesses try to recruit staff, recruitment difficulties have gone up. In the last few days, we have seen numerous reports about labour shortages in disparate occupations such as chefs, health workers and truck drivers. To ensure that labour shortages do not cause wage inflation and present a bottleneck to economic growth, it is incumbent upon government to help Greater Manchester’s businesses and educational institutions with the support and funding they need to deliver training and upskilling that meets employers’ needs. We have to look beyond this immediate optimism to fix the fundamentals to secure the opportunity to rebuild and renew our economy.”
Click here to find out more about our Quarterly Economic Survey and to read the full report for Q2.