Increased consumer spending after the lifting of all Covid-19 related restrictions in July has contributed to an increase in economic activity in Q3, according to the findings of this quarter's Economic Survey (QES) conducted by Greater Manchester Chamber of Commerce.
The QES based composite indicator for the city region, the Greater Manchester Index™, improved marginally with trade in services and manufacturing recording growth in the quarter. The survey of 483 businesses reveals that sales to both domestic and overseas customers increased in this quarter.
The Greater Manchester Index™ now stands at 31.9, an increase of 1.5 points from the previous quarter’s results. Current sales and advance orders from domestic customers increased relative to Q2 2021. Although construction output declined in Q3, growth in manufacturing and services contributed to the increase in the GM Index. Since businesses in the services group accounts for well over 80% of the city region’s economy, sustained economic recovery depends on growth in this sector.
The balances relating to international trade have improved this quarter. 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: “The strong economic performance in Q3 is a vote of confidence in the adaptability and resilience in Greater Manchester’s businesses. Customer demand is buoyed by the relaxation of restrictions and 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 recorded strong growth.”
“However, some economic pressures are building. Cash flow positions have not recovered to the extent customer demand has. Capacity utilisation remains modest with less than 50% 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. We have seen a lot of press coverage around the shortage of materials and consequent price increases. The latest results show that inflation is a concern for business, and many expect to have to increase their selling price to cover increased operational costs.
“Of particular concern is the acute shortage in labour. As businesses try to recruit staff, recruitment difficulties have gone up. Yet, 68,000 workers remain on furlough. This indicates there are skills mismatches because requirements are changing. A lot of investment in training to re-skill and up-skill existing workers will be necessary to ensure that labour shortages do not become a bottleneck for economic growth.”
This quarter’s survey was supported by Q Energy with a series of specific questions around net-zero. There is currently an increased global focus on carbon neutrality and green growth due to the COP26 climate summit taking place in November. The results were somewhat surprising: only 45% of the respondents were aware of the UK’s net zero ambitions. In making the transition to net zero, businesses face barriers such as the lack of specific information on carbon measurement and reporting and the high upfront cost for low carbon solutions and services. However, 60% of businesses cite that they find it important to achieve environmental and sustainable development objectives.
Vijay Natarajan, Co-founder and COO at Q Energy said: “We are pleased to support this quarter’s survey, however, with results showing that 49% of businesses cite lack of information around net zero, measurement and carbon reporting, there is still a long way to go before businesses can start to make clear actions to reduce their carbon footprint.”