QES FINDINGS REFLECT NATIONWIDE CONCERNS BUT SOME OPTIMISM REMAINS IN LIVERPOOL CITY REGION

Among a general mood of muted confidence and multiple pressures emanating from the latest Quarterly Economic Survey, there were some positives to be found within the feedback from businesses in the Liverpool City Region.

Recent taxation policies and the threat of further fiscal attacks later this year continue to be the greatest cause for concern, while inflation remains another major worry, with volatile geopolitical matters exacerbated by seemingly muddled government policy. Underlying that inflation are upward cost pressures across wages, raw materials, utilities, and supplier pricing, which are often not recoverable through price increases due to market sensitivity.

When added to business rates, increased competition from AI technology and the impact of seasonality for some firms, even the more ambitious and positive business owners are feeling cautious, while others are forced to scale back investment plans or reduce staff numbers.

One LCR business commented:

“There’s too much uncertainty, which has been caused by increased Government intervention and taxation. Businesses cannot be expected or encouraged to grow within such a financially punitive business environment, there’s no respect for the people who are doing the heavy lifting and work.”

However, there was scope for optimism within the qualitative and quantitative QES data. When asked if they expect turnover to increase in the next 12 months, 55% of LCR businesses surveyed replied ‘yes’.

Sales to UK markets increased for 41% of businesses, while 26% reported a decrease over the same period. While not optimal, these figures indicate the picture is not entirely gloomy.

A QES respondent said:

“Our industry hit the trough of the cycle in late 2024 and we are now in a slow recovery phase. Interest rates will keep a ceiling on demand, so any reduction in UK/EU/US rates would be favourable to our industry and business. We are cautiously hiring but we are also focussing on productivity improvements to increase profitability on growth.”

Another said:

“Our order book is growing and that will continue in the future. But we are very concerned about the Government’s proposals on employee’s ‘day one’ rights. In a highly skilled industry you need time to assess new employees’ ability to meet standards.”

The latest QES illustrates that, in today’s difficult trading environment, even those businesses experiencing growth remain wary that their plans could be derailed, or their profits absorbed, by events beyond their control.

Many respondents indicated they are likely to continue refraining from making investment decisions until the outlook becomes less opaque and urged the government to support them through consistent, funded policies around skills and investment, and certainty over additional business taxes in the foreseeable future.

A manufacturing business based in LCR said:

“We are taking a big gamble in expanding when many are contracting or consolidating. Increased investment in people, plant and additional facilities will absorb any additional profits from increased earnings for about 18 months. The government is the biggest variable in all of this, increasing pay scales and tax burdens on SMEs with no thought of how they will pay for it.”

Paul Cherpeau, chief executive of Liverpool Chamber, commented:

“It is clear that business confidence has yet to recover from the multiple shocks of increases in employer NI contributions and the national minimum wage, amplified by geopolitical factors and the implications of the new Employment Rights Bill.

“Understandably, many firms will continue to hold back from making longer-term decisions until the landscape is more defined, which could have ramifications for the city region and UK economy in the meantime.

“The recently-announced Industrial Strategy offers some level of roadmap but the government must give businesses clear, more consistent policies with a promise that there are no more taxes on business lurking around the corner.”