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The Greater Birmingham Chambers of Commerce Quarterly Economic Survey (QES) for Q4 2013 showed a sectoral divergence in domestic sales and advance order markets, as well as business confidence. The number of service sector firms reporting an improvement in these areas increased whereas for manufacturers, this number fell. However, both sectors reported improvements for export markets and labour growth. shows that the QES index for service sector domestic sales increased to 70 from 64, the highest index score since Q4 2007. However, fewer manufacturing firms reported an increase in domestic sales, with the index figure falling to 64 from 70.

The QES draws its results from questionnaire responses completed by businesses. For Q4 2013 a total of 392 companies were surveyed from across the Greater Birmingham and Solihull LEP area. An index score above 50 indicates that more firms overall are reporting improvement on the previous month; an index score of 50 means that on balance, there is no change; and an index score of below 50 indicates an overall decline in performance.

0.8% GDP Growth in Q3 2013

80 QES Index

1

70

0.5

60 0

50 -0.5

Manufacturing

40

Services

-1

David Bharier Economic Policy Advisor 0121 607 1814 d.bharier@birmingham-chamber.com Greater Birmingham Chambers of Commerce 75 Harborne Road, Edgbaston Birmingham, B15 3DH

30 -1.5

20 -2.1% GDP Growth in Q4 2008

10

-2

0

For previous editions of the QES, click here To view the British Chambers of Commerce QES, click here

-2.5

Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013

www.birmingham-chamber.com

Manufacturing Domestic Sales

Manufacturing Turnover Confidence

Index Score: 65

Index Score: 80

Index Score: 70

Index Score: 69

Service Sector Domestic Sales

Export Sales (Both Sectors)

Index Score: 62

Service Sector Labour Growth

The Quarterly Economic Survey (QES) is produced by Greater Birmingham Chambers of Commerce (GBCC) every quarter to assess how businesses are performing on a range of key indicators. Data from every UK region is compiled by the British Chambers of Commerce to form the largest business survey of its kind. The results from QES are monitored by the Bank of England, HM Treasury, and the European Commission as a quarterly indication of business conditions. As one of the biggest Chambers in the country, the results from the Greater Birmingham Chambers’ QES form a vital component in understanding the economic landscape of the region and BCCG continues to use the results of QES to inform its policy positions.


Sectoral divergence in domestic advance orders QES Index

As with domestic sales, both sectors saw a divergence in domestic advance orders in Q4.

80 Services Manufacturers

70 60 50

A higher proportion of service firms reported improvements, with the index figure rising to 70 from 63 last quarter, the highest since 2007 ( ).

40 30 20

However, fewer manufacturers reported improvements, with the index score falling to 65 from 68.

10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013

The QES and GDP growth

Historically, when the GDP rate shows an increase, we should also expect to see a rise in the number of firms reporting improved sales in the QES.

1.5

GDP Growth (%)

The QES index for domestic sales positively correlates to the GDP growth rate ( ).

1 0.5 0 20

30

40

50

60

70

-0.5 -1 -1.5 -2 -2.5

Exports continue to grow

More manufacturers reported improvements in export sales, with the index figure rising to 69 from 67 last quarter. Services recorded a similar improvement, with the index score rising to 69 from 60 last quarter ( ). The QES export index shows a similar growth pattern to the rise in the value of West Midlands exports.

QES Index

80

Both sectors saw continued improvement in their export performance for Q4.

70

QES index for manufacturing sales Value of WM Exports in Q3 2013: £6.5 bn £7,000

Manufacturers £6,000

Services 60 £5,000

50 £4,000

40 £3,000

30 £2,000

20 10 0

£1,000

£0

Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013


Labour growth continues upward trend for services QES Index

Sectoral disparity also emerged for the number of firms reporting that their labour force had increased over the last 3 months.

70 Services Manufacturers

60 50 40

For service sector firms, the index score rose to 62 from 59 last quarter. For manufacturers, the index score fell to 60 from 63 ( ).

30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013

More businesses face recruitment difficulties QES %

More firms from both sectors reported recruitment difficulties in Q4. The number of manufacturers reporting difficulties rose to 63% from 58% last quarter. For service firms, this rose to 59% from 52% ( ).

70 Manufacturers Services

60 50 40 30 20 10 0

Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013

Skilled positions hardest to recruit to

are

Skilled manual/technical jobs have historically been the hardest to recruit to for manufacturers. For Q4, 38% of firms reported recruitment difficulties for skilled jobs ( ).

100% 90%

Un and semi-skilled

80% 70%

Clerical

60% Professional / managerial

50% 40%

For service firms, 44% of those reporting difficulties said managerial positions were the hardest to recruit to.

Skilled manual / technical

30% 20% 10% 0% Q4 2007

Q4 2008

Q4 2009

Q4 2010

Q4 2011

Q4 2012

Q4 2013


Both sectors report cash flow improvements QES Index

The cash flow situation for both sectors improved in Q4. For manufacturers, the index score rose to 57 from 52 last quarter, the highest since 2007.

70 60 50

Manufacturers Services

40

Service sector firms reported a similar improvement, with the index score rising to 57 from 53 ( ).

30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013

The number of firms reporting confidence that their profitability would improve remained largely unchanged. For service firms, the index score rose to 72 from 71 last quarter. For manufacturers, the index rose to 76 from 75 ( ).

QES Index

The QES index for turnover and profitability confidence remained high for Q4. For the service sector, the index score for firms that believed their turnover would increase in the next 12 months rose to 81 from 78 last quarter. For manufacturers, the index score fell slightly to 80 from 85 last quarter ( ).

100 90 80

Manufacturers Services

70 60 50 40 30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013

90

QES Index

Turnover and profitability confidence remains high

80 70

Manufacturers Services

60 50 40 30 20 10 0 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013


Firms expect prices to see a further increase

Overlaid is inflation.

the

CPI rate of

QES Index

A higher proportion of firms believed that prices/costs would rise in the next 3 months. For manufacturers, the index score rose to 64 from 57 last quarter. For service firms, the index score saw a similar increase to 63 from 58, the highest since 2008 ( ).

80

6

70

Manufacturers

60

Services

5

4

50 2.7% CPI Inflation in Q3 2013

40

3

30 2

20 1

10 0

0

Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 Services

Raw material costs are causing price rises The majority of manufacturers currently suffering pressures to raise prices said this was due to the price of raw materials. For service firms, price pressures came primarily from overheads ( ).

Manufacturing Other overheads

Finance costs

Raw Material Prices

Pay Settlements

51% 36% 13% 11% 20% 42% 16% 11%

Firms cite competition as biggest external factor When reporting on the external factors that are more of a concern than 3 months ago, both sectors overwhelmingly said competition. This indicates a gradual shift away from concerns over monetary policy ( ).

Services Manufacturing Corporate Taxation

14% 10%

Competition

34% 28%

Inflation

18% 18%

Business Rates

14% 18%

Exchange Rate

9% 17%

Interest Rates

12% 9%


Greater Birmingham Chambers of Commerce 75 Harborne Road Edgbaston Birmingham B15 3DH www.birmingham-chamber.com

GBCC Quarterly Economic Survey (QES), Q4 2013  

Greater Birmingham Chambers of Commerce (GBCC) Quarterly Economic Survey (QES) for Q4 2013

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