Despite various economic forecasts made at the beginning of this year suggesting a very pessimistic outlook, economic performance in Greater Manchester improved in Q1 2023 according to the findings of the latest Quarterly Economic Survey (QES) conducted by Greater Manchester Chamber of Commerce.
The headline Greater Manchester Index, a composite indicator made of key QES measures, increased to 30.3 (17.8 in Q4 2022).
The survey of nearly 300 businesses held between February 13th and March 7th revealed that sales to UK customers decreased in the services and construction sectors, while it improved in the manufacturing sector. Multiple business surveys in 2022 had shown that manufacturing sector businesses were reporting declining demand, and the turnaround seen in Q1 2023 is very welcome. Consistent with the increase in demand, capacity utilisation and cashflow positions amongst manufacturing sector businesses have also improved. Another significant development is the improving international trade picture. Businesses in all sectors reported that export sales and advance orders from overseas customers improved in this quarter.
The survey results also showed improvement in other important economic indicators such as business investment and business confidence. Businesses in all three sector groups reported that they are optimistic in maintaining their turnover, which indicates that they expect stable demand. Optimism that profitability can be maintained have also shown a modest increase, a reflection perhaps of the fact that selling prices have increased to absorb higher operation costs. Spending on capital investment projects also improved in Q1 2023.
Subrahmaniam Krishnan-Harihara, Head of Research at Greater Manchester Chamber of Commerce, said: “The increase in the Greater Manchester Index is good news for business prospects. The improvement in international trade, business confidence and investment have all contributed to the increase in the index. The low level of business investment has been a concern for quite some time and, as the cost of living crisis forces households to rein in spending, business investment needs to pick up to sustain economic growth.
“One reason business investment may have gone up in Q1 could be that businesses phased investment in this quarter to make use of the super deductions scheme. It is, therefore, important to assess how business investment fares in the coming months. The Chamber of Commerce network’s economic forecast indicates that business investment will continue to lag, and we called for measures to mitigate this. In his Spring Budget, the Chancellor announced full expensing, which allows businesses to deduct 100% of the cost of eligible plant and machinery from their profits before tax. While it is a positive signal, businesses also need certainty and clarity about the economic outlook before they commit to expanding capacity.
“At the same time, businesses will also be concerned that inflation remains above 10%. Food inflation in the UK is particularly high and if that puts pressure on household budgets, employees are likely to demand wage increases, which could in turn put pressure on business cashflow and margins. Overall, the QES results show that there is cautious optimism amongst Greater Manchester’s businesses and are a clear indication that the regional economy is showing some resilience despite the headwinds.”