Business confidence rebounded sharply during the second quarter of 2021 as coronavirus restrictions were eased across the country, according to a major report released today by three regional Chambers of Commerce.
The latest results from the West Midlands Quarterly Economic Snapshot shows that more than three in five (62 per cent) businesses expect to increase their turnover over the course of the next 12 months, compared to 43 per cent in Q1. The snapshot, which covers the West Midlands Combined Authority area, is the most comprehensive regular report of its kind in the region.
The data is collected from quarterly surveys conducted by Greater Birmingham Chambers of Commerce (GBCC), Black Country Chamber of Commerce (BCCC) and Coventry & Warwickshire Chamber of Commerce (C&WCC). Only 14 per cent of services sector firms surveyed expect their profits to fall over the course of the next year which marks a return to the levels we were seeing pre-pandemic.
This is slightly higher for manufacturers with 18 per cent of the businesses surveyed expecting their profits to decrease over the next 12 months. Nearly half (47 per cent) of the businesses surveyed reported increased domestic sales this quarter with the number of firms experiencing a decline in UK sales falling from 37 per cent last quarter to 19 per cent in Q2.
In terms of international sales, there was an overall improvement in the number of firms reporting an increase - 25 per cent compared to 20 per cent in the previous quarter. This is the highest figure recorded since the start of the pandemic and contrasts starkly with the 8 per cent recorded during the first national lockdown (Q2 2020) last year.
However, the number of firms reporting hiring challenges increased significantly this quarter with 57 per cent of firms attempting to recruit struggling to do so. This is the highest figure since Q2 2019 and represents an 18 per cent increase compared to the last quarter.
Businesses are also facing significant pressure to raise prices with 44 per cent of firms anticipating an increase in the next three - a rise of 25 per cent compared to this time last year. This is particularly evident in the manufacturing sector with 61 per cent of firms surveyed expecting their prices to increase over the next three months compared to 47 per cent the previous quarter.
On the other hand, the percentage of service firms expecting to have to increase their prices rose from 32 per cent to 39 per cent this quarter. Henrietta Brealey (pictured), chief executive of the GBCC, said: “It is encouraging to see rising confidence amongst local businesses with 62 per cent of firms expecting their profitability to increase over the next 12 months.
“Q2 saw the re-opening of large swathes of the UK economy with a further easing of national restrictions in both April and May (alongside the vaccine rollout) increasing business optimism for the year ahead. However, price pressures remain a cause for concern with 44 per cent of firms expecting their prices to increase over the next 3 months which could hinder businesses ability to grow and recover from the impact of the pandemic.
“Despite the lifting of coronavirus restrictions on the 19 July, many firms are still facing financial hardship and will require additional support from government as they look to get their operations off the ground after nearly 16 months of forced closure. The pandemic has not impacted all businesses equally and some firms now find themselves burdened with substantial debts for the first time.
“The government must take this into careful consideration as they look to wind down existing support schemes over the coming months otherwise they risk undoing the good work that has been done to support businesses over the past year. Whilst we hope that there will be no need for restrictions to be re-imposed in the future, it is imperative that the government helps to shore up business confidence by offering reassurance that the appropriate level of financial support will be provided if the need arises.”
