Posted: 15/04/10 by Northamptonshire Chamber
Results from the Quarter 1 2010 Northamptonshire Chamber Quarterly Economic Survey (QES) show mixed fortunes for the county’s business sectors in terms of recovery. Manufacturers have chalked up another quarter of improvement, with incremental growth in sales at home (over 50% declaring increases) and steady performance abroad.
However, results from the services sector have taken a backward step in the county, with key measures swinging back into negative territory. Domestically, just under 40% (39.6%) of services firms have seen sales decrease over the past three months, and there is a negative balance of almost ten per cent (-9.6%) on orders and advance custom for the coming quarter.
Commenting on the results for the first quarter of the year, Paul Griffiths, Chief Executive of Northamptonshire Chamber, said: “It is encouraging to see improving fortunes for the manufacturing sector in the county, and its increasing optimism in terms of recovery. But, the contrasting results from our services firms, back into negative territory again, after some seasonal positivity last quarter is a worry. Certainly, the sector has not had an easy start to 2010 from the dreadful weather conditions, which kept a lot of consumers at home, through to rising petrol prices, and the unsettling talk of public spending cuts which could have a significant affect on private sector contractors.”
Used by public and private sectors as a barometer of what’s happening in the local economy, the survey found that on the job front things seemed to have stabilised for manufacturers with over three-quarters (77.8%) stating workforce numbers have remained the same. However, cashflow still appears to be a problem for a significant number.
Drilling down a bit deeper into the issue, the Chamber survey asked its members what factors most affected their cashflow. The majority of manufacturers cited “promptness of payment/credit control” as the main problem, closely followed by “bad debts”. Speaking to one firm locally who had first hand experience of “bad debts”, they felt very aggrieved that nothing can be done about the business that goes into administration owing you money one day, only to be re-established a week or so later trading under a very similar name/sector debt free.
Cashflow issues, whilst marginally improved from the previous quarter, still abound also for the area’s services sector with a third claiming worsening cashflow over the past three months. Interrogating firms further, the Chamber has found challenges around sales forecasting and late payments.
Mr Griffiths continued: “The negative cash flow balances in the services sector indicate that many businesses are still facing serious financial pressures, although it seems this is sometimes due to lack of demand, rather than any particular reluctance on the part of the banks to lend. It is critical now that any incoming administration acts as quickly as it can to restore stability to the economy and a return to confidence for services businesses.
“Local businesses are showing resilience despite difficult and uncertain trading conditions, but fortunes appear to be mixed and confidence is still wavering. A new Government must nurture this with well-thought out policies that support business growth and job creation. Special attention must be paid to bolstering our exports in goods and services, which will help rebalance the economy away from an over-reliance on debt and the public sector.
“Whatever the result of the General Election, a new Government must avoid additional business taxes that could stifle recovery. Within the first 90 days of a new administration, the 1% hike to employers’ National Insurance Contributions, planned for 2011, should be scrapped and replaced by a less damaging 1% rise in VAT.”