Chambers of Commerce: Manufacturing spurt is further evidence of economic recovery

The latest Lancashire Quarterly Economic Survey (QES) provides further evidence that the economy is healing.

The new survey, compiled by the county’s three Chambers of Commerce in association with Moore and Smalley Chartered Accountants and Business Advisors, shows improvements in most key areas for both manufacturing and services compared with Q2, with many balances now stronger than in the last two years. Indeed, the manufacturing sector has seen a 45% increase in its UK sales balance from the same quarter last year when it slumped 10%.

Key findings in the Q3 2013 survey:

· The domestic sales balances in both sectors have reached their highest levels since the Lancashire QES report was first published Q4 2011.

· Workforce levels in both sectors improved in Q3 with the manufacturing employment balance up nine points to +24%, whilst in services the employment balance improved three points to +16%.

· All of the business confidence measures improved in this Quarter, with both sectors expecting to see improvements in turnover and profitability in the next twelve months. The business confidence measures are at their highest levels in two years.

· Manufacturing investment intentions are considerably better than at this point a year ago with capital investment balance seeing a +13% improvement in this Quarter alone.

· There was very little change in the number of firms expecting to increase prices in the next three months, with the vast majority (75%) expecting the price of goods and services to remain constant in Q4.

Commenting on the results, Babs Murphy, Chief Executive of the North & Western Lancashire Chamber, said: “It is fantastic to see our small yet dynamic manufacturing sector doing so well, with our results suggesting a recent growth spurt. However, we need to ensure that this does not become an aberration, but rather the norm, particularly when the economic recovery is still facing external risks.

“External shocks from the US shutdown and continued risks elsewhere in the world could all impact on our fragile recovery. At home, the impact of reducing the deficit, fixing the banking system, and the relentless squeeze on living standards will inevitably act as a constraint on growth in the next few years.

“All this means that it is vital to sustain the recovery and avoid setbacks. The MPC must continue its forward guidance on interest rates, and must work to bring inflation down without increasing its QE programme. On its part, the government must switch policy priorities towards measures to boost growth such as infrastructure investment, cutting business rates and taxes, promoting exports, and boosting the flow of lending to growing businesses through a fully-funded Business Bank.”

Stephen Gregson, director of corporate finance at Moore and Smalley, said: “The continued improvement in confidence levels across both sectors and particularly so in manufacturing is very welcome. As others have pointed out, the key question is whether this survey’s results come to be regarded as the ‘turning of the tide’ or merely a brief burst of better news. Time will tell.”