Business confidence in the East Midlands is plummeting, new research shows, as the cost of doing business continues to rise.
With inflation at 9.1%, its highest level in 40 years, and an economy running on empty into a probable recession, the latest survey of business leaders from the East Midlands Chamber does not suggest any sign of slowing down.
The quarterly economic survey found that less than one in 10 companies expected their profits to rise this year, up from a third at the start of 2022.
While the number of those expecting an increase in turnover has fallen from 62% to 42% in the past three months.
Some 322 businesses in Derbyshire, Leicestershire and Nottinghamshire responded to the quarterly survey between May 16 and June 10 – and said confidence had been hit by weaker overseas sales and orders, alongside a stable UK market.
The problems were due to high inflation and exorbitant energy costs – partly due to the war in Ukraine and the sanctions against Russia – as well as increases in the cost of raw materials, people and fuel.
These issues combine to slow business investment, which the chamber says will be crucial in spurring productivity gains that can help fight inflation.
Chris Hobson, director of policy and external affairs at the chamber, said: “Problems with supply chains – which have readjusted since the impact of the pandemic and rising demand as we emerge in this post-pandemic period – alongside changes in trading conditions resulting from the UK’s exit from the EU and, more recently, the impact on prices following the Russian invasion of Ukraine, have combined to affect business confidence and activity levels.
“This decline in confidence is having an impact on investment, with intentions to invest in training (down 3% quarter-over-quarter) and equipment (down 6%) all being two reduced, and at a time when 40% of businesses say they are operating at full capacity – a record for the survey in recent times.
“The underlying concern here is that for an economy to grow, businesses need to invest.
“A struggling economy is not driven by a lack of demand, but rather by a hampered ability to meet that demand. This in turn puts further pressure on prices, risking a situation that continues to deteriorate as the months go by. »
Survey results suggest UK sales stagnated between Q1 and Q2, overseas sales were down, recruitment was getting tougher while two-thirds of businesses expect to a rise in prices over the next three months.
The chamber said: ‘Business confidence has plunged, with the proportion of firms expecting increased profitability falling 23% and those expecting improved turnover dropping 20%.’
Mr Hobson said the Government must urgently tackle the financial challenges facing businesses which will ultimately be passed on to consumers.
He said: “Companies need an injection of confidence to improve their investment plans and respond to the challenges they face.
“Since many of these issues are external, it’s easier said than done, but there are levers the government can use to support businesses.
“On fuel, he should act to further reduce customs duties and reduce the VAT applied to fuel purchases, while the HMRC mileage rate should be increased from 45p per mile to 60p.
“Small businesses should be offered greater help in subsidies on fuel bills, similar to that received by consumers, and those struggling with reimbursements related to support programs associated with coronaviruses should be given more leeway for the refunds to be made.
“Finally, incentives should be given to companies that wish to invest in their staff, similar to the programs that already exist for capital investment, which themselves should be extended.
“These are not usual times, but the current situation is not permanent either.
“It is right that the government is acting to introduce special measures at a time when the economy needs them, knowing that once the waters calm down businesses will continue their growth trajectory and drive a competitive UK economy. “