Chamber outlines what the economic downturn means for Greater Manchester

The Greater Manchester Chamber of Commerce has laid out a bleak picture for the city-region’s finances and businesses as figures show the economy declined in the latest quarter.

The Greater Manchester Index used to measure the health of Greater Manchester’s economy recorded a significant fall and there are also concerns over declining sales, export figures, cashflow and investment.

That in turn has significantly knocked business confidence, the Chamber has warned, and so far the first days of the new Government have done little to dispel the worries among companies.

The Chamber said it was vital that ministers in prime minister Liz Truss’ Cabinet now move quickly to tackle the uncertainty and volatility that is being experienced.

What do the latest figures show for the Greater Manchester economy?

The Chamber’s Index recorded a significant drop in the third quarter of the year, down by 18 points to 13.5 after previously being just above 30. This plunge marked the end of five quarters which were more or less stable for Greater Manchester’s economy.

Domestic demand in services and construction fell, while international sales declined across the board. Overall the export balance fell below zero, which the Chamber described as “worrying” as this had not happened since the Covid-19 pandemic.

The decline in domestic orders was particularly sharp, falling to around zero.

The only sales improvement was in manufacturing, but the Chamber said this could be because it was recovering from a lower base after a significant fall in the second quarter of 2022.

Business’ cashflow positions have weakened further and recruitment difficulties have increased, although the overall employment position remains relatively stable and 84% of businesses recruiting are looking to fill full-time roles.

However, business confidence has taken a hit and investment in companies in areas such as staff training and new equipment has declined. The Chamber said 65% of businesses expect to have to increase their prices, a figure that showed no improvement from the previous quarter.

And the impact of a tough economic climate is not being felt equally by businesses across Greater Manchester.

The Chamber said small firms, those employing fewer than 50 people, were experiencing the most difficulties, while medium-sized companies employing between 50 and 249 people were faring best.

The business-to-business (B2B) sector was particularly hard hit, which the Chamber suggested means firms are cutting back on discretionary spending.

Similarly, a decline in business-to-consumer (B2C) spending was likely evidence of residents reining in their expenditure, the Chamber said.

The figures come from the Quarterly Economic Survey (QES), for which almost 300 businesses were quizzed between 22 August and 12 September.

What did the Chamber say about the numbers?

The Chamber said there was no disguising the fairly bleak picture for Greater Manchester’s economy and the challenges businesses are facing.

While some of the figures related to issues which have been causing concern for a while, others are the result of problems which have been bubbling up now coming to the surface.

Subrahmaniam Krishnan-Harihara, head of research at the Chamber, said: “Things are moving fast and not in the right direction. I said that things were piling up and suddenly we might have a crash in the index, and that is exactly what we have had.

“Cashflow is a major concern and has been for quite some time. Cashflow positions have never recovered to the extent that demand has and it weakening further in this quarter is going to put a lot of pressure on businesses.

“Energy prices are going up, fuel prices are still high and there are all the other issues too, so it is no surprise. The smaller businesses with less than 50 employees are most under stress.

“We have heard from our members in the hospitality sector that their energy costs have doubled or even tripled in the last few months. That is going to put additional pressure on.

“Employment prospects remain fairly stable but labour shortages and wage inflation are both serious concerns.

“In Greater Manchester there has been a sharp decline in domestic orders and there is a lot of uncertainty. Retail has gone down and exports are facing lots of pressures.

“Classical theory would say the decrease in the value of the pound would have a positive impact on exports but we import a lot of raw materials in the UK. We bring things into the country, add value to them and then they are exported, so there are costs incurred. There are also supply chain issues and shipping costs.

“The uncertainty in the economy has badly affected business investment. This is of concern to us because we would like businesses to invest in training and development to help some of the labour market pressures.

.”They are not to be blamed for being unwilling to invest in training at the moment, but it is an indication of the current macroeconomic climate.”

What impact has the new Government’s mini-budget had?

Since the quarterly figures were put together the UK economy has experienced more volatility in the wake of Chancellor Kwasi Kwarteng’s mini-budget, which received a hugely-negative reaction and led to a fall in the value of the pound.

Mr Krishnan-Harihara said Ms Truss’ new administration had so far failed to do anything to reassure businesses about their worries for the future, and indeed the opposite had happened after the Government’s economic platform was laid out.

He also warned about the knock-on impact businesses struggling can have on other areas of the economy.

He said: “We’ve had businesses importing goods saying there’s absolutely no way they can make things work on this trajectory. with the decrease in the value of the pound that was already weak. They will find it hugely difficult to cover their costs.

“We import a huge amount in this country so that’s going to affect household budgets, then consumer spending, then the economy. The Chancellor might have set off a vicious circle instead of what he claimed would be a virtuous cycle of growth.

“In the short term there’s going to be a lot of instability and volatility in the markets.”

Mr Krishnan-Harihara said the Government needs to address business uncertainty and said one area that would help would be policies on energy prices and bills. He said the measures set out had flaws in them and were not as generous for businesses as the support promised for households.

He also said businesses needed incentives to invest in staff, saying it was important for firms to continue upskilling and reskilling their workers.

He said: “Any measures the Government can take to offer certainty to businesses are what we need, because we are not going through the best of times, economically speaking.”