Chamber News

• 80% of businesses surveyed (92% of whom are SMEs) attempting to recruit have faced challenges, with hospitality and manufacturing firms still the most likely to report difficulties
• Almost six in ten (59%) businesses are actively trying to recruit staff

• BCC calls on Government to work with business on solutions including skills training, investment and urgent reform of the Shortage Occupations List (SOL) 

The latest Quarterly Recruitment Outlook (QRO), a survey of more than 5,000 UK firms of all sectors and sizes by the British Chambers of Commerce (BCC) reveals businesses are still facing record high difficulties in hiring new staff. The first quarter results for 2023 show that recruitment difficulties have fallen just two percentage points from the record high level of 82% in Q4 2022. Attempted recruitment in Q1 was virtually unchanged from the previous quarter, with 59% of those surveyed looking to find staff (61% in Q4 2022). While recruitment difficulties are being experienced across the economy, firms in the hospitality and manufacturing sectors were the most likely to report recruitment difficulties (83% in each sector). This is closely followed by the construction and engineering sector (81%) and then professional services; and public, education, health sector on 79%. The recruitment pressure points vary across sectors. For firms who struggled to recruit in the construction and engineering sector, 71% faced difficulties in finding skilled manual/technical workers. However, for hospitality businesses that struggled to recruit, 64% faced difficulties in finding semi/unskilled workers. Investment in training remains stubbornly low in an environment of increasing cost pressures. Just over a quarter of firms (27%) reported an increase in their training investment plans over the last three months (24% Q4 2022), while 14% report a drop. Overall, 67% of businesses say labour costs are a source of inflationary pressure, with a similar number (66%) worried about energy costs. Concerns around labour costs are highest in manufacturing (76%) followed by construction and engineering, logistics, and hospitality (each at 70%). Responding to the findings, Nova Fairbank, Chief Executive at the Norfolk Chambers of Commerce said: “People shortages are a massive issue and employers can see little sign of improvement. The high number of unfilled job vacancies is damaging businesses and the economy. Norfolk firms are struggling to fulfil order books and turning down new work. “While investment in training is part of the solution, it is being held back by rising overall cost pressures and a lack of time and resource at firms to mentor and support new recruits. “There is no quick fix and employers and the government need to work together to find solutions. While firms can do more to make workplaces more flexible and jobs easier to access, the government must redouble its efforts to encourage and help people into work. “Support for parents and carers, older workers and those with health issues will be crucial. At the same time, where there is evidence of urgent and critical skills shortages that are crippling business sectors, the government must adopt a sensible and pragmatic approach to immigration and ensure that the Shortage Occupations List reflects the reality on the ground. “The Chamber Network is rooted in its communities, representing businesses of all sizes across Norfolk and the UK, and these are the big issues they are telling us need addressing if we are to get the economy growing again.”

Reacting to the latest ONS inflation data for March, Nova Fairbank, CEO of Norfolk Chambers of Commerce, said: “Today’s CPI rate of 10.1% means that prices continue to rise at an alarming rate. Driven largely by housing and food costs, this is on top of an already high growth rate from this time last year. “More positively, today’s figures show that the Producer Price Index has eased to 7.6% from 12.8%, indicating the peak may have passed for input price growth. “Our research shows that inflation is still by far and away the top concern for UK SMEs. This has been driven by three years of global lockdowns, supply chain crises, energy shocks, and new trade barriers with the EU. “Small businesses, particularly those in the retail and hospitality sector, have been the least able to absorb cost rises, and we see that most have not invested or grown. “Businesses need to see a reduction in the cost and burden of exporting and importing, particularly with the EU, as well as increased support to deal with the unprecedented energy price shock.”

Reacting to the ONS GDP figures for February, Nova Fairbank, Chief Executive at the Norfolk Chambers of Commerce, said: “Although today’s GDP figures indicate the UK economy continues to technically avoid a recession, it’s now clear we are stuck in a prolonged period of almost no growth. “After a sharp drop in business confidence last year, our latest research shows that optimism among Norfolk SMEs is now on the way up. But this is yet to translate into an improvement to business conditions in general. “The Chambers expects GDP to contract overall by 0.3% in 2023, a view echoed by the IMF forecast in their World Economic Outlook published earlier this week. “The business environment needs to improve quickly to ensure confidence doesn’t fall back to the levels we saw last year. While last month’s Budget included several positive measures for Norfolk’s economy, it did not go far enough to shift the dial on growth which remains stubbornly low. “The Government has not addressed some of the major issues holding firms back, such as the unprecedented energy price shock and record tightness in the labour market. “Following the attention being given to the Windsor Framework by world leaders this week, global trade also needs to be a core priority. UK exporters have faced major administrative costs since the introduction of the Trade and Cooperation Agreement with the EU and the focus must now be on ensuring the new customs and paperwork arrangements work smoothly for businesses both side of the Irish Sea.”

Reacting to the latest ONS Trade data for February, William Bain, Head of Trade Policy at the BCC, said: “This latest data provides further evidence the UK is finding it tough to generate any sustained rise in exports. The overall picture for the last two years is broadly static, although this masks a better position on services than with goods. “Services exports values showed a modest rise in February 2023 by 0.7% (excluding inflation). This mirrors the shallow recovery in services export volumes over the past two years. “But this is not enough to compensate for a lacklustre performance elsewhere. Additional data from the Bank of England and the Office for Budget Responsibility indicates that the UK’s export performance is the worst in the G7. “The World Trade Organisation’s latest forecast for global trade growth of only 1.7% in 2023 demonstrates the strength of the headwinds facing all exporters. “But this is precisely the time to be putting measures in place to raise export capacity and readiness here at home. The Government must do more to help firms export – it is vital for the overall growth of our economy.” Analysis of the data:   Removing the effects of inflation, total UK goods export values fell by 0.8% compared to January. A fall in goods export values to the EU of 6.2% (driven by lower volumes of fuels, machinery and transport equipment) was accompanied by a fall in sales to the rest of the world of 0.7% (largely in lower chemicals exports to China and South Korea). Total goods imports values (excluding inflation) fell by 1.5%. Import values from the EU rose by 1.5% on January driven by machinery and transport equipment import gains (including cars from Germany) and higher fuel imports (refined oil from the Netherlands). But import values from the rest of the world fell by 4.5%, with reduced gas and oil imports from the US and Norway, and lower chemicals imports from the US. In services, excluding inflation, import values rose by 0.6% while export values rose by 0.7%.    In the three months to February 2023, goods export values fell by 3.8%, and goods import values by a smaller amount of 1.8%. Services export values fell over the same period by 1.6%, while imports fell slightly by 0.4%.  In the three months to February 2023, the overall UK trade deficit, removing inflationary effects, widened to £13.2bn.  More detail on the ONS data can be found here.

The remit for the Norfolk and Suffolk LSIP is in four parts:

• Articulate the employers skills needs – what are the skills employers need locally and struggle to find?
• Translating employers needs into changes in provision – how can those employers needs best be met by the provider in more responsive ways?
• Address learner demand and employer engagement – what can local stakeholders and employers do to raise demand for and make better use of those skills?
• Report annually to the DfE on what we want to achieve, why it matters, what changes are needed, and who needs to be involved.  In other words what does skills success look like?

As you will be aware, the timescale for engaging the wider business community across Norfolk and Suffolk has been extremely tight and continues to be ongoing.  Next steps for the LSIP include further interaction with our four Working Groups and the convening of the Common Framework Group to consider potential solutions and actions.  The full Local Skills Improvement Plan will be submitted to the Secretary of State by 31 May 2023. As required by the Department for Education, we are pleased to provide you with the draft priorities, as identified by a range of businesses across our region to help support your consideration for the LSIF bid. Click here to view 

Join us on Wednesday April 26th at Newmarket Racecourse for our LSIP Co.llaboration event

This Norfolk and Suffolk Local Skills Improvement Plan (LSIP) collaboration event is a chance to showcase the extensive employer engagement which has taken place, detailing the analysis and key findings in which businesses are communicating the regions skills gaps and needs.

We will be showcasing what’s working well in the region and how we can continue to influence a local skills system which puts employer engagement at the heart of the agenda.

Norfolk Chambers of Commerce is working closely with Hitachi Energy to bring a Meet the Buyer event for the Hornsea 3 on 25^th April at Norwich City Football Club. This event is a key chance for local SMEs in specific sectors, to meet and discuss the opportunities to work on the Hornsea 3 Offshore Wind. This project will provide huge value for local businesses and will enable opportunities for collaboration within the supply chain. Hitachi Energy has been appointed by Ørsted, the world’s most sustainable energy company, to deliver the Hornsea 3 offshore wind farm. With a capacity of 2,852 MW, Hornsea 3 will produce enough low-cost, clean, renewable electricity to power around 3.2 million UK homes, making a significant contribution to the UK Government’s ambition of having 50 GW offshore wind in operation by 2030 as part of the British Energy Security Strategy. The project (subject to Ørsted taking a Final Investment Decision on Hornsea 3) will see the installation of 240 km of onshore cables that will connect the offshore wind farm from the landfall at Weybourne in Norfolk to the Norwich Main National Grid Substation. Works are scheduled to commence in March 2023 with an anticipated completion in 2027. Both Hitachi Energy and Ørsted are committed to engaging with the local community and supply chain to maximise the benefits and opportunities for individuals and the local economy. Hitachi Energy has proactively identified a number of the relevant trades, services, commodities, and skills required and is working closely with Norfolk Chambers to co-ordinate and facilitate as many opportunities as possible for local, and particularly, for small businesses and individuals to get involved and benefit from this exciting project. Hitachi Energy is advancing the world’s energy system to be more sustainable, flexible, and secure. As the pioneering technology leader, we collaborate with customers and partners to enable a sustainable energy future – for today’s generations and those to come. Norfolk Chambers of Commerce, Chief Executive, Nova Fairbank said “Following previous successful Meet the Buyer events, we’re delighted to be bringing back another event. Our mission is to connect the Norfolk community and what better way than bringing Norfolk businesses together on such a significant project”. If you’re interested in attending the event to showcase your services, please click here.

Reacting to news of an agreement on the UK’s accession to the CPTPP, William Bain, Head of Trade Policy at the BCC, said: “The addition of the UK to this trading bloc takes it to 12 countries which account for 15% of global economic output. “It will open up new opportunities for our businesses in both inward and external investment with the other 11 countries. “The UK has bilateral trading terms negotiated with nine of the eleven current members, but no agreements had previously been reached with Malaysia and Brunei, so they will be of particular interest. “There are not many multi-national trade agreements like this one, so it is an interesting new prospect. “We see particular relevance for small and medium sized businesses in reduced costs to import components from member countries to use in manufactured goods for export through the rules of origin in the agreement. “There are also generous terms for data flows which underpin an increasing part of international trade.   “We will be scrutinising the deal in detail, but at first glance this looks to be good news for UK businesses to enter or upscale their trade in these markets, with increased confidence and more generous trading terms. “We look forward to speedy ratification and then working with the UK Government, and others, to ensure firms get the best possible access to this thriving market within the global trade system.”  More information on the CPTPP can be found here.

• Over half (52%) of UK firms believe their business turnover will increase over the next 12 months, up from 44% in Q3 2022.
• However, only one in three (34%) firms experienced an increase in sales over the past three months.
• Almost half (47%) of hospitality businesses reported a drop in cashflow in the last quarter.

The BCC’s Quarterly Economic Survey (QES) for Q1 2023 shows that while business confidence has improved from a very weak base, most firms see no improvement to business conditions. The survey of over 5,200 firms – 92% of whom are SMEs – reveals a sectoral division in business performance, with hospitality and retail firms consistently more likely to report worsening cash flow, investment, and turnover than other sectors. The research took place between February 13 and March 9, before the Chancellor’s Spring Budget was announced. Growth in business activity remains weak, with retail and hospitality sectors facing most significant challenges. The percentage of firms reporting increased domestic sales has not seen any bounce back since it fell significantly in Q3 2022. Only one in three (34%) firms experienced an increase in sales over the past three months, while 24% reported a decrease and 41% reported no change.  The retail and hospitality sectors remain particularly weak. Almost two in five (38%) retail firms experienced a decrease in sales over the past three months, with one in three (32%) hospitality businesses reporting a fall. More businesses continue to report a decrease, rather than an increase, in cash flow, highlighting the precarious state many SMEs are still in. Only one in four (25%) businesses said their cash flow has increased over the last three months, while 30% have seen it decrease.  The hospitality and retail sectors are again facing the greatest challenges. 40% of retail firms, and almost half (47%) of hospitality businesses, reported decreased cashflow. After a significant fall in Q3 2022, business confidence is now on the up. After business confidence plummeted to historically low levels in the second half of 2022, there has been a marked improvement in sentiment in the first quarter of 2023. Over half (52%) of firms believe their business turnover will increase over the next 12 months, up from 44% in Q3 2022. While profitability confidence has also improved, it continues to remain weaker than turnover confidence. 42% of businesses now expect their profits to increase over the next year, up from 34% in Q4 2022. Little discernible improvement to business investment over past six years Three quarters (75%) of respondents reported no increase to investment in plant/equipment. There has been little discernible improvement to investment over the past six years; only a quarter of firms planned to increase investment in Q1 2023, the same level as reported in Q2 2017. Inflationary pressures continue to ease slightly, but still remain the top concern Following a drop last quarter, the percentage of firms expecting their prices to rise shows further signs of easing, as it fell five percentage points from 60% in Q4 2022 to 55% in Q1 2023. The overall level of concern regarding inflation has dropped for the first time in over two years. However, at 74%, the level remains close to the historical high. Cost pressures are varied, but labour costs and utilities come out top overall Cost pressures vary considerable across sectors; 87% of hospitality firms reported utilities as a factor driving price increases while 86% of manufacturers cited raw materials. David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: “After a significant decline in business confidence in the second half of 2022, results from QES Q1 show an improvement in business sentiment as political turmoil and inflationary pressures show some signs of easing. “However, this comes from a very weak base, and while confidence has improved, this is yet to translate into an overall improvement of business conditions. Most SMEs still report no improvement to sales, cash flow, and investment. “Three years of economic shocks – Covid lockdowns, global supply chain crises, inflation, and Brexit – have taken a significant toll on UK SMEs. The QES Q1 data once again confirms that these shocks have disproportionately impacted the retail and hospitality sectors, which are once again most likely to be reporting worsening sales and cash flow.” Responding to the findings, Director General of the British Chambers of Commerce, Shevaun Haviland, said:  “Last month’s Budget included several positive measures for business, including increased childcare support as well as plans for full capital expensing. However, it did not go far enough to shift the dial on growth which remains stubbornly low. “The Government failed to tackle some of the major issues holding firms back from their potential, in particular energy costs and the tight labour market which remain top business concerns. “The Government’s new energy support package represents a drop of 85% in the financial help available to businesses. We reiterate our calls for increased, targeted support for those firms who desperately need it. “The energy crisis faced by firms and households are two sides of the same coin. Yet, non-domestic customers do not enjoy the same protection as households. “To ensure competition in the business energy sector, and solve market failures, Government must also ensure Ofgem has the necessary powers to properly regulate the industry. “While we welcomed the Government’s decision to add five new construction jobs to the Shortage Occupation List, the lack of skilled labour is having a corrosive effect on our economy. This shift to a new system cannot come fast enough and other sectors facing huge recruitment pressures, such as hospitality, must be given help.” What businesses say: “Increases in prices, in general, have affected profitability and cash flow to the point I am having to borrow more finance. If I don’t get the finance, my business will fold.”– Micro services firm in Northern Ireland “As an advanced manufacturing organisation, we have a huge reliance on energy, we’re a very high user consuming >27Giga Watts of electricity. Our fixed pricing contract expires in March and the uplift in cost will be >£5m so will need to be passed through to our customers.” – Large manufacturer in Business West “The market feels buoyant, lots of enquiries and activity, it doesn’t seem to fit with the mood music from government or the media.” – Small retail or wholesale firm in the East Midlands Link to QES infosheet Q1 2023

• Energy bills remain a top business concern, as many face a drastic reduction in their support
• Energy market for businesses must be reformed to protect firms and correct market failures
• Firms are facing a further financial squeeze, with corporation tax, living wage and business rates all changing from April 1st

As businesses face an 85% decrease in energy support from tomorrow, the British Chambers of Commerce (BCC) has highlighted the need for an energy support contingency plan, and is calling for increased, targeted help for firms who desperately need it. The Chambers are also calling on Government to increase Ofgem’s power to strengthen protection for businesses in the energy market. Nova Fairbank, Chief Executive at the Norfolk Chambers of Commerce, said: “We have been signalling for months that many Norfolk businesses will struggle to afford their energy bills when financial assistance reduces by 85%, with many receiving a fraction of their original support. Almost half (47%) of firms say paying bills will be difficult from tomorrow onwards. “But of the seven energy policies we advocated for the Government to include in this month’s Spring Budget, not one was acted upon. “Flexibility to increase support for those who desperately need it – ignored. Easing the burden of claiming VAT on energy – ignored. Funding for improved business energy efficiency – ignored. And so the list goes on. “Government also failed to heed our calls to increase regulation of the business energy sector. The energy crisis faced by firms and households are two sides of the same coin. Yet, non-domestic customers do not enjoy the same protection as households. “To ensure competition in the business energy sector, and solve market failures, Government must ensure Ofgem has the necessary powers to properly regulate the industry. We are also asking Ofgem and Government to introduce a ‘duty to supply’ mechanism to the non-domestic energy market, to ensure businesses can access fixed rates, providing them with certainty and stability. “Along with the reduction in energy support, businesses are facing several other changes in the business environment from tomorrow. Corporation tax is increasing, as is the national living wage, while a number of firms will see their business rates change due to revaluations. “These changes will have a significant impact, but Government is yet to offer any meaningful support to offset the challenges currently facing so many UK businesses.”

Reacting to the Government’s announcements on its updated climate and energy strategies, Nova Fairbank, Chief Executive at The Norfolk Chambers of Commerce, said: “The government has grasped the scale of the climate challenge with a wide-ranging plan to boost green energy production. “Policies the Chamber Network have campaigned for have been brought into play; amending planning rules to make it easier to develop renewable energy; boosting British nuclear power; upgrading our electricity grid; unlocking private investment for Net Zero and a £10 billion boost for Export Finance to support the UK’s burgeoning green export trade. “But there is a gap around business energy use. To meet the UK’s ambitious 15% energy efficiency target, Norfolk firms will need to install vital measures such as insulation, energy management systems and renewables. “Many smaller firms will struggle with the capital costs, so support should be provided where necessary, as has been pledged for households. “There also appears to be a mismatch between good ideas, such as UK-wide insulation, heat pumps and electric vehicle charging points, and the availability of a skilled workforce to make them happen. “Alongside the investment in infrastructure and manufacturing must come further investment and policy changes in training to make these plans a reality. “Allowing apprenticeship levy funds to be used for all forms of accredited workplace training would be a simple step to help deliver the green jobs needed for Net Zero. “The Government has taken a big step forward with these announcements, but it now needs to plug the gaps in its strategy to ensure it does not lose momentum in the years ahead.” More detail on the Government’s plans can be found here. Get your business involved with our Business Climate Leaders programme  Net Zero grants, funding and support  

• Unreliable public transport letting down almost three in five (58%) rural SMEs

• Almost two in three (64%) SMEs believe they don’t have access to sufficient skilled labour in their local area

• More than one in four (27%) SMEs expect their turnover to decrease over the next year, while less than a third (30%) plan to increase investment in technology and R&D

Factors such as the availability of quality public infrastructure and access to skilled labour are entrenching a rural-urban divide among UK SMEs. This is according to a new survey of more than 900 SMEs by the British Chambers of Commerce (BCC) and Xero, the global small business platform. The survey, exploring the suitability of SMEs’ local trading environments, found that those based in rural areas were more likely to report a deficit in key success attributes. General business outlook Across the country, the SME business outlook is subdued. Only half (53%) expect to see turnover growth in the next 12 months, while one in four (27%) expect turnover to shrink over the same period. Equally, less than a third (30%) of SMEs plan to increase investment in technology, research, and development, while 18% expect a decrease. Public transport When assessing the suitability of local infrastructure, the rural-urban divide was particularly notable in public transport. Well over half (58%) of SMEs in rural areas do not believe their area has reliable and well-connected trains, compared with just 39% in urban areas. Rail network deficiencies are also impacting SMEs based in business, retail or industrial parks, half (51%) of which were not satisfied with this provision. This rose further still when it came to buses and trams – over three-quarters (79%) in rural or countryside areas do not think they have access to reliable buses and trams, compared to 42% in towns, villages and high streets. There is also a regional disparity evident; SMEs in the North of England (52%) and the Midlands (51%) disagreed that they had access to reliable and well-connected trains, compared with only 36% of SMEs in the South. Internet connectivity The rural-urban divide is also evident when it comes to connectivity. While three-quarters (75%) of SMEs overall agree their area has reliable broadband, this rises to 82% in urban areas and falls to around half (56%) in rural areas. Labour market Firms report a high level of dissatisfaction with their local labour markets; almost two in three (64%) SMEs do not believe their local area has high availability of appropriately skilled labour. However, there is divergence on this issue based on the type of business area. Firms in business, industrial or retail parks appear to struggle most acutely with this issue, with almost three in four (72%) stating that they did not have access to appropriately skilled labour. While still concerning, this drops to 56% for firms based in urban areas. Alex Veitch, Director of Policy & Public Affairs at the BCC said: “Our research highlights the rural-urban divide that continues to exist between firms across the UK, with rural businesses generally reporting higher levels of dissatisfaction with the quality and availability of local resources. “High-quality public infrastructure and access to a skilled labour force are both key to the success of a business, in particular SMEs, and today’s findings indicate that rural businesses are at a significant disadvantage. “Government must urgently prioritise the development of public infrastructure. Such investment will not only enable local and small businesses to adapt and thrive, it will also create jobs and inject money into local economies across the UK.” Jo Copestake, Director of Small Business at Xero, said: “When small businesses are eventually able to pivot to growth mode, any recovery would be inequitable, as many rural small businesses don’t believe they have the same trading conditions as their urban counterparts. We can’t risk that the conditions for recovery are skewed in favour of businesses in certain locations, which would reinforce the divides that have hampered the nation’s full economic potential for so long. “Small businesses are the backbone of our economy, and that means their roots are all around the country. We must create an equitable trading environment, where each and every business can access the digital know-how, connectivity and infrastructure required to build a healthy business.”

Responding to news of the ratification of the Windsor Framework, William Bain, Head of Trade Policy at the British Chambers of Commerce, said:   “The joint EU and UK decision to give formal effect to the Windsor Agreement is another important step in improving trading conditions between Great Britain and Northern Ireland.   “For the BCC, the priority is now making sure the new customs and paperwork arrangements, plus the trusted trader schemes, work smoothly for businesses either side of the Irish Sea.   “We look forward to close engagement with HMRC over the coming months to make sure the on-the-ground reality of this deal produces tangible benefits for firms.”