Chamber News

(Based on September 2015 data releases)

This month’s headlines:

• UK growth in Q2 unrevised with the service sector and consumer spending driving growth.
• The QES for Q3 2015 signals moderate economic growth over the next year.
• US interest rates kept on hold for now amid continued global uncertainty.

The latest monthly economic review by the British Chambers of Commerce (BCC) showed that UK Economic Growth remained unrevised at 0.7%. However the UK’s recent GDP history has been upgraded by the Office of National Statistics. This is due to upward revisions to GDP growth between 2011 and 2013. The UK is now 5.8% above its pre-recession peak, up from an earlier estimate of 5.2%

The latest QES for Q3 2015 revealed weaker balances for both the manufacturing and service sectors but the survey did signal moderate economic growth over the next year. Click here to view the full Norfolk QES results.

As reported earlier in September, the US Federal Reserve decided against raising US interest rates. BCC have advised that they now expect the first rise in UK interest rates is likely to be seen in Q2 2015 at a rate of 0.75%.

Commenting on the National Minimum Wage increase – which is now in force as of yesterday – Caroline Williams, Chief Executive of Norfolk Chamber said:

“The changes to the National Minimum Wage, coupled with the introduction of the National Living Wage, will leave businesses with a large increase in wage bills to adapt to over the coming months.”

“Making ends meet is clearly an issue of huge concern to many in Britain today. And we applaud all of those businesses that pay, or aspire to pay, their staff above the Living Wage. That includes a huge majority of Chamber of Commerce members, with 61% paying all staff at or above the Living Wage, and a further 20% paying most staff above the Living Wage rate.”

“It is important for politicians to recognise that the UK economy is still fragile and to heed the Low Pay Commission’s considered recommendations for future wage rates, if they are to reassure businesses who may be looking at their recruitment plans for the year ahead.”

The British Chambers of Commerce (BCC) Quarterly Economic Survey (QES) – Britain’s largest and most authoritative private sector business survey, based on almost 7,500 responses from firms, employing around 800,000 people – shows that Britain’s two-tier growth trend continues.

While both manufacturing and service national balances were generally weaker this quarter, manufacturing balances declined to a much larger extent than in services. This was not the case in Norfolk, where both sectors saw falling balances. In Norfolk the service sector dipped on the previous quarter. Nearly all key Norfolk manufacturing balances remained stagnant or fell, this paints a picture of prolonged, slow manufacturing growth.

Caroline Williams, Chief Executive of Norfolk Chamber said:

“Following recent trends, growth in both the service and the manufacturing sectors in Norfolk has slowed over the last quarter. Businesses completing the survey, which represented 37% of the total East of England responses), reported a very limited increase in employment over the last 3 months, despite the reduction in Norfolk’s official unemployment figures. And both sectors continue to report difficulties in recruiting skilled staff. More telling is the falling employment expectations balances for both sectors in the coming 3 months.”

“During the recession, many employees opted for secure employment, however as the economic situation improves, the trend is for them to seek progression and improved wages. This has created gaps in some companies due to a shrinking skills pool.”

“Locally, the oil and gas industry sector advised that whilst contracts are not being cancelled, they are being delayed. The challenge facing businesses at the start of the supply chain is to find ways to sustain their businesses to ensure they are around to take advantage when the upturn comes.”

Overall these results show that the Norfolk business community is falling back into a more cautious approach to growth, however investment is still being made in staff training, despite the weakening order books.”

Key findings in the Q3 2015 Quarterly Economic Survey:

• Overall, the results signal moderate economic growth over the next year, but the UK recovery is facing serious global challenges.
• In both manufacturing and services, most key balances were weaker in Q3 than in Q2, even though there were a few improvements.
• Even so, the falls in the Q3 service balances are in general smaller than the declines in the manufacturing balances.
• In absolute terms, most Q3 service balances are stronger than the manufacturing balances.
• Intentions to increase prices rose sharply in manufacturing (+8% in Q2 2015, +21% in Q3 2015) and also services (+11% in Q2 2015, +20% in Q3 2015).
• The percentage of firms operating at full capacity increased slightly in both main sectors.

Norfolk Services

• In services, there was a slight downturn from Q2 to Q3 in the Norfolk domestic sales balance (decreasing from +33% to +29%). However the balance for employment in the previous three months (increased from +17% to +20%).
• However, all the other key service balances declined slightly between Q2 and Q3. Confidence in profitability went from +44% to +38%, investment in plant & machinery went from +14% to +12% and employment expectations dipped slightly from +23% to +22%.

Norfolk Manufacturing

• In manufacturing, the Norfolk balances for exports, investment in plant, confidence, employment expectations and cashflow recorded falls between Q2 and Q3.
• From Q2 2015 to Q3 2015 export sales fell from +29% to +0%, export orders fell from +18% to +0%, confidence in turnover fell from +42% to +37%, confidence in profitability fell from +31% to +23%, employment growth expectations fell from +23% to +16% and cashflow fell into negative territory from +8% to -4%.
• Norfolk manufacturers advised an increase in the balance for Investment in training which rose from +3% to +19%
• The domestic manufacturing balances for sales and orders produced mixed results with sales remaining relatively static +5% to +6 % but order, whilst still in negative territory rose from -13% to -2% in Q3 2015.
• The balance of manufacturers who expanded their workforce in the last three months also remained the same at +23% in Q3 2015.

John Longworth, Director General of the British Chambers of Commerce, said:

“These latest survey results are somewhat disappointing, as both manufacturing and service firms experienced dampened growth. The real area of concern is manufacturing. Confidence is low, as growth continued to fall, and our measure of manufacturing export growth hit a six year low. Services growth, on the other hand, dipped only slightly and overall trends show the sector remains relatively strong and stable.”

“Global uncertainty, weakened demand from China and the strength of the pound are some of the factors likely hindering manufacturers’ performance. If the manufacturing sector has entered a prolonged period of slow growth, then closing the trade deficit and improving the current account deficit will become more difficult.”

“If we want to make sure this period of two-tier growth is only temporary then we must help businesses get access to the working and growth capital that they require. We must also deal with the intensifying skills gap, which is holding British businesses back. The Chancellor’s Spending Review is the opportune time to tackle these shortcomings, not only for manufacturers but for all companies. Only action to help fix the fundamentals – skills, infrastructure and access to capital – can help end the UK’s two-tier growth pattern and ensure all businesses can grow.”

Commenting on Angela Eagle MP’s speech at Labour Party Conference, Caroline Williams CEO Norfolk Chamber said:

“This was a very political speech, more concerned with addressing the Conference than the business community. Much of this is Labour doctrine from before the change of leadership and it is still not clear what Labour policy will be in regards to business.

“It is welcome that the Shadow Business Secretary wants to partner with business, as it is a trait of the most successful economies in the world. However, it will need to be a true partnership, not the usual master servant relationship that government tends to favour.

“We welcome recognition of some of the fundamental issues facing business, such as access to finance, innovation and skills – as they are key to building a strong, sustainable economy. In addition, Norfolk businesses will welcome a focus on driving quality in apprenticeships and reforming the EU. It is, however, disappointing that infrastructure was not mentioned as it is a key area of economic development for Norfolk and the UK.

“We would hope that Labour uses this opportunity to consult with local businesses and economists, to get a thorough understanding of the UK and Norfolk economy and the importance of wealth creators for this country.

“The Opposition must also be careful that application of industrial policy does not equate to picking winners and propping up ailing industries. It would be better to create an environment in which all businesses can prosper and grow, and where winners can pick themselves.”

Half (50%) of the senior businesspeople polled in a major new British Chambers of Commerce survey have revealed that the concessions the Prime Minister brings back from Brussels will have an impact on their voting intentions in the upcoming EU referendum.

The findings from the leading business group demonstrate that many businesspeople have not yet taken a firm position on the question of Britain’s future relationship with the EU – and a clear desire for greater clarity from Downing Street.

If an in-out referendum were to be held tomorrow, 63% of businesspeople would vote to remain in the European Union, 27% would vote to leave, and 10% are unsure. Yet fully 50% said their vote could change depending on David Cameron’s renegotiation package.

The survey polled over 2,000 senior business leaders from all sectors, regions and all company sizes during August 2015. Highlights – including business understanding, impacts, and priorities – are detailed below.

Commenting on the poll results, Caroline Williams, Chief Executive of Norfolk Chamber said:

“Although many businesses will have made their decision, as to which way they will vote in the EU Referendum, there is a large proportion of the Norfolk business community who will chose which way to vote, dependant upon the level of concessions agreed within the renegotiated package. We acknowledge that there is limited information as to what the Government’s negotiating stance is, so we will continue to monitor and listen to the Norfolk business community over the next few months. It is essential that the business community does influence the government’s agenda so do let us know your views”

Also commenting on the results, John Longworth, Director General of the British Chambers of Commerce, said:

“Businesspeople want more clarity on the Prime Minister’s renegotiation plans before they have their say on Britain’s future in the EU. With half keeping their options open before making up their mind on how to vote, business’s top concerns need to be at the top of Downing Street’s negotiation agenda.

“Businesspeople are demanding a real shift in the balance of power between the UK and Brussels in any deal. Clear safeguards for the UK, and greater decision-making here at home, are at the top of their priority list.”

Key highlights – August 2015 BCC Europe Survey

BUSINESS KNOWLEDGE

Businesspeople are following the EU debate closely, with 51% reading about it at least weekly, and a further 26% at least every fortnight.

Majorities say they are familiar with the implications of an in-out referendum, with 72% saying they understand the implications for their business and 69% saying they understand the implications for the UK.

BUSINESS IMPACTS

Over eight in ten business leaders report no material impacts of the planned referendum on their businesses to date.

If the UK were to leave the EU, 40% currently expect this would have a negative impact on their overall growth strategy; 40% expect it would have no impact; and 14% expect it would have a positive impact.

When asked about the impact of a future change in the UK’s status in the EU on their business, 46% of businesspeople expect a negative impact – but the same amount, 46% expect either no impact or a positive impact.

THE PM’S RENEGOTIATION PACKAGE

Only 31% of businesspeople claim to be familiar with the PM’s renegotiation package – with those who are not at all familiar representing 30%.

Businesspeople want the Prime Minister to focus his aspirations for renegotiation on greater powers for the UK parliament to block proposed EU legislation (56%), allowing the UK to opt out from ‘ever closer union’ (41%) and greater UK control over migration (40%).

The most beneficial pan-EU reforms would be a reduction in regulation and red tape (59%) and a change in the balance of power between Brussels and individual member countries (45%). Some 11% do not believe any EU reforms would have a beneficial impact on their business.

VOTING INTENTIONS

Businesspeople who favour remaining in the EU are more committed to their position (48% completely committed) versus those who favour leaving the EU (37% completely committed). Notwithstanding, 50% of the total believe the Prime Minister’s reform package could affect their vote.

John Longworth, BCC Director General, also commented:

“Many assume that the EU referendum is a simple in-out debate where both camps are firmly entrenched in their positions, but this survey shows that businesspeople want more information and greater clarity, and for now at least their vote is still up for grabs.”

Norfolk’s seven-year-olds have posted record results in reading – with the County moving ahead of the national average for the first time.

Key Stage 1 results, published this week, show that 91% of pupils achieved the expected level two or above in reading – up from 89% in 2014 and above the national average of 90%.

In writing and maths, Norfolk was in line with the national average with 88% achieving at least level two in writing and 93% in maths.

Meanwhile reading performance for younger children in the county also showed improvement, with Norfolk narrowing the gap on the national average.

Seventy-three percent of six-year-olds passed the phonics check this year, a four percentage point improvement on last year’s 69%. Nationally, 77% passed the check, up from 74% last year.

The results follow significant improvements in the achievements of the county’s five-year-olds this summer, with a record proportion of children (65%) achieving “a good level of development” at the end of the reception year. The improvement of seven percentage points was greater than the six percentage points recorded nationally.

James Joyce, Chairman of the Children’s Services Committee at Norfolk County Council, said:

“Excellence in education is our priority and today’s results show that Norfolk’s infant aged children are beginning to make gains on their peers nationally – surpassing them in reading in Key Stage 1.”

“Getting early education right is crucial because results at five, six and seven give a good indication of how children will go on to achieve later in their education. Reading is particularly vital because it unlocks the rest of the curriculum for children, as well as providing a huge amount of joy.”

“Whilst it is encouraging to go ahead of the national average on this measure and to be in line with the national average for writing and maths for seven-year-olds, there is still much to do if we are to collectively ensure that all of Norfolk’s children are reaching their potential.”

“We want Norfolk to not simply reach but exceed the national average across every key stage and this is an aspiration shared by the council, headteachers and governors across the County.”

Caroline Williams, Chief Executive of Norfolk Chamber said:

“We, as a business community, need to work in partnership with the education establishments to capitalise on this success. To bridge the gap between education and work we need to inspire these children from an early age and develop them into the workforce of the future.”

While on a five day tour of China, the Chancellor George Osborne announced an important milestone on nuclear new build. Mr Osborne insisted that new nuclear power stations are essential to make sure the lights stay on as he gave the green light to the initial government guarantee for the first such plant in Britain for 20 years.

He announced the new government guarantee, provided by Infrastructure UK, for a new nuclear power station planned for Hinkley Point C in Somerset. The initial deal is set to be worth around £2 billion and will pave the way for a final investment decision by energy company EDF, supported by China General Nuclear Corporation and China National Nuclear Corporation, later this year, and with further amounts potentially available in the longer-term.

The construction and operation of Hinkley Point C will create thousands of jobs in Somerset and more widely in the nuclear industry across the UK, as well as boosting Britain’s energy security. It is also expected to open the door to unprecedented collaboration in the UK and China on the construction of new nuclear power stations.

During the next ten years, Britain is expected to need to replace around quarter of its capacity due to ageing nuclear and coal power plants retiring, which the new Hinkley Point power station will help achieve.

Mr Osborne said: “Britain was the home to the very first civil nuclear power stations in the world and I am determined that we now lead the way again. Nuclear power is cost competitive with other low carbon technology and is a crucial part of our energy mix, along with new sources of power such as shale gas.”

“So I am delighted to announce this guarantee for Hinkley Point today and to be in China to discuss their investments in Britain’s nuclear industry. It is another move forward for the golden relationship between Britain and China – the world’s oldest civil nuclear power and the world’s fastest growing civil nuclear power.”

The timetable for Sizewell C is dependent on the progress being made at Hinkley Point C. The Chancellor’s announcement also opens up opportunities for potential Chinese collaboration in the Sizewell C design and build.

Commenting on the Chancellor’s announcement, Caroline Williams, Chief Executive of Norfolk Chamber said:

“Norfolk Chamber welcomes the announcement by the Chancellor and hope that this will aid EDF and its partners to reach a final investment decision on Hinkley Point C. Not only will a final decision on Hinkley bring the development of Sizewell C a step closer, but it will help ensure the security of the UK’s energy supply going forwards.”

A new app which allows customers to pay using their mobile phones has been adopted by independent businesses in the Norwich Lanes. About 1,000 people across Norwich are already using the Droplet software, which gives retailers a way of receiving money with being hit by transaction fees.

The concept was created by Norfolk-born entrepreneur Steffan Aquarone, who launched the digital start-up after getting a £1m cash-injection from wealthy backers. Mr Aquarone, said more than 25 businesses in the Norwich Lanes are now accepting payment through the app, despite only launching the software two months ago. As well as paying for goods, the free app also allows people to transfer money between friends, or leave messages for a shop after a purchase has been made.

Norfolk Chamber is also looking at how technology can be put to work for businesses. Following four year’s success, the Chamber is holding an exciting and dynamic Technology Conference on Wednesday 23 September. With Norwich announced as one of the top 10 technology cities in the UK (Tech Nation report 2015), the region has propelled itself into the forefront of the digital age and earmarked itself as a driving business force to be reckoned with.

In an evolving business age that is online 24/7, ‘THE FUTURE IS HERE’ event will provide an interactive insight into how digital technology impacts business today and how it is shaping and influencing the future outlook of business both in the region and on a wider scale.

With over 100 businesses in attendance, and first-rate expert advice from 16 business stands, 10 key note speakers, 4 workshops and networking lunch and exhibition, Chamber is proud to present it’s most superior B2B event to date.

Highlights will include key note speeches from influential local and national sector leaders on important topics such as:

• Power of the Cloud – Amazon; Microsoft
• Master data management – Zing Insights; Sean Clarke
• Mobile ready – Proxama; Naked Element
• Connecting with the future – Rainbird; Tech City

Chamber Chief Executive, Caroline Williams said: “Digital technology is one of the fastest growing sectors in the region and we are thrilled to see so many companies choosing to start-up here. The rate of growth and wealth of new talent in this area goes to show what a progressive region Norfolk is and we are delighted to be encouraging such developments and evolution in business.”

Places are selling fast – for full details and to book your place at THE FUTURE IS HERE event click here.

Commenting on the US Federal Reserve interest rates decision today, John Longworth, Director General of the British Chambers of Commerce, said:

“Given the current global uncertainty, the Fed was right to keep rates on hold for now, and avoid exacerbating the problem. We would urge the MPC to follow suit, particularly given the more mixed picture emerging from the UK labour market, and the recent disappointing trade and manufacturing figures.

“The Bank of England should keep UK rates at their current level until well into 2016 at the earliest, and when rates do start to rise – as they must eventually do – it is vital that increases are limited to small incremental rises, in order to maintain business confidence.”

• Economic growth has grown solidly in the last year
• Demand for commercial property has increased.
• Recruitment difficulties continue to increase

The latest Bank of England Agent’s summary of business conditions for Quarter 3, 2015 was released this week.

The summary noted that overall activity has grown solidly in the last year, with increased demand being attributed to rises in real incomes and credit availability. However export driven growth is subdued.

Demand for commercial property has increased in pace with economic activity and investment in this sector had remained strong. In contract housing market activity has not picked up at the pace expected.

Recruitment difficulties continue to increase, with signs of building pressure on labour cost growth in the service sector. Service sector price inflation has remained modest and goods prices are lower than a year ago.

To read the full report please click here.

At today’s Bank of England Lunch, Tim Pike, the South East Agent for the Bank of England and Chamber members debated the confidence of the Norfolk business community in the current economic climate and how this is could be impacting on productivity in our region.

Attendees noted that whilst business confidence was dipping slightly, another key concern for many employers was recruiting skilled staff. Although apprenticeships were helping to fill some of the skills shortages, this was a long term solution and did not help firms to recruit the more senior skilled workers which are needed now. This is being particularly felt in the manufacturing, engineering and IT sectors. Also discussed at the lunch was Europe, the EU Referendum and the amount of regulatory burdens being placed businesses.

The future of cross -country rail services from Norwich to Liverpool, via Thetford has been secured. East Midland Trains has now extended its franchise agreement to 2018 and will continue to run the cross-country service.

Concerns had previously been raised that the agreement may cease, which would have resulted in the loss of the service, which links Norfolk to the west of the country.

Elizabeth Truss, MP for South West Norfolk was pleased that a deal had been struck. She said:

“The cross-country services provide a key rail route for residents in south west Norfolk. Not only does it allow for travel to the west of the country but also travelling via Peterborough offers the opportunity to connect to train services heading north and south.”

Also commenting on the Caroline Williams, Chief Executive of Norfolk Chamber said:

This route is critical rail link for our region and will help ensure that our economy is both accessible and competitive. Norfolk Chamber continues to lobby for improvements to our rail and road networks that will deliver growth for Norfolk and East Anglia.”