Greater Manchester business survey shows economic downturn

The Greater Manchester Chamber of Commerce’s (GMCC) latest Quarterly Economic Survey has shown a recent downturn in the economic outlook of the city-region’s businesses.

The Greater Manchester Index, a composite indicator made of key QES measures, declined by 18 points from the previous quarter and now stands at 13.5, after hovering in the early 30s for five quarters.

The survey of nearly 300 businesses in the city-region between August 22nd and September 12th 2022, and so results do not consider the effects of the Bank of England’s most recent interest rate rise, the Chancellor’s Growth Plan or the recent decline in value of the pound. GMCC instead attributes the stalling of the local economy to uncertainty over consumer spending and high energy costs.

Survey respondents reported that sales to UK customers decreased significantly for both B2B and B2C services, with only the manufacturing sector showing a slight uptick albeit following a sharp decline in the previous quarter. Export sales also showed a decline, and have yet to benefit from the declining value of sterling.

Subrahmaniam Krishnan-Harihara, Head of Research at GMCC, said:

“Inflation and uncertainty around the ability of households to sustain consumer spending are having a clear impact on economic growth and business sentiment. In Q2, we saw that businesses were beginning to get very worried about the wider economic impact of higher energy and commodity prices. That has taken a further downward turn in this quarter. The sharp decline in demand for B2C services is clear evidence that consumers are reining in expenditure. Businesses also appear to be cutting down on discretionary spend, which seems to have affected B2B services.

“Of particular concern is the reported reduction in cash positions. Since the pandemic, cash flow positions never recovered to the extent demand did. In the immediate aftermath of the pandemic, there were lots of pressures on businesses. That has only worsened now. The smaller businesses with less than 50 employees are most under stress according to this quarter’s data. 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.”

The downward trend in the economy has also seen business confidence take a hit, and is now in negative territory according to the GMCC Quarterly Economic Survey, with the region’s businesses expecting profits and margins to decline against expectations; this follows the profit warning issued by Stockport-based musicMagpie on Monday 26th September as a result of slowing consumer spending.

Subrahmaniam added:

“The loss of confidence and weakening in other QES measures does not bode well for business investment. The Prime Minister and the Chancellor exuded a lot of optimism over the Growth Plan announced last Friday. The latest QES data shows that the gap between their optimism and the reality that businesses face ‘on the ground’ is stark and widening rapidly. The focus from government must be on providing certainty.”