Greater Manchester economy rebounds as restrictions ease

The Greater Manchester economy has begun to rebound from the impact of the pandemic with businesses across the city-region reporting a substantial increase in customer demand during the last 3 months in Greater Manchester Chamber of Commerce’s (GMCC) latest Quarterly Economic Survey.

Survey respondents across all three economy sector groups, services, manufacturing and construction, demonstrated signs of an economic bounce-back with the Greater Manchester Index improving 24 points on the previous quarter.

The construction have led the way in demand in Q2, with 60% of firms reporting improved sales, compared with just over half of firms in the services and manufacturing sectors. Sustained economic recovery in Greater Manchester will depend however on strong performance for the services sector, which represents over 80% of the city-region’s economy.

The balances relating to international trade have improved this quarter and are above zero for the first time since April 2020, with more businesses seeming to get used to new regulations and requirements for EU-UK trade.

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

It will be a relief to both Greater Manchester’s business community and political leadership that there is now a strong rebound in the city region’s economy. After a long period of Covid-19 related restrictions, Greater Manchester’s business community seems buoyed by relaxation of restrictions. Although the postponement of the last phase of restrictions has caused some concern, this quarter’s results reveal robust growth as consumer spending has increased. The services sector, which includes the worst affected sectors of retail, hospitality and leisure has now started to grow again.”

“The survey results also showed that cash flow positions have improved in line the improvement in customer demand. Capacity utilisation remains modest with only 40% of businesses reporting that they are operating near full capacity. Without sustained improvement in customer demand, businesses will not be able to raise enough revenues to invest in expanding productive capacity. The results reveal that there are concerns around rising operational costs, probably as a result of anxiety around having to meet deferred tax liability on repay debt taken on during the pandemic. As a result, discretionary business spending is still low.

“Of particular concern is that some age-old problems have resurfaced: as businesses try to recruit staff, recruitment difficulties have gone up. In the last few days, we have seen numerous reports about labour shortages in disparate occupations such as chefs, health workers and truck drivers. To ensure that labour shortages do not cause wage inflation and present a bottleneck to economic growth, it is incumbent upon government to help Greater Manchester’s businesses and educational institutions with the support and funding they need to deliver training and upskilling that meets employers’ needs. We have to look beyond this immediate optimism to fix the fundamentals to secure the opportunity to rebuild and renew our economy.”