Local business survey shows slowdown in activity across all sectors of Greater Manchester economy

The Greater Manchester Chamber of Commerce’s (GMCC) latest business survey has revealed a slight slowdown in activity in Q2 of 2023.

The latest Quarterly Economic Survey (QES), conducted between 22nd May and 12th June, saw the Chamber’s headline Greater Manchester Index fall from 30.3 in Q1, to 22.1. Survey findings from the responses of nearly 300 businesses in all 10 boroughs of the city-region found decreases in sales to UK customers across all three key sectors of the Greater Manchester economy: services, manufacturing, and construction.

For manufacturers, the survey also found a decrease in capacity utilisation and cashflow positions in line with the fall in demand; export sales and advance orders also fell, despite the sector reporting strong performance in the previous quarter.

Other economic measures, including business investment and business confidence also showed a mixed picture. While businesses were optimistic of stable demand and maintaining current levels of turnover, there was reduced confidence in profitability.

Subrahmaniam Krishnan-Harihara, Deputy Director of Research at Greater Manchester Chamber of Commerce, said:

“The decrease in the Greater Manchester Index is disappointing but is in line with other economic developments. In Q1, the economic commentary was about the resilience of the UK economy. Resilience is now combined with uncertainty and while a technical recession may be avoided, there are some clear headwinds and a series of challenges for business.

“Businesses will be concerned that inflation remains stubbornly high. In the 13th consecutive rise, the Bank of England recently set the base rate at 5% – four times what it was a year ago. Although this went against market expectations, the latest inflation figures perhaps gave the Bank no choice but to effect a 0.5 percentage points increase. UK inflation has proved hard to tame. Contrary to early expectations that inflation would be transitory, it is evident that inflation is persistent although it has come down from peak levels of around 11%.

“Another theme coming out of latest QES results is one of apparent contradictions. Inflation is very high and yet, consumer confidence and consumer spending both remain strong. Spending on hospitality is particularly strong at the moment and perhaps a partial explanation behind the 7.6% inflation we are seeing in the hotels, restaurants and cafes sub-sector. That is higher than ‘core’ inflation. Higher mortgage interest rates haven’t had a dramatic impact on house sales and in fact, house prices increased by 3.5% in the 12 months to April 2023.

“That UK debt is at 100% of GDP and the need to maintain tight fiscal policy will possibly see public spending reined in, this could be of particular concern in Greater Manchester and the North West. But with the Energy Guarantee Scheme ending this week, government borrowing is expected to decrease in the coming months.

“In summary, there are some bright spots and an equal number of contradictory indicators. How the interplay between these myriad factors plays out will determine the economic trajectory for the next year. Greater Manchester’s businesses will probably view the data with a mix of cautious optimism and the hope that inflation can be tamed without damaging economic performance.”