Our last Quarterly Economic Indicator (QEI) survey took place in August, at a time when a positive rate of economic growth and a labour market that was still surprisingly strong. But businesses also faced several major challenges too, such as ongoing uncertainty surrounding the war in Ukraine, supply chain shortages and the sharply rising cost of both fuel and utilities.
Take part in the survey for Q4 online
Against this background our local QEI survey results were more muted than those recorded in May. The indicators for both current conditions and expectations declined in value, but the scale of this decline was limited and both indices fell to levels similar to those recorded back in December 2021. The boost in confidence we saw during the first few months of this year had been effectively wiped out by the time we held our second survey in May.
Our May and August survey results highlighted that local businesses had become much more concerned about recent orders and profitability but our respondents were also more confident about prospects for future orders, apparently expecting any drop in activity to be short lived. The tourism sector had the broadest concerns about orders whilst the greatest concerns about profits were expressed by the business services sector, healthcare, manufacturing and tourism.
There were also some positive surprises in our survey results. Local businesses gave us a stronger assessment of cash flow, which is critical for the health and survival of any business, and also confirmed that employment had increased across the region, which provided a relatively strong signal of confidence at that time.
The positive assessment of cash flow came as a particular surprise in our last survey, given that the majority of businesses were already facing significant increases in the costs of key goods and services. By August, energy costs had gone back ahead of labour costs as the primary concern of local businesses, followed closely by the impact of shortages on material prices and hefty increases in transport and shipping charges. But many businesses across the Dundee & Angus region were clearly confident about their ability to increase prices to compensate for these rising costs. Almost 53% of respondents in May were aiming to raise prices by 5-10%, and a further 35% were seeking to raise prices by 1-5%.
Overall, our results confirmed that local businesses were well aware of both current and expected challenges and were attempting to mitigate the impact of these on both sales and profits. In addition to the obvious concerns about rising input costs, respondents also recorded fears about the potential for tax policy, interest rates and exchange rates to impede future economic activity. However, despite the worsening background, all businesses who replied to our survey were confident enough to predict that their business prospects would remain unchanged, or even improve, over the coming year.
So where are we now?
Events have been fast moving since May and the challenges we now face are huge. The wholesale gas price has almost tripled since the time of our last survey, the petrol price recently reached record highs albeit it is coming down, food prices have increased sharply and labour and energy costs are on the rise. The resulting broad surge in price inflation is causing severe damage to the purchasing power of households and businesses alike.
The Bank of England now expects inflation to reach as high as 13% within the next few months, interest rates could hit 3% and stay at an elevated level throughout 2023. It is also forecasting a recession by the end of this year, due to the squeeze on household incomes, and expects output to fall further in every quarter of 2023 as the real value of household income continues to decline. Everything hinges on energy prices and whether there are further supply shortages and price increases to come, which would make the downturn even more severe, or whether supply issues ease allowing energy prices to fall back to more ‘normal’ levels, easing the extreme cost pressures we are all facing today.
Our current survey
Our QEI survey has proved invaluable in highlighting essential information about the opportunities and challenges facing local businesses at any point in time. Given how turbulent everything is at the moment, and the high level of uncertainty about what lies ahead, it is more important than ever that we can identify and fully understand the key issues facing local businesses and can quantify the true severity of these challenges.
Whether you have already participated in this survey or not, we really hope that you will do so from now on. Only you can provide us with the information we need about how your experiences and expectations are changing, based on what is happening in your specific sector and in the local economy as a whole. This timely local information places us one step ahead of the official nationwide data and enables us to start lobbying proactively for any necessary changes in policy.
The survey is completely anonymous, although we do ask you to tell us the sector you operate in. Once we present the results, you will be able to compare your own experiences and expectations against other businesses in your own particular sector, and across the Dundee & Angus region as a whole. Completing the survey should take only 10-15 minutes of your time, but the impact will be huge and the information you provide will be invaluable to our understanding of the local business economy.
Take part in the survey todayhttps://surveys.dundeeandanguschamber.co.uk/zs/URB3La
Survey closes 05/12/22
Dundee & Angus Chamber of Commerce
As the leading business membership organisation in Dundee & Angus and part of the worldwide long-established Chamber of Commerce brand, we help local businesses to connect, communicate and develop for business benefit.
