The theme that runs through the latest Business Bulletin released this week by Heart of the South West LEP is one of cautious optimism. Business confidence levels are significantly improving and there has been modest growth in recent months, with unemployment also falling. However, there are still considerable challenges for particular places, sectors and groups.
Key data and intelligence are brought together in this document from a range of leading business organisations representing over 25,000 businesses in the Heart of the South West area – approximately a third of the total number of businesses here. Other sources include the Heart of the South West Growth Hub, the Office for National Statistics, Oxford Economics, and the Bank of England.
Using this intelligence, the bulletin sets out both the national and local outlook.
Notable points in the bulletin:
- Nationally, the Office for Budget Responsibility, Economic and Fiscal Outlook, March 2021, anticipates GDP to grow by 4% in 2021 and to regain its pre-pandemic level by the second quarter of 2022, six months earlier than forecast in November 2020. However, beyond 2022, it also forecasts the economy will suffer a ‘scarring’ impact in supply capacity, with the pandemic lowering output in the medium term by 3% relative to its pre-pandemic path.
- Also looking at the national picture – according to the Office for National Statistics (ONS), between February and April 2021, there were an estimated 657,000 vacancies, representing 8% growth compared with the previous quarter.
- In the South West, the ONS’ ‘Labour Market in the Regions of the UK May 2021’ report shows that the overall employment rate stands at 76.7%, a fall of 2 percentage points from January to March 2020, but largely unchanged from the previous quarter and higher than the UK average. Unemployment is 3.9%, also below the UK average of 4.8% but 0.7 percentage points higher than the same period in 2020.
- According to the FSB, business confidence in the South West reached 39% in Q1 of 2021 – a significant swing from the -40% recorded in Q4 2020. However, 51% of small businesses in the South West reported a decrease in revenue in Q1, primarily due to the lockdown. 52% expect an increase in the next three months.
- The SWMAS South West Manufacturing Barometer, covering Q3 2020 demonstrates the the pandemic and Britain’s new trading relationship with the EU continue to represent significant issues. 53% of respondents stated that importing products from the EU had been negatively impacted, and 61% reported negative price changes with supply chains. Despite this, 40% said that Britain’s new relationship with the EU would not hinder their economic recovery.
- The ICAEW Regional Business Confidence Monitor for Q1 2021 reports an improvement in business sentiment in the South West. Domestic sales have contracted by 2% year-on-year as of Q1 2021, the largest fall in the South West since the survey began. This is largely due to the damage incurred by the hospitality sector.
- The ICAEW Business Confidence Monitor also reports that 35% of South West businesses cite customer demand as the most pressing growing challenge. The number of businesses citing transport issues as an issue has also grown sharply. Despite this, businesses expect sales and exports will expand sharply in 2021, leading to an increase in profits and planned increases in overall employment numbers.
The full version of the HotSW LEP’s Winter Business Bulletin can be read here: https://heartofswlep.co.uk/wp-content/uploads/2021/06/HotSW-Quarterly-Business-Bulletin-Spring-2021.pdf
