Quarterly Business Bulletin Winter 2020/21

Whilst the need to support businesses in the short-term remains essential, progress must also be made to tackle the longer-term underlying structural challenges in the South West to protect it from future crises – that is one of the over-riding summations from the Heart of the South West LEP’s latest quarterly Business Bulletin.

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 data, the bulletin has the following outlook for 2021:

  • Earlier forecasts suggested a return to growth in 2020, which has been put back following further lockdowns; however, the most recent Bank of England Report considers a reasonably fast recovery through 2021 is quite possible as the vaccine rollout accelerates;
  • Unemployment has grown less than expected as a result of the Government’s employment support schemes and financial support to businesses; however, it is likely to peak at a higher level than previously hoped in 2021 irrespective of the continuation of Government support, with a possibility of 7.75% unemployment in the middle of the year;
  • Whilst there is inequality across income groups, high levels of personal debt have been paid off in the last 12 months: total household incomes were 1.2% higher in Quarter 3 of 2020 compared to the same period in 2019, whilst household consumption was 10% lower. This suggests that when recovery comes it could be strong, as was seen in summer 2020;
  • Brexit may not be dominating the headlines because of COVID-19, and securing a trade deal has helped the UK’s start to life outside the EU, but the increased friction in trade is widely expected to reduce productivity and the size of the UK’s economy in the long-term. The fishing sector is experiencing particular challenges.

Locally, the South West Small Business Index (SWSBI) shows how smaller firms in the area continue to be adversely affected by COVID-19, particularly in relation to general business confidence and employment intentions. However, whilst confidence for small business owners in the South West hit a low in Q4 of 2020 of -40%, it is still higher than the national average of -47%.

Business conditions look set to remain tough. 56% of South West businesses expect to see a decrease in profit over the next three months. In terms of employment, 13% said they intended to increase headcount, whilst 14% said the opposite.

The ICAEW Regional Business Confidence Monitor undertaken in Q4 2020 reports that exports in the South West were down by -1.6% year-on-year – a steeper contraction than seen nationally. However, the reported fall in domestic sales of -0.9% was less severe than the UK average of -2.2%, possibly as a result of the region’s relatively large hospitality sector benefitting from increased domestic tourism in the summer months.

The full version of the HotSW LEP’s Winter Business Bulletin can read by clicking on the button below.

Download the Quarterly Business Bulletin Winter 2020/1