business

Business Confidence Weakens In Yorkshire And The Humber

Business confidence in Yorkshire and the Humber has weakened for the third quarter in a row, and now stands below the UK average, a survey of chartered accountants has found.

ICAEW’s Business Confidence Monitor (BCM) for Q2 2022, published today showed a reading of 13.1 on the index, meaning that businesses in Yorkshire and the Humber are some of the least confident in the UK.

Along with businesses across the country, companies in the region face significant challenges which could harm future growth, ICAEW said. Input costs were increasing, while salaries had risen in response to recruitment challenges.

Amid the increase in the cost of living, and last week’s announcement that inflation had hit 9%, ICAEW said the survey results suggested that targeted, strategic financial measures were needed, to relieve households and stop issues spilling further into the economy.

Supply-side challenges

Input price inflation is at 4.5% in Yorkshire and the Humber in Q2 2022, the joint-highest rate in the UK. This partly reflected supply-chain disruptions, and also sharp increases in energy and commodity prices due to the Russia-Ukraine war, ICAEW said, with input prices set to rise by a further 4.3% in the region. To offset these higher costs, firms have increased selling prices by 3.2% year-on-year, and expect to increase them further.

Staff turnover and the availability of non-management skills were the most common growing challenges for businesses, cited by 48% and 46% of businesses respectively. An increasing number of companies are also finding the availability of management skills to be a growing challenge; at 28% of those surveyed, this is the highest rate seen in Yorkshire and the Humber since the survey started.

Transport problems have continued to affect businesses in the region, and although the percentage has eased over recent quarters, they are still a growing challenge for 31% of businesses. Ongoing shortages of HGV drivers and Brexit-related disruptions to delivery and trading are likely reasons for these problems, the BCM reported.

Salary growth has picked up as businesses try to overcome recruitment challenges, with average total salaries up by 2% year-on-year and set to rise by 3.2% in the next 12 months. Staff headcounts rose by 2.3% year-on-year, with a similar increase planned over the next 12 months.

In the year to Q2 2022, domestic sales in Yorkshire and the Humber grew at 5.4%, a slower rise than almost anywhere else in the UK. Over the next 12 months, domestic sales are expected to rise at a slower pace than currently’.

Dr James Callaghan,

Dr James Callaghan, ICAEW Regional Director for Yorkshire and the Humber, said:

“With a number of challenges from rising costs and staffing challenges, it’s little surprise that confidence among businesses in Yorkshire and the Humber has declined for the third quarter in a row. Meanwhile, we know that families are struggling with the cost of living.

“While none of these problems are of the government’s making, they must understand the emotional and financial toll on people and families. The Chancellor should address the high cost of living with targeted, strategic financial measures to prevent disastrous consequences for people’s standard of living and the amount of spending in the economy, which could result in real pressure on businesses.”

Nationally, business confidence fell for a third quarter in a row, amid concerns on the tightening of the economy and rising inflation. Confidence for the quarter was at 18.6 on the index, down from its peak of 47 three quarters ago. Cost pressures and staff shortages were hampering expectations of a more positive outlook, ICAEW said.