Positive conditions for Lincolnshire economy but business confidence dropping in times of uncertainty

The Quarterly Economic Survey (QES) is a critical tool for businesses in Lincolnshire, allowing them to answer a series of questions on key economic indicators, which when aggregated formulate common trends, business insight and essentially, provides a snapshot of how the local economy is performing.

The survey is the largest and most representative survey of its kind in UK. As a result the results of the survey are closely monitored by policymakers such as the Treasury, the Bank of England, the Office of Budget Responsibility, the EU Commission and the IMF.

The survey is undertaken by the British Chambers of Commerce on behalf of Lincolnshire Chamber of Commerce, Lincolnshire County Council and in partnership with the University of Lincoln.

Results from the second quarter demonstrate that short term business performance is generally positive for the time being, with an increase in domestic and overseas sales and strong levels of recruitment contributing to workforce growth.

However, business confidence appears to have taken a hit amid political turmoil.

David Grey, Principal Lecturer from the University of Lincoln said: “Political uncertainty, not least over what Brexit actually means and when and how it is implemented, is likely to hinder investment plans and depress business sentiment for some time”.

Delving deeper, results show that manufacturing has suffered a slowdown this quarter with very few businesses in the sector reporting increased sales and orders. This drop comes on the back of a decline in new order intakes resulting from increased prices of raw materials.  

Whilst sales levels are down for manufacturing, there is positive news for the service sector as domestic sales are up from the previous two quarters, demonstrating a steady increase despite business uncertainty. However, much like the manufacturing sector, orders appear to be lagging behind.

With regards to overseas sales and orders, businesses have reported improvements in export sales albeit at a much slower rate than last year’s increment, but still an increase in unsettled times - particularly for overseas trade. However, export orders have remained relatively lacklustre despite the competitive boost of the weak sterling exchange.

At a glance, business confidence appears to have taken a slight hit with more respondents expecting a drop in turnover and profits during the next 12 months. This expectancy also suggests why fewer firms are looking to increase their workforce in the near future, despite many businesses reporting a workforce increase over the last three months.

There are a number of contributing factors offering a rationale to this confidence drop. This might include inflationary pressures, the introduction of the National Living Wage (NLW) back in early April, the impromptu snap general election and the road to Brexit which still remains unclear and is consequently affecting business sentiment.

Cllr Colin Davie, Executive Member for Economic Development at Lincolnshire County Council, said: "The results suggest that it's generally a positive picture for Lincolnshire businesses at the moment. However, there are signs that confidence has been affected by the current political uncertainty. My message to local businesses is this: you can rely on us to provide the support you need to thrive. I'm optimistic about our future, and truly believe that, for Lincolnshire, the best is yet to come."

The QES acts as a voice for local businesses in Lincolnshire and without strong input from the local economy, the less likely it is that the correct measures of support will be given to help make changes, plug gaps and steer the county in the right direction.

For more information on the QES, including information on how to join the survey panel and read the latest briefing, please visit the Lincolnshire Research Observatory www.research-lincs.org.uk/Economic-Briefing.aspx

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