The East Midlands Chamber’s Quarterly Economic Survey found that the proportion of companies expecting to see improvements in profitability and turnover over the coming year has fallen by 21% and 17 % respectively between the second and third quarters of 2022.
A lack of optimism about what lies ahead is due to lower sales in the UK and overseas, as well as early orders, as well as an 18% negative change in cash flow from one quarter to the next.
The tightening grip of the “cost of doing business crisis” – driven by rising costs for energy, human resources, raw materials and fuel – means that almost six in ten companies now expect to be forced to raise their own prices, while their intentions to invest and recruit are now slipping.
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Sales fell between the second and third quarters of the year – falling 16% domestically and 4% overseas – while advance orders also fell 7% in the UK and 3% internationally ; Although there was an 11% increase in the number of companies increasing their workforce between quarters, the outlook for the future is less optimistic with a 15% drop in the proportion of companies planning to increase their workforce . This comes as 73% of companies attempted to recruit in Q3, but, of this cohort, 72% encountered problems filling vacancies among a relatively equal split of professional, skilled manual, unskilled and clerical workers. ; 57% of companies expect to be forced to raise prices (vs. 55% net in Q2) as they grapple with rising costs for utilities, people, raw materials and fuel; Cash flow, after declining for 1% net of companies in the second quarter, is now down for 18% net of companies, marking a negative variation of 19%, while growth opportunities are scarce with 38% at full speed. working capacity; The lack of space at the margins means that investment intentions continue to decline – falling 6% quarter-on-quarter for plant and machinery, and 2% for training; Business confidence plummeted, with the proportion of companies expecting improved profitability and revenue each falling 10% between the second and third quarters.
Chris Hobson, director of policy and external affairs at the East Midlands Chamber, said: “These findings paint a difficult picture for business.
“For the first time, demand indicators – how busy businesses are selling their goods and services – have also fallen, both internationally and here in the UK.
“This is a concern as it suggests the impact of inflation is starting to dampen activity.
“Cash flow is now deteriorating for more companies than it is improving and, given the well-publicized pricing pressures that are now at a critical point for many companies, this all points to the need for immediate action to support businesses.
“We also need a longer-term strategy to build trust and give them the encouragement they need to start making more strategic investment decisions.”