quarterly economic review · 2017-05-12 · quarterly economic review quarter 4 2016 report summary...
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QUARTERLY
ECONOMIC REVIEW
REPRESENTATION
QUARTERLY
ECONOMIC REVIEW
QUARTER 4 2016
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QUARTERLY ECONOMIC REVIEW QUARTER 4 2016
REPORT SUMMARY Businesses in Milton Keynes are thriving in both domestic and international
markets as we enter the New Year, according to the latest Quarterly
Economic Survey report from Milton Keynes Chamber of Commerce.
The business barometer indicates a sharp rebound for UK manufacturing sales and increased export sales across all
sectors in the fourth quarter of 2016.
A total of 50 businesses, employing 2,552 people from across Milton Keynes, took part in the review of the final quarter
of the year.
At home, 43% of manufacturing firms said their UK sales had increased over the past three months, versus 25% in Q3.
And all of them reported that UK sales had improved or remained the same.
For the service sector, 85% of companies said their UK sales had stayed constant or increased.
Both sectors saw improved UK orders in Q4, as well as impressive increases in export sales – 33% for manufacturers and
18% for those in the service sector.
In order to keep up with demand, all firms surveyed said their workforce would increase or remain in line with the
previous quarter going forward, with more than half of manufacturers noting an increase in their in house team in this
quarter.
Exchange rates appear to be the biggest cause for concern in external factors for all – unsurprising considering the
uncertainty of Brexit over the second half of the year and in the coming months ahead.
Milton Keynes Chamber of Commerce chief executive said: “It is very encouraging to see the success of firms across all
markets in the last three months of 2016 and the hiring intentions of our respondents this quarter are also very positive.
“I hope that this optimistic end to the year will also mark the start of a successful New Year which will hopefully also
bring some clarity to the Brexit process and settle exchange rates. Only time will tell.”
Paul Griffiths, Chief Executive Milton Keynes Chamber of Commerce
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RESPONSES Milton Keynes Chamber of Commerce’s Quarterly Economic Survey (QES) is a regular independent business survey
and forms part of the biggest and most representative survey of its kind in the UK.
It is widely recognised as a key economic indicator by Government, The Bank of England and independent economists
alike. It also provides both central and local policymakers with an important source of feedback of the performance,
concerns and views of businesses across Milton Keynes.
The QES questionnaire covered ten broad sections;
The fieldwork for Milton Keynes Chamber of Commerce’s latest QES was conducted via electronic and hard copy
questionnaire during the period 7th November to 28th November 2016. This report therefore sets out analysis and
interpretation of the findings for the fourth quarter of 2015. A total of 50 businesses, employing 2,552 people from
across Milton Keynes responded. The sector split of respondents is shown in the table below.
0%4%
10%
2%0%2%0%
50%
18%6% 2%
6%0%
Production
Manufacture Electronic /IT GoodsManufacture OtherGoodsConstruction
Transport /CommunicationRetailing / Wholesaling
Hotels / Catering
Professional Services
Marketing / Media
Consumer Services
Public / Voluntary Sector
Other Services
Unknown
UK Sales and Orders Activity
Export Sales and Orders Activity
Employment
Recruitment and Skills Shortages
Cashflow
Investment
Business Confidence
Capacity
Price Pressures
External Factors
QUARTERLY ECONOMIC REVIEW QUARTER 4 2016
UK SALES AND ORDERS The UK sales activity balance figure for those operating across the manufacturing sector for the fourth quarter rebounded sharply when compared to the third quarter, with 43% of firms saying that their UK sales had increased versus 25% in Q3. 0% of manufacturing firms surveyed during the fourth quarter said that UK sales had declined.
36% of service sector businesses also reported that UK sales activity was consistent with the third quarter.
85% of service sector firms said that their UK sales had remained in line with the third quarter or had increased. 100% of firms operating across the manufacturing sector reported either an increased in UK sales or sales that remained consistent with third quarter. Both the manufacturing and services sectors reported increases in UK orders over the previous three months when
compared to the third quarter – 33% for manufacturing and 31% for the services sector.
* Net (percentage) balances are the difference between the percentage of businesses that expect improving or
increasing positions and those expecting worsening or decreasing ones.
(20)
0
20
40
60
80
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
UK SALES
Manufacturing Services
(20)
0
20
40
60
80
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
UK ORDERS
Manufacturing Services
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EXPORT SALES AND ORDERS Manufacturing and service sector export sales activity reported a sharp increases in the fourth quarter when compared to the third quarter – 33% for manufacturing and 18% for the services sector reported increase in export sales.
This compares to the previous quarter when there was an equal number of services sector reporting a decrease in export sales versus those reported an increase leaving a balance figure of 0%. The manufacturing sector on the other
hand was actually in contraction territory with more firms reporting a decrease in export sales versus those that had reported an increase.
Businesses surveyed during the fourth quarter across both sectors were both in contraction territory with more businesses reporting a decrease in export orders compared to those that reported an increase. The fourth quarter reversed this with both sectors seeing an increase in export orders. 33% of manufacturing firms and 19% of services sector firm reported an increase in export orders.
* Net (percentage) balances are the difference between the percentage of businesses that expect improving or increasing positions and those expecting worsening or decreasing ones.
(20)
0
20
40
60
80
100
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
EXPORT SALES
Manufacturing Services
(40)
(20)
0
20
40
60
80
100
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
EXPORT ORDERS
Manufacturing Services
QUARTERLY ECONOMIC REVIEW QUARTER 4 2016
EMPLOYMENT Businesses operating in both the manufacturing and service sectors reported an increases in their workforce during the fourth quarter, with manufacturing seeing the largest increase. 57% of manufacturing firms reported an increase in their workforce versus 26% for the services sector.
100% of manufacturing businesses stated that their workforce had either increased or remained consistent with the third quarter. 93% of services sector firms reported that their workforce had either increased or remained consistent with the previous quarter.
Hiring intentions for the next three months for businesses operating across both the services and manufacturing sectors increased slightly when compared previous quarter. 100% of manufacturing firms stated that their workforce
would either increase or remain consistent with the previous three months. 100% of service sector businesses reported that their workforce would either increase or remain in line with the previous three months.
* Net (percentage) balances are the difference between the percentage of businesses that expect improving or increasing positions and those expecting worsening or decreasing ones.
(40)
(20)
0
20
40
60
80
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
Workforce - Last 3 Months
Manufacturing Services
0
10
20
30
40
50
60
70
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
Workforce - Next 3 Months
Manufacturing Services
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RECRUITMENT & SKILLS SHORTAGES Data compiled during the fourth quarter shows that 71% of manufacturing companies and 38% of service sector companies attempted to recruit staff.
40% of manufacturing companies reporting that they had experienced difficulties in recruiting suitable staff during the
fourth quarter. There was a 20% decrease in businesses operating in the services sector reporting that they had experienced difficulties in recruitment during the fourth quarter.
0
20
40
60
80
100
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
%
Businesses Attempting to Recruit
Manufacturing Services
0
20
40
60
80
100
120
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
%
Businesses Experiencing Difficulties to Recruit
Manufacturing Services
QUARTERLY ECONOMIC REVIEW QUARTER 4 2016
The following table highlights the skills areas where businesses experienced difficulty in sourcing new employees during the fourth quarter.
CASHFLOW & INVESTMENT
There was a deterioration in cashflow for businesses operating across both sectors during the fourth quarter. The balance figure for the services sector was at 0, meaning that an equal number of firms reported an increased in cashflow versus those that reported a decrease. The manufacturing sector reported a balance figure of 11% in Q3 whereas this quarter the balance figure was 5%.
0
2
4
6
8
10
12
Skilled Manual /Technical
Professional /Managerial
Clerical Un / Semi-Skilled
No
.
Skills Shortages
Manufacturing
Services
All Responses
(20)
(10)
0
10
20
30
40
50
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
Cashflow
Manufacturing Services
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There was divergence of data for the manufacturing and service sectors during the fourth quarter when surveyed about their investment plans for plant/machinery. The manufacturing sector reported a sharp deterioration in investment in plant/machinery with the overall balance figure going from 60% to -29%. At the same time the
services sector during the same timeframe reported a slight increase from 12% in Q3 to 17% in Q4. This quarter 0% of manufacturing firms reported that they had increase investment in plant/machinery whilst 22% of businesses that operate across the service sector reported that they had increase investment in this area.
The majority of firms 71% for manufacturing and 72% for services reported that their investment plans in
plant/machinery had remained in line with Q3.
Similarly, the services sector invested more into training when compared to their counterparts in the manufacturing sector. The manufactuirng sectors investment in training entered contraction territory with the overall balance figure reading -14%. On the other hand, service sector investment in training actually recorded a slight increase from 19% in Q3 to 22% in Q4.
* Net (percentage) balances are the difference between the percentage of businesses that expect improving or
increasing positions and those expecting worsening or decreasing ones.
(40)
(20)
0
20
40
60
80
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
Investment - Plant & Machinery
Manufacturing Services
(40)
(20)
0
20
40
60
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
Investment - Training
Manufacturing Services
QUARTERLY ECONOMIC REVIEW QUARTER 4 2016
CONFIDENCE Business confidence across Milton Keynes as determined by turnover remained healthy during the fourth quarter across the services sector but there was a slight decline for those surveyed this quarter in the manufacturing sector.
57% of manufacturing businesses stated that their turnover during the fourth quarter had increased. Also during the fourth quarter 72% of service sector businesses stated that their turnover had increased.
BUSINESS CONFIDENCE –TURNOVER NEXT 12 MONTHS - NET BALANCES
% Balance Q2 - 2013
Q3 - 2013
Q4 - 2013
Q1 - 2014
Q2 - 2014
Q3 - 2014
Q4 - 2014
Q1 - 2015
Q2 - 2015
Q3 - 2015
Q4 - 2015
Q1 - 2016
Q2 - 2016
Q3 - 2016
Q4 -2016
Manufacturing 50 68 71 74 79 74 69 60 44 61 60 40 56 60 29
Services 38 61 71 81 70 74 78 69 67 67 79 67 56 45 60
* Net (percentage) balances are the difference between the percentage of businesses that expect improving or increasing positions and those expecting worsening or decreasing ones.
0
20
40
60
80
100
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
CONFIDENCE - Turnover
Manufacturing Services
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Confidence when looking at profitability based on respondents to this quarter’s survey remained in robust health for those businesses operating in the services sector. However this deteriorated sharply for businesses in the manufacturing sector.
There was an equal number of manufacturing firms, 43% reporting an increase in profitability as reported a decrease. 79% of service sector firms reported that confidence based on profitability had remained the same or had increased during the fourth quarter when compared to the third quarter.
BUSINESS CONFIDENCE – PROFITABILITY NEXT 12 MONTHS – NET BALANCES
% Balance Q2 - 2013
Q3 - 2013
Q4 - 2013
Q1 - 2014
Q2 - 2014
Q3 - 2014
Q4 - 2014
Q1 - 2015
Q2 - 2015
Q3 - 2015
Q4 - 2015
Q1 - 2016
Q2 - 2016
Q3 - 2016
Q4 -2016
Manufacturing 32 47 50 65 67 59 55 45 33 42 40 20 44 60 0
Services 24 46 55 71 66 63 66 60 57 51 58 45 36 30 45
* Net (percentage) balances are the difference between the percentage of businesses that expect improving or
increasing positions and those expecting worsening or decreasing ones.
0
20
40
60
80
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2016
Q3 -2016
Q4 -2016
Net
% B
alan
ce
CONFIDENCE - Profitablity
Manufacturing Services
QUARTERLY ECONOMIC REVIEW QUARTER 4 2016
CAPACITY Fourth quarter data shows that a majority of businesses operating across both the services and manufacturing sectors are still operating below capacity. 67% of service sector firms surveyed said they were operating below capacity
whereas the figure for the manufacturing sector was 83%. However, the 17% figure of those businesses surveyed in
the manufacturing reporting that they were operating at full capacity is in fact a 17% versus Q3.
17%
83%
CAPACITY - Manufacturing
Full Capacity Below Full Capacity
33%
67%
CAPACITY - Services
Full Capacity Below Full Capacity
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PRICE PRESSURES As can be seen by the graph below there was a dramatic increase in price pressures for businesses operating across the manufacturing sector. As the same time during the fourth quarter, the services sector prices pressure remained broadly in line with Q3. The services sector reported a 1% rise in price pressures during the fourth quarter, rising
from 25% to 26%.
As can be seen in the graph below, increases in other raw material costs were the main contributing factor for businesses overall when asked what was leading them to increase their prices.
* Net (percentage) balances are the difference between the percentage of businesses that expect improving or increasing positions and those expecting worsening or decreasing ones.
0
20
40
60
80
Q2 -2013
Q3 -2013
Q4 -2013
Q1 -2014
Q2 -2014
Q3 -2014
Q4 -2014
Q1 -2015
Q2 -2015
Q3 -2015
Q4 -2015
Q1 -2016
Q2 -2017
Q3 -2016
Q4 -2016
Net
% B
alan
ce
PRICE PRESSURES
Manufacturing Services
0
2
4
6
8
10
12
14
16
Pay Settlements Raw Materials Finance Costs Other Overheads
No
.
Pressure on Prices
Manufacturing
Services
All Responses
QUARTERLY ECONOMIC REVIEW QUARTER 4 2016
EXTERNAL FACTORS When combining figures for both the manufacturing and services sector, exchange rates was the leading course for
concern amongst businesses in Milton Keynes during the fourth quarter.
02468
101214161820
No
.
External Factors of Concern
Manufacturing
Services
All Responses