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The Business Magazine July 2024
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Business West: The labour market remains critical issue for South West businesses

The Business Magazine article image for: Business West: The labour market remains critical issue for South West businesses
Business confidence in the South West has fallen into negative territory as companies face challenges including inflation and interest rates, according to a survey published today (Thursday) by ICAEW, The Institute of Chartered Accountants in England and Wales.
2 July 2024
Business confidence in the South West has fallen into negative territory as companies face challenges including inflation and interest rates, according to a survey published today (Thursday) by ICAEW, The Institute of Chartered Accountants in England and Wales.

Business West’s latest Quarterly Economic Survey (QES), which polls businesses across the South West, reveals 69 per cent reported difficulties in recruitment, particularly for skilled manual/technical and professional/managerial roles. Despite this, 79 per cent  of respondents are looking to recruit full-time positions and 49 per cent for permanent positions.

General economic conditions and business uncertainty remain the top concerns, with 62 per cent  and 51 per cent  of businesses respectively. Concerns about inflation have eased slightly, but it remains a significant issue for a quarter of respondents. 

A significant number of survey respondents indicate that political events, such as elections and changes in government policies, are major concerns for businesses. This uncertainty impacts their confidence and planning.

Matt Griffith, Director of Policy at Business West, said: “These findings underscore the ongoing recruitment challenges and capacity issues faced by businesses. Addressing these concerns is crucial for enhancing productivity and growth in the region. Further focus on skills development and workforce planning could be instrumental in mitigating these challenges.” 

“The business landscape is grappling with ongoing economic challenges and moderate optimism in specific areas. There is a slight improvement in confidence regarding the UK economy, but businesses still face significant uncertainties and pressures. However, the election outcome, whatever that may be, will at least bring businesses some certainty and a government that will set out an economic strategy for the next five years. This should help our businesses to plan.”

Phil Marsh, CEO, S&B Automotive Academy, Bristol said: “We are unsure how things will differ with a change of government. Around 70 per cent of our business is supported by apprenticeship training. We are unsure how this will be impacted by changes in policy and how funding will be impacted. Economy and inflation play a big part in buying resources. Our numbers are improving and things are currently looking much better for us.” 

Michelle Graham, Co-Founder & Director, Niche Recruitment, Chippenham, added: “Potential change of government always causes unsettlement in the labour market and we expect to see the upcoming general election have an impact on the confidence of the economy, just as it starts to settle.” 

“We have seen a slowdown in the number of roles currently being hired for and feel this is due to uncertainty and lack of confidence in the UK economy. With the general election looming 2024 has got off to a slower-than-anticipated start.” 

Domestic sales remained positive in Q2 with a net balance of five per cent, indicating resilience despite broader economic challenges. Manufacturers reported stronger performance compared to businesses in the service sector. The net balance for export sales stood at one per cent. Manufacturers show a stronger performance (16 per cent), while services still face challenges (minus eight per cent). 

The Q2 results reveal a trend towards price stability among businesses, with 61 per cent reporting that their prices remained constant over the past three months. However, it is relevant to highlight that a considerable 35 per cent of participants increased their prices, while only a small proportion, five per cent, reduced them. 

Other findings include:

  • Confidence in individual business prospects also reflects resilience, with 57% of participants having a positive outlook for their next twelve months. Although this has declined by 6% since March.
  • Confidence in the UK economy shows a modest improvement, with a net balance of -21% (compared to –26% in Q2).
  • Profitability forecasts are moderately optimistic, with 46% expecting improvement, but they lag behind turnover expectations (52%). 
  • Labour costs are the most prominent, affecting 66% of businesses, followed by utilities (46%), raw materials (38%), and fuel (29%). Other notable pressures include finance costs (21%) and import costs (17%). 
  • In Q2 2024, cash flow challenges persisted across all sectors. The net balance for cash flow was -8%, with 24% of businesses reporting increased cash flow and 32% experiencing a decline. 
  • Over the past three months, the availability of finance has shown mixed results. Only 6% of businesses reported an improvement in financial availability, while 38% reported no change, and 17% experienced a deterioration. 

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Nicky Godding is editor of The Business Magazine. Before her journalism career, she worked mainly in public relations moving into writing when she was invited to launch Retail Watch, a publication covering retail and real estate across Europe.

After some years of constant travelling, she tucked away her passport and concentrated on business writing, co-founding a successful regional business magazine. She has interviewed some of the UK’s most successful entrepreneurs who have built multi-million-pound businesses and reported on many science and technology firsts.

She reports on the region’s thriving business economy from start-ups, family businesses and multi-million-pound corporations, to the professionals that support their growth and the institutions that educate the next generation of business leaders.

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