Q4 Full Report - Derbyshire and Nottinghamshire Chamber of ...

QuarterlyEconomic SurveyDECEMBER 2009

INDEXContentsPage(s)1. Introduction 32. Summary of results 43. Performance in the last three months 5-84. Trends analysis 9• UK sales 9• Export sales 10• Employment levels 11• Recruitment 12-13• Cash flow 145. Expectations for the next quarter 15-16• UK orders 17• Export orders 18• Labour force 19• Price pressures 20• Investment intentions 21-22• Confidence levels 23-246. Skills, Education and Business Engagement 25-267. Proposed use of business rates supplements 278. Postal Strike impacts 27-282

1. IntroductionDerbyshire and Nottinghamshire Chamber of Commerce (DNCC) surveys itsMembers quarterly on the latest business trends affecting businesses in the twocounties. This report sets out the findings for the fourth quarter of 2009 with thesurvey being conducted between 16 November and 9 December 2009. Businesseswere surveyed by postal and on-line surveys.There were 359 respondents to the Quarterly Economic Survey, 216 fromDerbyshire and 143 from Nottinghamshire. There were 225 respondents fromservice sector businesses and 134 from manufacturers.The findings of this survey are consolidated with the results obtained by otherChambers into the national British Chambers of Commerce Survey which providesguidance to Government, Bank of England and other key policy makers.The survey also included a focus on skills’ shortages and priorities for expenditure;the potential use for business rate supplements and the impact and responses tothe postal strike.For more information about the survey please contact John Dowson, Head of Policyand Representation on 01159 330049 or on john.dowson@dncc.co.uk3

Business Conditions2. Summary of Results• The improvements in the Derbyshire and Nottinghamshire economyflattened out in the fourth quarter of 2009. The outlook for the first quarterof 2010 is slightly better, however, there is little sign that employmentlevels are going to improve significantly and businesses are slightly lessconfident about future profitability.• Net cash flow balances are improving across both counties but there arestill more businesses reporting worsening rather than improving cash flow.• Overall net balances for both domestic and export orders are higher thanthe previous quarter.• Investment in both machinery and training are increasing but remain lowerthan both regional and national levels.• The confidence levels of Derbyshire and Nottinghamshire businesses forfuture turnover and profitability are higher than the East Midlands levels.• Net job losses are expected in the construction and engineering sectors andnet job growth in financial and business services. North Derbyshire looksset for net job losses whilst job growth is expected in Amber Valley,Erewash and Nottingham City in the next three months.Skills• If funding is limited, businesses believe that supporting training in theexisting workforce and higher education are the top priorities forexpenditure on skills.• The top priorities for skills that need improving in Derbyshire andNottinghamshire businesses are customer care and managerial andsupervisory skills.• Of the changes in education, businesses know most about nationalapprenticeships (62%) and least about the 14-19 Diploma (29%).Business Rate Supplements• Overall only 14% of businesses believe that business rate supplementsshould be used to fund major sporting venues locally with 62% opposing.Postal Strike• Only 24% of businesses changed their operations as a result of the postalstrikes.• Overall 13% of all Derbyshire and Nottinghamshire businesses are usingalternative deliverers following the postal dispute whilst 23% are nowmaking or receiving payments electronically, using electronic exportdocumentation or trading more online.4

3. Performance in the last three monthsThe table below shows the changes in the net variances* on a number ofindicators of performance in the last quarter and expectations for the next quarter.Quarterly Economic SurveyDecember 2009DNCCNottinghamshireDerbyshireManufacturersServicesPerformances in the last quarterUK sales 0 5 -4 -2 4Export sales -6 -11 -3 -2 -9Workforce changes -1 -7 1 -1 -1Businesses recruiting 0 -5 1 5 -4Recruitment difficulties3 -6 10 12 1Cash flow 11 16 6 11 11Full capacity 0 2 -2 -2 1Expectations for the next quarterUK orders 7 12 2 0 10Export orders 2 6 -5 5 -4Future workforce -4 3 -7 1 -6Investment in machinery 8 5 10 5 7Investment in training 5 2 5 4 2Confidence in turnover 2 13 -6 5 1Confidence in profitability -3 13 -15 -3 -2Expectations for prices 0 4 -4 1 1• Net variance is the difference between the percentages of businesses reportingimproving or increasing positions and those reporting worsening or decreasing positions.5

Derbyshire and NottinghamshireMost of the net variances considering performances in the last quarter had notchanged much or at all from the September 2009 Quarterly Economic Survey. Anotable exception was the improvement in business cash flow in both sectors andcounties. There was also a slight deterioration in export sales in the quarter.Changes from September Quarter 2009All Derbyshire and Nottinghamshire Businesses-10 -5 0 5 10 15Net % balance changeFull capacityCashflowRecruitment difficultiesBusinesses recruitingEmployment levelsExport salesUK SalesThere was a slight increase in the number of manufacturers that had attempted torecruit but a 12% increase in the number reporting difficulties in employingworkers with appropriate skills.Changes from September Quarter 2009All Manufacturing Businesses-5 0 5 10 15Net % balance changeFull capacityCashflowRecruitment difficultiesBusinesses recruitingEmployment levelsExport salesUK Sales6

Fewer service sector businesses attempted to recruit staff in the last quarter.The biggest negative net variance for service sector businesses was export saleswhere 9% more businesses reported lower sales. There was, however, a slightimprovement in sales in the UK market.Changes from September Quarter 2009All Service Sector Businesses-10 -5 0 5 10 15Net % balance changeFull capacityCashflowRecruitment difficultiesBusinesses recruitingEmployment levelsExport salesUK SalesDerbyshireThere were slight reductions in sales in the last quarter in both UK and exportmarkets. Employment levels and the number of businesses attempting to recruitwere largely the same but there was a 10% increase in the number of Derbyshirebusinesses reporting difficulties in recruiting workers with appropriate skills.Changes from September Quarter 2009All Derbyshire Businesses-5 0 5 10 15Net % balance changeFull capacityCashflowRecruitment difficultiesBusinesses recruitingEmployment LevelsExport salesUK Sales7

NottinghamshireMore Nottinghamshire businesses reduced employment levels and fewer attemptedto recruit workers in the last quarter. There was also a reduction in thoseexperiencing difficulties when recruiting.The biggest negative variance was export sales whilst there was a slightimprovement in sales in the UK market. The biggest positive change was in cashflow where 7% more reported improving and 9% fewer worsening positions.Changes from September Quarter 2009All Nottinghamshire Businesses-15 -10 -5 0 5 10 15 20Net % balance changeFull capacityCashflowRecruitment difficultiesBusinesses recruitingEmployment levelsExport salesUK Sales8

4. Trends AnalysisUK SalesSales in the UK market did not change in the quarter with the same percentage(30%) of businesses reporting improving and worsening positions. Service sectorbusinesses are more positive than manufacturers where there are still morecompanies reporting worsening rather than improving sales.UK Sales By Sector3010Net %-10-30Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-50Manufacturing Services CompositeFewer Derbyshire businesses reported higher UK sales whilst 2% moreNottinghamshire businesses improved sales and 3% fewer reported worseningsales.UK SalesAll Derbyshire and Nottinghamshire Businesses4020Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Nottinghamshire Derbyshire9

Export SalesOverall, export sales were slightly lower in the last 3 months. The samepercentage (17%) of manufacturing businesses reported improving and worseningexport sales. There was a reduction in service sector exports but there are stillmore businesses reporting higher rather than lower export sales.40Export Sales by Sector20Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40Manufacturing Services CompositeExport Sales fell in the both counties. The biggest deterioration was inNottinghamshire where the percentage (14%) of businesses reporting improvingand worsening sales is the same.40Export SalesAll Derbyshire and Nottinghamshire Businesses20Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Nottinghamshire Derbyshire10

Employment LevelsOverall, employment levels changed little from the September quarter with a 1%reduction in both sectors. Employment in the manufacturing sector remains weakwith 15% increasing and 27% reducing employment levels. The correspondingfigures for the service sector are 18% and 22%.Employment levels in last 3 months by sector4020Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40Manufacturing Services CompositeEmployment balances in Derbyshire continued to improve in the quarter whilstthey deteriorated slightly in Nottinghamshire. Only 19% and 13% respectively ofDerbyshire and Nottinghamshire businesses increased and 23% and 26% reducedemployment levels in the quarter.40Employment levels in the last 3 monthsAll Derbyshire and Nottinghamshire Businesses20Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Derbyshire Nottinghamshire11

RecruitmentOverall there was no change in the percentages of businesses that attempted torecruit in the quarter and a 3% increase in those reporting recruitment difficulties.The main difficulties in recruiting in Nottinghamshire and the service sector areprofessional, managerial and clerical and in Derbyshire and the manufacturingsector the main difficulty is recruiting skilled manual and technical workers.More Derbyshire and manufacturing businesses attempted to recruit and 38% and37% respectively experienced recruitment difficulties. Fewer Nottinghamshire andservice sector businesses recruited and whilst 34% and 37% respectively reporteddifficulties in recruiting workers with the appropriate skills.80RecruitmentAll Derbyshire and Nottinghamshire Businesses60Net %40200Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009Tried to recruitDifficulty in recruiting80RecruitmentAll Derbyshire Businesses60Net %40200Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009Tried to recruitDifficulty in recruiting12

80RecruitmentAll Nottinghamshire Businesses60Net %40200Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009Tried to recruitDifficulty in recruitingRecruitment: All Manufacturing BusinessesNet %806040200Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009T ried to RecruitDifficulty recruitingRecruitment: All Service Sector Businesses8060Net %40200Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009T ried to RecruitDifficulties Recruiting13

Cash FlowOverall net cash flow balances improved by 11% with 1% more reportingimproved positions and 10% fewer worsening cash flow. Nottinghamshire andservice sector businesses are more positive than Derbyshire businesses andmanufacturers but in both counties and sectors there are still more businessesreporting worsening rather than improving cash flow balances.Cashflow by Sector20Net Balance %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40Manufacturing Services Composite20CashflowAll Derbyshire and Nottinghamshire BusinessesNet Balance %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Nottinghamshire Derbyshire14

5. Expectations for the next quarterDerbyshire and NottinghamshireMost of the net variables looking ahead for the next quarter have improved. Onlyconfidence in profitability and export orders reduced slightly. The notableimprovements are investment in machinery and UK orders.Expectations for the next quarterAll Derbyshire and Nottinghamshire businesses-10 -5 0 5 10Net % balance changeExpectations for pricesConfidence in profitabilityConfidence in turnoverInvestment in trainingInvestment in machineryEmployment levelsExport OrdersUK OrdersWith the exception of confidence in profitability all of the variables formanufacturers improved slightly.Expectations for the next quarterAll Manufacturing Sector Businesses-5 0 5 10Net % balance changeExpectations for pricesConfidence in profitabilityConfidence in turnoverInvestment in trainingInvestment in machineryEmployment levelsExport OrdersUK OrdersService sector businesses report slight deteriorations in export orders andemployment levels and improvements in UK orders and investment plans formachinery.Expectations for the next quarterAll Service Sector Businesses-10 -5 0 5 10 15Net % balance changeExpectations for pricesConfidence in profitabilityConfidence in turnoverInvestment in trainingInvestment in machineryEmployment levelsExport OrdersUK Orders15

DerbyshireDerbyshire businesses’ confidence in future profitability levels has reduced fromthe positive September Quarter.On the positive side businesses are increasing investment plans for bothmachinery and training.Expectations for the next quarterAll Derbyshire Businesses-20 -15 -10 -5 0 5 10 15Net % balance changeExpectations for pricesConfidence in profitabilityConfidence in turnoverInvestment in trainingInvestment in machineryEmployment levelsExport OrdersUK OrdersNottinghamshireAll the variables for Nottinghamshire businesses improved with net balanceimprovement of 13% for confidence in both profitability and turnover which are attheir highest levels since March 2008. This may be partially affected by the delayin implementation of the Workplace Parking Levy in Nottingham.There are also significant improvements in UK orders.Expectations for the next quarterAll Nottinghamshire Businesses-5 0 5 10 15Net % balance changeExpectations for pricesConfidence in profitabilityConfidence in turnoverInvestment in trainingInvestment in machineryEmployment LevelsExport OrdersUK Orders16

UK OrdersThere is further improvement in orders for those businesses selling in the UKmarket which all came from the service sector. Overall there are still morebusinesses reporting worsening rather than improving orders but the net balancesare at their highest levels since June 2008.UK Orders By Sector4020Net %0-20-40Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-60Manufacturing Services CompositeSignificant improvements in net balances for UK orders are reported byNottinghamshire businesses and were now the same as their counterparts inDerbyshire.50UK OrdersAll Derbyshire and Nottinghamshire Businesses30Net %10-10-30Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-50DNCC Nottinghamshire Derbyshire17

Export OrdersOverall, export order balances improved slightly with a 5% improvement formanufacturers and a 4% reduction in net balances for service sector businesses.302010Export orders by sectorNet %0-10-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-30Manufacturing Services CompositeDerbyshire businesses’ net export orders balances fell back to zero with 20% ofbusinesses reporting both improving and worsening orders. The comparablepercentages for Nottinghamshire are 20% and 13%.30Export OrdersAll Derbyshire and Nottinghamshire Businesses10Net %-10Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-30DNCC Nottinghamshire Derbyshire18

Labour ForceNet balances for employment levels in the next three months deteriorated slightly.This is due to 3% fewer service sector businesses planning to increase theirworkforces and 3% more expecting to shed labour. There is a slight improvementin the net employment balances for manufacturers but these are still less positivethan their service sector counterparts.Employment in the next 3 months by sector4020Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40Manufacturing Services CompositeDerbyshire businesses’ future employment balances deteriorated by 7% whilstthose for Nottinghamshire businesses improved by 3%. The majority of businessesexpect employment levels to remain the same and only 14% and 15% areexpecting to reduce employment in Derbyshire and Nottinghamshire respectively.Net job losses are expected in the construction and engineering sectors and netjob growth in financial and business services. North Derbyshire looks set for netjob losses whilst job growth is expected in Amber Valley, Erewash and NottinghamCity in the next three months.40Employment in the next 3 monthsAll Derbyshire and Nottinghamshire Businesses20Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Derbyshire Nottinghamshire19

Price PressuresPrice pressures have not changed much in both sectors. The main pressures toraise prices come from raw materials costs for manufacturers and otheroverheads for service sector businesses.Price Pressures by Sector40Net %200-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009Manufacturing Services CompositeIn Derbyshire 5% more businesses expected prices to decrease comparedwith 4% fewer Nottinghamshire businesses.50Price PressuresAll Derbyshire and Nottinghamshire Businesses30Net %10-10Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009DNCC Nottinghamshire Derbyshire20

Investment IntentionsIn both sectors there were slightly more businesses increasing and also slightlyfewer reducing their investment plans for plant and machinery.Investment in Plant and Machinery by Sector4020Net %0-20-40Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-60Manufacturing Services CompositeThere are increases in investment intentions net balances for plant and machinerywith those for Derbyshire improving by 10% and Nottinghamshire by 5%.40Investment in Plant and MachineryAll Derbyshire and Nottinghamshire Businesses20Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Nottinghamshire Derbyshire21

Net balances for investment plans for training improved slightly in both sectors butonly 11% and 15% of Manufacturers and service sector businesses increased theirplans whilst 17% and 15% respectively scaled back their training investment.40Investment in Training by Sector20Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40Manufacturing Services CompositeFor the first time since June 2008, more businesses in Nottinghamshire areincreasing rather than reducing their training plans. There is also an improvementin the level of investment in training by Derbyshire businesses however the netbalance is still negative but back to the same levels as September 2008.40Investment in TrainingAll Derbyshire and Nottinghamshire Businesses20Net %0-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Nottinghamshire Derbyshire22

ConfidenceConfidence levels for turnover in the next three months increased slightly inboth sectors with around a half of business expecting turnover to improve.Confidence: Turnover by sector7050Net %3010-10-30Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009Manufacturing Services CompositeConfidence levels for turnover in both counties are now similar as net balancesfor Nottinghamshire businesses increased by 13% whilst those for Derbyshirereduced by 6%.Confidence: TurnoverAll Derbyshire and Nottinghamshire Businesses8060Net %40200-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009DNCC Nottinghamshire Derbyshire23

Businesses in both sectors are slightly less confident about future profitability.Confidence: Profitability by sector6040Net %200-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40Manufacturing Services CompositeNet balances for confidence about future profitability deteriorated in Derbyshire by15% whilst they increased by 13% in Nottinghamshire. There are still morebusinesses expecting profitability to improve than reduce with 42% and 23% inDerbyshire and 46% and 21% in Nottinghamshire respectively.60Confidence: ProfitabilityAll Derbyshire and Nottinghamshire Businesses40Net %200-20Dec 2007Mar 2008June 2008Sept 2008Dec 2008Mar 2009June 2009Sept 2009Dec 2009-40DNCC Nottinghamshire Derbyshire24

6 Skills, Education and Business EngagementSkills that need improving in the workforceThe top priorities for skills that need improving for all Derbyshire andNottinghamshire businesses are customer care (29%); managerial and supervisory(25%); creativity and innovative (18%) and marketing and research (18%).The biggest difference between sectors is managerial and supervisory skills whichare an issue for 31% of manufacturers and 21% of service sector businesses.Creativity and innovative; foreign languages and team working skills were alsomore of a problem to manufacturers. Marketing and researching skills are more ofa problem for services sector businessesGeographically, creativity and innovative and ICT skills are a bigger issue forNottinghamshire businesses whilst team working skills are more of a problem forDerbyshire businesses.One fifth of all businesses reported that they have no skills that need improving intheir workforces.Skills that need improving in existing workforcesAll Derbyshire and Nottinghamshire businesses4030%20100Creative/innovativeCustomercareExportingFinancialForeignLanguagesICTLiteracyManagerial/supervisoryMarketing/researchingNumericalProblemsolvingTeamworkingNone25

Priorities for expenditure on skills and educationIf, after the election, funding is limited businesses believe that supporting training in theexisting workforce (43%) should be the top priority for expenditure on skills. Highereducation expenditure (29%) is the second priority and 14- 19 year olds the third.There is little variation between sectors or counties.Top priority for expenditure on skillsAll Derbyshire and Nottinghamshire BusinessesUnemployed10%Highereducation29%Pre 14 yearolds14-19 year olds3%15%Currentworkforce43%Awareness of changes in skills and educationThere is little awareness of the 14-19 Diploma (29%) across the two counties whilstmore businesses know about national apprenticeships (62%) and work placements(57%). Generally awareness is lower in Derbyshire and service sector businesses.Awareness of changes in skills and education70%605040302010014-19 diplomaNational ApprenticeshipsWork placements aspart of the curriculum26

7 Proposed use of business rate supplementsOverall only 14% of businesses believe that business rate supplements should beused to fund major sporting venues locally with 62% opposing.In Derby City, where it had been proposed to use business ratesupplements to fund the development of Pride Park as part of the bid to bea host city for the football World Cup in 2018, there is only 10% support.Should business rate supplements be used tofund major sporting venues - All Derbyshire andNottinghamshire businesses24%14%62%YesNoDon't Know8 Postal strike impactsOnly 24% of businesses changed their operations as a result of thepostal strikes.Has the postal dispute changed your operations -All Derbyshire and Nottinghamshire businesses4%24%YesNoDon't Know72%27

Overall 13% of all Derbyshire and Nottinghamshire businesses are usingalternative deliverers following the postal dispute whilst 23% are now making orreceiving payments electronically, using electronic export documentation ortrading more online.Changes as a result of the postal dispute - All Derbyshireand Nottinghamshire businesses%20151050Making/receivingpaymentselectronicallyTrading moreonlineUsing analternativedelivererUsing electronicexportdocumentationOf those that changed their operations 82% are making or receiving paymentselectronically; 54% are using an alternative deliverer; 43% are trading moreonline and 33% are using electronic export documentation.%100806040200Changes as a result of the postal dispute -Derbyshire and Nottinghamshire businesses thathad changed their operations.Making/receivingpaymentselectronicallyTrading moreonlineUsing analternativedelivererUsing electronicexportdocumentation28