The latest Quarterly Economic Survey (QES) by Greater Manchester Chamber of Commerce reveals a significant boost in business confidence compared to the first quarter of the year.
This improvement comes after a notable decline in economic performance at the start of 2024.
The Greater Manchester Index, a composite indicator derived from key QES measures, has risen to 30.6, marking a 27-point increase from the previous quarter. Subrahmaniam Krishnan-Harihara, Deputy Director of Research at Greater Manchester Chamber of Commerce, noted the stark contrast between the two quarters, emphasising the return of consumer confidence and growth across various sectors, including services, manufacturing, and construction.
“While the first quarter was challenging, this quarter shows a resurgence in consumer confidence and significant growth since March,” he said. “We’ve seen a growth in services, and manufacturing and construction are at their highest levels for months.”
Inflation and Business Concerns
Despite the positive outlook, businesses remain concerned about inflation, even though the headline CPI has reached the 2% target. Wage inflation, in particular, continues to be a significant issue for many businesses. However, the proportion of businesses worried about inflation has decreased compared to 2023.
The survey indicates a rise in both domestic and overseas demand, with a notable increase in quarterly domestic sales balance from -4.7 in Q1 to +18.0, and quarterly export sales balance improving from -5.2 to +11.1. However, a sub-regional analysis shows varied performance, with growth in the North of Greater Manchester, a marginal decline in the city centre, and decreased international activity in the South.
Sectoral Differences
Krishnan-Harihara explained these regional differences by highlighting the sectoral composition of different parts of Greater Manchester. “There is more manufacturing in the North, which has seen significant growth. In contrast, hospitality and retail, concentrated in the city centre, have been less successful. The South, focused on logistics, home to the airport, has experienced a downturn in international activity.”
He added that consumer spending remains a critical driver of the UK economy, accounting for 67% of economic activity. “Retail sales saw a turnaround in May, with increased consumer confidence and willingness to spend despite rising prices. Pay rises, including significant increases in the Living Wage and Minimum Wage, have boosted disposable incomes, easing cost-of-living pressures. Consequently, recruitment activity has surged, with many employers planning to expand their workforce.”
Trade and Export Challenges
The UK, one of the largest exporters of services globally, has seen an increase in export sales for both services and manufacturing. However, concerns about the UK’s trading relationship with the EU persist. Krishnan-Harihara emphasised the importance of prioritising trade with the EU, given that 46% of UK exports and nearly 60% of imports involve EU countries.
“Trade with the EU must be a priority for the new government. Recent Free Trade Agreements have limited impact as trade with many of these countries is minimal. Unfortunately, trade with the EU was barely mentioned during the election campaign,” he said.
Future Economic Policies
Krishnan-Harihara also commented on domestic policy, noting that during the election campaign, all major parties pledged not to cut services or raise taxes, despite these being mutually exclusive goals. He called for clarity on whether the new government will invest in infrastructure in the North West and support business investment.
The QES results were unveiled at the Chamber’s Q2 Economic Review, sponsored by Intercity and Centrality.
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The survey underscores the cautious optimism among businesses in Greater Manchester, highlighting the importance of strategic support from the new government to sustain this positive momentum.
