Chamber wants to see increased investment to match ‘levelling up’ rhetoric

Cumbria Chamber of Commerce is urging the government to set out further detailed investment plans in research and development to match its rhetoric on levelling up for the region.

The call comes after recent studies show that North-West businesses has the lowest expectation for growth in export sales over the next 12 months, with a projected rise of less than two percent.

Figures from a combined Bank of England and ICAEW (Institute of Chartered Accountants of England and Wales) presentation also reveal that the region has one of the worst expectations for a rise in domestic sales over the next 12 months.

The region trails areas such as the South East of England, Wales and Scotland, with the South East in particular expecting a rise of more than eight per cent, compared to just six per cent for Cumbria and other areas of the North-West.

The latest study, which was presented to business leaders last week, make for concerning reading when put into context with the current impact of Brexit and the Coronavirus pandemic on some key industries for the county.

What the monitoring study highlights:

Sales have been weak over the last year. Domestic sales are lower in Q2 2021 than a year ago while exports contracted at a much sharper rate than nationally.
This weakness has fed through to profits, although the falls here have been cushioned slightly by an easing of labour and input costs.
Employment levels have fallen over the past year, but the declines have been modest, thanks to the government’s furlough scheme.
Regulatory requirements and transport problems have come to the fore as growing challenges, partly linked to Brexit delays and Covid-19 containment measures.

While the majority of the report will be concerning for businesses, there are some positives in the report, with the North West’s Business Confidence Index rising in Q2 2021, underpinned by expectations of rebounds in sales and profits.

Meanwhile there is a hope that as businesses continue to rehire and people return from furlough that there will be a post-pandemic lift in investment rates.

Cumbria Chamber’s Managing Director Suzanne Caldwell said: “The recent Queen’s Speech said that the government would ‘level up opportunities across all parts of the United Kingdom’.

“Levelling up the north of England has been a key part of the government’s rhetoric for a long time and it is vital that communities which have suffered levels of deprivation or feel left behind have that chance to catch up.

“The Institute for Fiscal Studies (IFS) have highlighted that this is still a huge problem, which is backed up by the latest data update provided by the Bank of England and the ICAEW.

“A combination of Brexit and the Covid-19 pandemic has accelerated a lot of issues that businesses have already been experiencing, whether that’s decline in retail and more traditional business sectors or a struggle to recruit workers with the right skills.

“Government spending in the last few years in the north-west on research and development has been less than a third compared to London and the south-east, less than half compared to the south-west and Cumbria is behind our neighbours in Lancashire and Manchester so there’s a lot that the government needs to do.”

Research from the Institute for Fiscal Studies (IFS) found that: “On a wide variety of measures, regional disparities in the UK are greater than in most comparable countries.”

Additional findings in the study showed that immediate conditions remain very uncertain for businesses, and with renewed surges in coronavirus cases across the world, risks are skewed to the downside.

Companies in the North West report a range of growing challenges, led by regulatory requirements. The proportion of businesses citing these has been exhibiting an upwards trend in recent quarters and now stands at 39%.

It is possible that difficulties due to new regulatory processes following Brexit could be a reason here, as well as Covid-related measures.

The same factors could also be driving the rise in the percentage of companies reporting transport problems as a more pressing issue. At 29 per cent, this is the joint highest rate seen in the region since the survey began in 2004.

Positive prospects for the next 12 months by the ICAEW is a return to economic growth, with domestic sales like to be far quicker than exports, reflecting slower vaccine roll-outs and a Brexit effect.

Employee growth, investment rates and R&D budgets are also expected to improve at varying levels.

Suzanne added: “These latest figures show that we can expect steady growth, which is desperately needed but what is clear is that while we’re likely to see growth, it is at a lower rate than in the south of the UK.

“That needs to close, and for that to happen some of the key problems are recruitment and exporting issues need to resolved imminently. The Turing Scheme needs to start immediately rather than in two months’ time and the government needs to smooth out the red tape issues with the EU.”

**The Chamber advises businesses to check its Covid Toolkit, which has details of the new restrictions and links to apply for grants for businesses that are affected by the restrictions.

The toolkit is on the Chamber’s website at: https://www.cumbriachamber.co.uk/news/28573-restart-rebuild-and-renew