Region's economy remains robust despite challenges
"Coventry and Warwickshire’s overall economic outlook index indicated a robust local landscape as the pace of expansion increased."
The economic outlook in Coventry and Warwickshire improved slightly in the first quarter of the year – but a gap is opening up between manufacturers and service sector businesses when it comes to confidence.
They were the findings of the Coventry and Warwickshire Chamber of Commerce’s latest Quarterly Economic Survey (QES) which measures how firms across the patch are performing and how they feel about the months ahead.
The survey suggests that the economic outlook has improved since the final quarter of 2021 despite a range of issues that are affecting companies across the city and the county.
The survey, which is delivered in partnership with Prime Accountants Group, is analysed by the Economy & Skills Group at Warwickshire County Council. Its analysis uses a similar score to the national Markits Purchasing Managers Index (PMI) where 50 is the balance and anything above means the majority feel positive and anything below means the reverse. As well as giving a barometer for the local economy, the results are fed into the British Chambers of Commerce’s national QES.
The overall outlook for the region jumped from a score of 57.9 to 59.6 but while the service sector showed improvement, manufacturing had taken a dip.
When it comes to confidence, the service sector leapt from 71.3 to 83.7 but in manufacturing it slipped from 55.8 into negative territory of 46.1.
However, there were signs of improvement in overseas sales for manufacturers – from 40.5 up to 45.0 – and also in investment and cashflow which moved from 44.0 to 49.7.
Plans to recruit dropped in both the service sector and in manufacturing.
Sunny Parekh, of Warwickshire County Council, said: “Coventry and Warwickshire’s overall economic outlook index indicated a robust local landscape as the pace of expansion increased, with the index score moving further past the 50-mark in the first quarter of 2022, representing overall levels of optimism and expansion amongst local businesses.
“The first quarter of the year presented local businesses with a unique operating environment, creating a deviated picture between the local sectors.
“Geopolitical unrest in Europe meant that existing price pressures intensified as raw material and energy prices surged and inflation hit record heights. The latest QES show that the manufacturers’ economic outlook became subdued as business confidence declined amidst ongoing price pressures.
“Despite such headwinds, the impact of the Omicron wave of Covid-19 was brought under control and remaining restrictions on the economy were lifted, resulting in significant expansion and optimism within the local service sector. This offset the decline seen in the manufacturing results. Business confidence levels amongst local services reached significant heights in Q1, indicating positive expectations for 2022.
“Looking forward, the coming quarter points towards further surges in inflation and increases to the cost of living, painting a difficult picture for the local business landscape.”
Sean Rose, head of policy at the Coventry and Warwickshire Chamber of Commerce, said: “The small increase in the overall economic outlook for Coventry and Warwickshire is a positive sign, particularly when we have to consider the variety of issues that are hitting businesses.
“The outlook is broadly in line with the rest of the UK and, as it remains above the 50-point mark, this suggests the regional economy will continue to grow.
“There is a clear divide between the confidence of our service sector businesses and our manufacturers – driven, most likely, by the fact that our manufacturers are much more affected by the rising prices across the board.
“It is vitally important, therefore, that we continue to raise these issues with decision-makers, that we keep pushing for further support and also getting the message across that the Chamber is here to help businesses to grow – even in difficult times.”