We're on the up, firms tell survey

Oct 3 2007 By Andrew Mernin

MORE than a third of firms in the region expect a major climb in turnover this year despite interest rate rises, The Journal’s business barometer has found.

The half-yearly survey, which questioned firms on our Top 250 list, said 35% of companies expect a major increase in sales in the next 12 months, compared to just 8% in our previous study conducted last March.

The research, compiled for nebusiness by Newcastle Business School, also shows the number of businesses targeting growth in European and international markets has more than doubled from 13% to 35% in the last six months.

This sharp rise corresponds with a dip in growth prospects at home with only 25% of firms expecting to experience growth in the UK market compared to 54% six months ago. Meanwhile, the number of businesses who said interest rate rises would only have a small negative effect on their confidence jumped from 51% to
67.5%, despite the fact that interest rates have risen from 5.25% to 5.75% since the last survey in March.

Brian Snowdon, professor of economics and international business at Newcastle Business School, said the survey revealed a clear improvement in confidence in the region.

However, he also warned that recent turmoil in the financial market, which forced mortgage lender Northern Rock to seek an emergency loan from the Bank of England, could offset the optimistic predictions made by firms in the business barometer.

He said: “Bank of England and City economic forecasters have now become more pessimistic with respect to growth prospects in 2008 with a consensus expecting a slowdown.

“It remains to be seen if the optimism and confidence displayed in the business barometer survey has now moderated as
a result of increasing uncertainty arising from the recent turmoil in financial markets.”

Dean of Newcastle Business School, Prof Paul Croney, said: “It’s too early to predict the likely impact of the Northern Rock crisis on business confidence and results in the region. The main worry stems from a potential fall in consumer confidence if uncertainty continues in the UK financial and housing markets.

“However, judging by the response of the people of the North-East to rally in support of Northern Rock as one of our most successful and loyal companies, it is clear that the positive culture of the North-East will continue to help us through any future economic challenges.”

When asked what they would improve about the North-East business environment, almost a third (30%) of businesses said transport links while 30% also said poor transport links were holding the region back as a place to do business.

However, 47.5% of firms said the region had a business-friendly climate.

See page two for the full business barometer report