Business confidence hit by credit crunch
Jan 19 2008 by Chris Knox, The Journal
CONFIDENCE among the region’s businesses has been significantly dented by the onset of the credit crunch, with few expecting significant growth and even fewer expecting to recruit staff, new figures show.
The research by Lloyds TSB Commercial reveals that the balance of North-East firms expecting improved rather than worsening conditions over the next six months dropped to 25% compared to 34% in July.
The listing, which is worked out by subtracting the percentage of business owners who foresee a tough six months from those who are more confident, also shows that few business in the region will be investing heavily, with this balance dropping from 10% to -8%.
The figures indicate that such a drop in capital investment will have a major impact on job creation, with the balance of those expecting to recruit over the first half of 2008 dropping from 28% to 4%.
The less positive outlook comes after six months of slower orders, sales and profits for much of the region’s businesses. The balance of firms that reported higher sales during the second half of 2007 fell to 29% from 45% in the previous survey, while the balance of companies which saw bigger order books dipped from 39% to 33%.
This has had a major impact on profit expectations, with a balance of only 7% of North-East firms expecting higher profits in the first half of the year, compared to 29% in July 2007.
Despite the gloomy picture, which echo figures for most of the rest of the UK, Lloyds TSB underlined that the country is far from a recession.
It highlighted statistics that revealed that the balance of firms reporting a positive cash flow had dropped minimally from 20% to 18%, and that this was way off the same figure during the recession of the 1990s – when 56% of all United Kingdom firms reported problems with cash flow.
Leigh Taylor, area director at Lloyds TSB Commercial in the North-East and Cumbria, said: “There’s no doubt 2008 will prove more of a challenge for many North-East firms, but it’s a ride most will be able to endure.
“It’s clear that investment spending will be capped, as businesses tighten their financial belts, but British firms are well versed in the art of cash management and financial planning and these are skills that should help them weather the storm throughout 2008 and beyond.”
The figures were part of a country wide survey by Lloyds TSB and took in the sentiments of over 1,800 business owners.
They did contain some positive news for North-East businesses in the form of pricing, with the balance of firms expecting to be able to raise their prices dipping just 2% to 29%.
