Upbeat North East business survey queried

Aug 11 2009 by Karen Dent, The Journal

NORTH East business leaders are voicing reservations about an upbeat survey which says most of the region’s firms are seeing a rise in orders for the first time in over a year.

The Markit North East PMI (purchasing managers index) report said the region’s private sector economy had expanded slightly in July, with more than 50% of firms reporting increased business activity.

But the CBI and manufacturers’ organisation the EEF said the monthly study’s findings were not borne out in the North East. Markit economist Alex Hamilton said: “The North East private sector economy bounced back into expansionary territory in July, with both activity and new orders returning to growth. Although excess capacity at firms led to further job losses, the pace at which job cuts were implemented continued to slow.”

New business growth in the region was “moderate” and dragged behind the national average. Companies experiencing growth said better economic sentiment, firmer demand and product launches had fuelled the improvement. Manufacturing had fared better than services, the report said.

But EEF regional manager Tony Sarginson said: “These improving figures appear more optimistic than the ones we got from our recent survey – having said that, ours are purely manufacturing/engineering sector work related. “We too hear optimistic sounds, but I’m afraid it is not backed by any real evidence or more importantly by companies winning new sales or orders. I would expect job losses to continue in our sector for all of this year – but hopefully the turn of the year might see some new orders and that might stop the fall in jobs. Companies are very keen to hold on to their skilled staff.”

CBI assistant regional director Liz Mayes agreed Markit’s findings appeared optimistic.

“CBI’s survey data has not shown the sorts of increases seen in the Markit survey. What our most recent analysis shows is that the rate of decline continues to slow but that conditions remain tough for firms in both service and manufacturing sectors.

“We are beginning to see greater optimism for the next quarter from medium sized companies, fuelled by improvements in export orders.” North East Chamber of Commerce head of policy Ross Smith said: “Our own North East Business Barometer survey showed that while there has not yet been a return to growth, positivity has steadily been coming back to business in the region.

“But it’s crucial that this doesn’t lead to complacency. Many businesses with great medium-term prospects still face real short-term struggles and no one should lose concentration on giving them the maximum possible help.”

Financial information firm Markit quizzed 1,300 manufacturing and service companies in the UK to pull together its figures for the region. July was the 17th successive month employment in the region’s private sector shrank, although job losses were at their slowest since last September.