Businesses show signs of economic recovery, but more banking support needed

Businesses, especially within the manufacturing and financial/business services sector are showing early signs of recovery, with 22% expecting conditions to improve in the next 12 months, compared to 9% in November 2008. But banks should be doing more to help businesses battle the tough economic conditions. This is according to Ipsos's National Business Survey - the largest survey of businesses in England and Northern Ireland, released today, 17 July 2009. The survey of over 6700 businesses by Ipsos on behalf of the Regional Development Agency Network and Invest Northern Ireland is the largest of its kind. It monitors output and performance to take the pulse of business in England and Northern Ireland to help policy makers target support where it is needed most. Signs of improvement in the economy include an increase in the number of businesses expecting domestic orders to rise in the next 12 months. 21% of firms now expect this, up from 13% in November 2008. Financial/business services and manufacturing firms expect to see the strongest upturn in domestic orders overall, while construction companies are the most pessimistic. Many businesses took measures to cut costs in the last 12 months, but fewer firms expect to in the coming year: 37% reduced staff in the last 12 months compared to 21% who intend to in the next 12. This trend runs across nearly all sectors, implying that the growth rate of UK unemployment may be set to slow down - if so, this will be very different to previous recessions where it peaked 3-4 years after the start. The survey also suggests that business cash flow positions may be set to improve a little; 1 in 3 companies delayed payments to suppliers in the last 12 months with a lower proportion - 1 in 5 - expecting to do this in the next 12 months. The Ipsos survey provides yet more evidence of what a tough year it has been for business. Performance over the last 12 months across all metrics - orders, numbers employed, output, prices, staff costs, profit margins and cash flow has deteriorated compared to November 2008 and June 2008. In June 2009, nearly half (47%) of businesses surveyed reported a fall in domestic orders in the previous 12 months, compared to 32% in November 2008. Businesses from all sectors still expect considerable pressure on profit margins and cash flows over the next 12 months. Ben Page, Chief Executive of Ipsos, commented on the results:

"As with consumers, there are now signs from businesses of more optimism about the future, although many still face huge challenges."

Analysis by Sector: Financial/business services

• The most positive sector overall - 26% of these firms expect conditions to improve in the next 12 months
• Least likely to expect reductions in the number of staff in the next 12 months - 16% compared to 32% of hotels and catering firms

Construction

• Remains one of the most pessimistic sectors overall - 37% of construction firms expect their business climate to deteriorate further in the next 12 months
• Most likely sector to expect cash flows to be lower over the next 12 months
• Have suffered the highest level of price competition overall - 82% have experienced a higher level of price competition in the last 12 months

Hotel/catering

• Expect acute pressure on business costs over the next 12 months - 72% expect higher energy costs compared to 55% for all businesses
• The most likely sector to state they are not well placed to weather any further downturn in economic conditions in the next 12 months

Despite emerging signs of recovery, the outlook is still gloomy and some businesses particularly remain at risk. 26% of firms overall stated they are not well placed to weather any further downturn in the economy. The problems are particularly acute in highly price-competitive sectors such as hotel/catering and construction where 38% and 34% of firms respectively feel they are not well placed to weather a further downturn - these sectors will be hoping for strong summer trade. Firms are still reporting problems getting support from banks when accessing or renegotiating finance: 29% report more stringent controls from their business bank. Only eight percent report an increase in support and assistance from their business bank since the downturn. For those at risk firms who are not well placed to weather a further downturn, a considerable 40% reported more stringent controls from their bank. Speaking on behalf of England's regional development agencies (RDAs), Richard Ellis, chair of the East of England Development Agency (EEDA), said:

"The results published today show that while the picture is still mixed and the effects of the recession are only now reaching some sectors of the economy, there are many good news stories across the country. These results from the National Business Survey highlight growing optimism - particularly within the financial and business services sector where the downturn has bottomed-out."

• Download the NBS national report

APPENDIX:

Over the next 12 months do you expect the business climate in which your business operates to generally improve, remain stable or deteriorate?

160	% stating Improve June 2009	% stating Improve November 2008
160Primary	16011%	16018%
160Manufacturing	16022%	1608%
160Construction	16017%	1605%
160Retail / distribution	16020%	1607%
160Hotels / catering	16019%	1607%
160Transport / storage / comms	16017%	1607%
160Financial Intermediation	16026%	16011%
160Public / personal services	16025%	14%

BASE:160All businesses in England and Northern Ireland, June 2009 (6708), November 2008 (4913)

How well placed is your business to weather any downturn in economic conditions over the next 12 months?

160	June 2009
	% stating well placed	% stating not well placed
160Primary	16077%	16018%
160Manufacturing	16075%	1608%
160Construction	16065%	1605%
160Retail / distribution	16072%	1607%
160Hotels / catering	16061%	1607%
160Transport / storage / comms	16075%	1607%
160Financial Intermediation	16074%	16011%
160Public / personal services	16075%	14%

BASE: All businesses in England and Northern Ireland, June 2009 (6742)

Notes to editors

1. The National Business Survey is one of the largest and most statistically robust of its kind carried out in England and Northern Ireland with over 6,700 companies responding from all sectors of the economy. Respondents are senior business leaders within their organisation.
2. The survey is carried out twice a year (spring and autumn) with the latest findings covering opinion for the months June 2009, November 2008 and June 2008. The survey asks a variety of questions ranging from business optimism to orders and output, skills issues, cost pressures and environmental performance.
3. The survey uses a predominantly postal methodology with the option to complete the survey online. Data are weighted to represent the regional business profile by business size (number of employees).
4. The latest survey fieldwork was conducted between 18th May and 26th June 2009.
5. The July 2009 report is available from www.ipsos-mori.com. You can also download reports from the previous two waves.
6. Detailed data for each government region is available from the relevant Regional Development Agency (RDA).
7. RDAs, as the largest single providers of business support in England, are leading the UK's economic recovery and providing the leadership and investment in emerging sectors that will see the economy well-prepared to capitalise on the upturn. A major aspect of our work is to foster a creative and innovative environment in which future growth sectors, such as low-carbon industries, digital communications and life-sciences, can flourish, creating jobs and prosperity within our regions.
8. A recent independent report into the impact of RDAs found that for each 1631 RDAs invest, an average of 1634.50 of economic return is generated for regional economies. This amounts to around 16323 billion in economic benefits for the UK economy each year and significant tax revenues for the Exchequer. We welcome today's results and look forward to our continued working with the business community to generate further wealth for the country.
9. Ben Page is available for interview. To request an interview with Ben, please contact the Ipsos press office on 020 7347 3452.

For further information or interview contact: Joe Marshall Director, Ipsos T : +44.20.73.47.3408 Lisa Nicholl Ipsos T: +44.20.73.47.3407160 Annie Tokatlian Ipsos T: +44.20.73.47.3246