Local firms shrug off recession fears

BUSINESSES in Suffolk and north Essex have shrugged off any talk of a recession and are looking forward to increased sales and employment over the next six months, according to the latest EADT/Larking Gowen Business Life Survey.

Two-thirds of businesses taking part in the survey, which is conducted every six months, reported an increase in turnover during the second half of 2007 while only 17 suffered a decline in sales.

Despite the downturn in consumer confidence and growing concern over the credit crunch since last summer, the balance of plus 49 is one better than recorded in the last survey and two ahead of the survey conducted at the same time last year.

Looking ahead to the next six months, businesses in the region are less confident that previously but their outlook remains firmly positive.

Despite the slow-down in the economy, nearly half of those in the survey (46%) expect their sales to increase during the first half of 2008 while only 16 anticipate a fall in turnover.

The resulting balance of plus 30 is, however, sharply down on the plus 51 recorded in the last survey and the plus 55 seen at this stage last year.

Employment trends also remain in positive territory, although again there is a sign of a slowdown.

More than a quarter (26%) of firms in the survey said they had increased their workforce during the second half of 2007 while only 7% reported a decrease.

The balance of plus 19 was, however, well down on the last survey (plus 28) and lower still compared with the survey at this time last year (plus 30).

Surprisingly, perhaps, an event higher proportion of businesses (34%) are expecting to increase their employment levels during the first half of this year, although the number anticipating a decrease (9%) is also slightly up.

The resulting balance of plus 25, while seemingly robust in view of concerns over the economy, is again well down compared with the last survey (plus 34) and the corresponding figure for this time last year (32%).

In view of the continued upward trend in employment during the second half of 2007 it is little surprise that there was only a modest improvement in ease of recruitment.

The proportion of firms finding it harder to recruit fell from 30% in the previous survey to 27% but the number finding it easier to fill vacancies increased by just one percentage point, from 11% to 12%.

The resulting balance of minus 15 therefore represents a slight easing in the market compared with minus 19 in the last survey, but remains slightly than the balance of minus 14 at this time last year.

In terms of the factors affecting profitability, more than half the firms taking part in the latest survey (52%) cited the state of the economy, followed by competition (21%), time management (7%) and legislation (5%).

This represents a significant shift compared with a year ago when the economy accounted for just 7%, well behind factors such as business rates/charges (17%), regulation and labour costs (12% each) and competition (11%).

Despite the Government's stated intention of reducing the burden of regulation the evidence of a slight improvement in previous surveys has given way to a sharp increase, with 84% of firms in the latest survey saying they are now spending more time on “red tape” than five years ago, up from 78% last time.

The second half of last year saw the minimum wage for adult workers raised to £11,481 a year (based on a 40 hour week) and, when asked whether there had been any detrimental impact on their business from the increase, an overwhelming 88% said there had not.

When then asked to what level the minimum wage would have to increase before it had a detrimental impact, 29% of businesses said £12,000 to £13,000 and an identical proportion said £13,000 to £14,000.

However, 11% of businesses the minimum wage would have to rise to £14,000 to £15,000 before it had a detrimental impact and as many as 31% said the figure have to top £15,000 before having a serious impact.

On a less positive note, more than half of those replying to the survey (53%) said that technology, such as mobile phones, the internet and email, had failed to help reduce their workload.

The trend towards business managers and owners working longer hours also continued, although the rate of increase showed signs of slowing.

The proportion of respondents working longer hours compared with five years ago has fallen from 51% to 40% over the past year while the proportion working fewer hours has increased from 13% to 24%.

And trends in holidays have swung into positive territory with 27% now taking more leave than five years ago compared with 25% this time last year and only 21% taking less holiday, against 33% a year ago, with a swing in the overall balance from minus eight to plus six.

How well business owners and managers are able to enjoy their time off remains a moot point, however.

Some 29% of respondents said they now found it easier to relax when not a work compared with five years ago, up from 19 a year ago. On the other hand, 33% said they now found it harder to relax, down from 42% a year ago but only reducing the overall balance from minus 23 to minus four.