Greater Birmingham businesses are showing signs of recovery thanks to a significant upturn in domestic sales and orders, a new economic report reveals. According to the latest Quarterly Business Report from Greater Birmingham Chambers of Commerce, firms across the region “remain upbeat and optimistic about the opportunities ahead” despite the pressures of inflation, interest rate raises and labour market shortages.
The Q2 report reveals 50 per cent of firms reported an uptick in domestic sales – compared to 46 per cent in Q1. The trend was positive across all sectors, with 54 per cent of manufacturers experiencing growth in UK sales – a sharp increase on the 29 per cent and 33 per cent recorded in the third and fourth quarters of 2022 respectively.
Service sector firms also reported a five per cent domestic sales increase, up from 44 per cent on last quarter. Meanwhile, businesses are expecting a balance sheet boost with 49 per cent of firms in the two sectors combined anticipating that their advanced domestic orders will increase – a seven per cent increase on Q1.
Henrietta Brealey (pictured), chief executive of the GBCC, said: “A little over three years on from the start of Covid-19 pandemic measures in the UK, two years from the end of the end Brexit transition period and one year on from Russia’s invasion of Ukraine and businesses still have rather a lot to contend with. Yet, as this latest Quarterly Business Report data shows, in Q2 the local business community as a whole remained upbeat and optimistic about the opportunities ahead.
“There were real signs of recovery with domestic sales and orders following consecutive quarterly decreases in the balance score throughout 2022. Cash flow projections for businesses across all sectors improved and a continuing upward trajectory for turnover forecasts.”
However, Ms Brealey warned export activity remains “tepid”, despite an 11 per cent rise in the number of firms reporting an increase in activity. Recruitment also remains among the biggest challenges facing businesses. Of the 61 per cent who attempted to recruit in Q2, 68 per cent reported difficulties (unchanged from the previous quarter).
Ms Brealey added: “Unsurprisingly, business sentiment showed recruitment challenges remain front of mind. While there was a notable uplift in export activity reported this quarter, it remains relatively tepid compared to growth sentiment in domestic sales.
“Yet, according to McKinsey, the UK’s exporting companies are more profitable, more innovative and faster growing than non-exporters. If we are to reach the Government’s export target of £1trillion then we need to scale up activity in sectors where overseas demand is growing.”
The Quarterly Business Report is sponsored by Birmingham City University, whose deputy vice chancellor Professor Julian Beer said: “At the time of writing, the Bank of England had just raised interest rates for a 13th consecutive time as it tries to stop prices rising so quickly, with the Bank rate increasing to five per cent. If prices continue to rise then further rate increases will be needed, with financial markets expecting a peak of six per cent early next year.
“Unsurprisingly, regional businesses highlighted inflation as their biggest external concern, although this picture was offset by increased confidence in anticipated turnover and profitability improvement. The level of increased business activity in the export market was also notable from the survey, perhaps in part reflecting a post Commonwealth Games bounce and business ambition following exposure of the region to an estimated audience of 1.5bn.”
The launch of the latest Quarterly Business Report, sponsored by Birmingham City University, focuses on the economic legacy of the 2022 Commonwealth Games. The event will be held from 9am to 11am at Birmingham City University’s Curzon Building on Tuesday July 18.