Overseas markets continue to present opportunities for exporters and manufacturers are outperforming services according the latest regional economic survey.
The latest Leeds, York and North Yorkshire Chamber of Commerce Quarterly Economic Survey, conducted in partnership with Leeds University Business School, reveals that overseas markets continue to present opportunities for exporters and that manufacturers are performing significantly stronger than their service sector counterparts.
More than half of exporting-manufacturers are experiencing an increase in overseas sales and orders and the majority of the sector's growth is coming from international trade. Service sector exporters reported improvements on the previous quarter's results, with 36% saying that overseas sales have increased.
With only 23% of service providers selling overseas - compared to 57% of manufacturers - there is concern that the sector's dependency on a fragile UK market will result in it experiencing slow or stagnant growth. The weak advance orders (+3% net increase) reported by the sector suggest that this weak performance is likely to continue into the next quarter.
Despite the fragile UK market, business confidence remains high. Manufacturers are more optimistic than services with 70% expecting their turnover to increase over the next 12 months compared to 58%, which is associated to the sector's strong overseas performance.
Manufacturers are leading the way in terms of job creation with one third increasing their workforce compared to one fifth of service providers.
Cash flow is also highlighted as a problem with more businesses experiencing a decrease than an increase and the problem is hitting smaller firms the hardest.
Dr Andrew Robinson of Leeds University Business School said: "Overall, the largest body of evidence indicates most firms' performance has remained relatively stable over the last three months. There are some significant 'pockets' of growth especially in the manufacturing sector but a minority of firms are still experiencing declining sales although this would seem to be less than in previous surveys.
"At one level the evidence points to most firms having reached some level of stability. It may also be indicative of the local economy being at a turning point, one in which its future direction is far from certain. For firms to expand we need market conditions to improve. Without this the situation could stay the same or even get worse."
Mark Goldstone, head of business representation at the Chamber, said: "It is encouraging that businesses are confident about their future prospects and predicting an increase in turnover and profitability. Overall, the economy remains fairly stable. We are still waiting to realise the impact of the public sector cuts and this uncertainty may help explain the challenges we are experiencing in the domestic market. Generally though, this region is performing fairly well.
"This quarter's survey shows that the majority of growth and job creation is a result of businesses capitalising on global demand through exports. This trend is echoed in other parts of the UK and Europe. Germany's robust exit from recession was primarily export-led and demonstrates the potential of overseas trade as an engine for growth.
"As the largest manufacturing area outside of London, the Leeds City Region could achieve substantial economic success by exploiting the overseas opportunities, but we need to get more businesses exporting. We also need to ensure that as a nation we don't become too over-dependent on trading with just the euro-zone. Exporters need to broaden their markets to target the BRIC and other fast growing economies in order to maintain growth.
"The focus of UK manufacturing has gone from the mass-market to specialist niche and advanced-production for which there is huge global demand. Made in Britain still has cache around the rest of the world and there is an important role for the Government, LEPs, Chambers and other businesses to play in promoting UK plc to the rest of the world.
"The service sector's over- dependency on the weak domestic market is of a concern. There are real opportunities for this sector to export and our survey shows that businesses in professional services, creative, retail and wholesaling are leading the way."
For more information please contact Hayley.Johnson@yourchamber.org.uk on 0113 247 0000
Or please contact the University of Leeds Press Office on +44 (0)113 343 4031 or email pressoffice@leeds.ac.uk
Notes to editors
Over 850 businesses responded to this quarter's survey.
Fieldwork took place between 23 May to 15 June 2011