RIU

NWDA Research Team, Renaissance House, Warrington Website: www.nwriu.co.uk

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Monthly Economic Update – August 2010 SUMMARY OF ECONOMIC CONDITIONS Generally sentiment among businesses in the Northwest remains positive. The PMI dipped to 55.8 in July; however the region continued to out-perform the wider UK economy. Greater volumes of new business, the result of improved economic conditions and new product development, supported growth in activity. Latest Northwest business sentiment surveys highlight that manufacturing in the region continues to perform robustly; services have recently recorded stronger growth in domestic demand, albeit weaknesses remain. Some concerns have been raised by businesses regarding the sustainability of the upturn due to an accumulation of downside risks. Industry specific intelligence provides a fairly optimistic picture across a number of regionally strategic sectors; automotive, chemicals, digital & creative and food & drink reported increased sales and improved demand. Market intelligence in the environmental sector provides a mixed outlook, a number of government-funded environmental and renewable projects have been cut impacting on regeneration levels and resulting in job losses. On a positive note a large number of new recycling plants have been progressed and developed in the region. The call centre sector has reported a mixed performance in recent months; business restructuring and consolidation have resulted in both job losses and gains. Currently in the Northwest 25% of call centre workers are employed in high threat industries, finance, outsourcing and public services. There are some signs of improvement in the Northwest labour market with employment numbers again increasing and unemployment falling in the quarter to June. However jobs growth appears to be driven by lower value added sectors such as admin, recreation and other services. Public admin and education have also experienced growth but it is likely these will be only temporary sources of jobs growth. Still a concern for the region is individuals moving from unemployment into inactivity, a potential signal of disengagement from the labour market. JSA claimants fell in July, although there has been a clear slowdown in people coming off JSA. Long-term youth unemployment has finally started to fall; reductions in numbers over the last two months are the first since the recession got underway. KEY CHALLENGES AND HOTSPOTS Input prices remain a pressure on businesses especially manufacturing firms; in the Northwest input prices remain comfortably above their long-term trend and have been rising at a faster rate than nationally. Business sentiment surveys suggest some cash flow difficulties remain impacting on investment intentions. Some growth in investment has been recorded but levels remain weak by historical standards. The potential for future interest rate rises which may further reduce business investment remains a concern for businesses in the region.

RIU

NWDA Research Team, Renaissance House, Warrington Website: www.nwriu.co.uk

Page 2 of 2

BUSINESS SPECIFIC INTELLIGENCE / INFORMATION ON KEY QUESTIONS Uncertainty about the future remains, raising concern over the sustainability of the recovery. Firms have indicated that the general costs of doing business have increased through finance, taxation and late payments. The future VAT increase could further impact demand, dampening business growth. Anecdotal evidence suggests that businesses are uncertain as to whether the support they need will be available after the changes made in the emergency budget. The impact of public sector cuts has been raised by a number of sectors, direct, job losses, reduced demand and indirect impacts, through supply chains. The environmental sector has raised concerns over the supply of skills critical to make the transition to a low-carbon economy; improving current skills supply rather than concentrating on developing new curricula and training.