Businesses in the Westcountry have again reported an increase in confidence levels which is now backed up by plans to recruit and invest.
The Michelmores/ WMN Business barometer has been showing a more positive outlook amongst the region’s business community for some time but, in line with national trends, this recovery has been seen as fragile with many firms delaying additional recruitment or investment until there is even more of an uplift.
Predictions from the Office for Budget Responsibility show that the UK’s gross domestic product is expected to rise by 2.7% in 2014, up from a forecast of 2.4% in December. The growth forecast for 2015 has been raised from 2.2% to 2.3% and 2016 has been left unchanged at 2.6%.
This follows a revision to forecasts by the International Monetary Fund which now expects the UK to grow by 2.9% in 2014, up from a forecast of 2.4% in January and 1.9% last October.
With these encouraging signs it seems as though more businesses do now believe that we are moving further from recession after several years of flat or sluggish growth when there were concerns about a triple dip recession.
According to the barometer, 92% of Westcountry businesses are optimistic about the next 12 months, with just 71% saying that they expected business levels to increase over the next three months.
This compares to 48% at the last barometer, in December 2013.
More firms are now planning to increase the size of their workforce over the next three months with 51% saying that they would be hiring – a noticeable increase on the last barometer when 20% said they planned to recruit.
But while the economic outlook is inspiring confidence, there are still concerns about issues such as red tape and infrastructure spending.
Unusually in a survey there was complete agreement on one issue with 100% of respondents saying that not enough was being spent on transport infrastructure regionally.
Similarly, 90% said that not enough was being spent on transport infrastructure nationally.
Repairing potholes was seen as the biggest priority for transport investment, with 33% calling for investment while 32% thought that rail links should be the biggest priority and 28% said that upgrading the road network would bring the biggest benefits for the region.
Specific improvements that respondents wanted to see included the dualling of the A30 and A303 and investment in an alternative rail line into the Westcountry.
Pieter Burger, Exeter-based investment advisor at Raymond James, said: “I would like to see a new South West line leaving London, splitting at Bristol to head to South Wales and the South West stopping at Bath, Taunton, Exeter, Torbay, Plymouth and Truro. Eight minutes saved between Birmingham and London (with HS2) are irrelevant and very expensive for the cost per minute.”
Mike Harris, from Wessex GS Ltd, said: “We need better routes in and out of the South West. Most of the agriculture and a lot of the manufacturing in the region gets shifted by road to the supermarket/ transport hubs and most of tourism uses these routes. If the M5 is closed for any length of time we almost become an island with the A303 becoming completely snarled up.”
Other concerns were the impact of prolonged low interest rates and changes to pensions on older consumers whose spending power has been diminished.
“Our core business is reliant on the mature market. The continued erosion of low interest rates and poor real savings returns has seen this market shrink substantially in the last five years,” said Mark Seward, managing director of Sidmouth Hotels and the Sidmouth Inn.
Nationally, the outlook continues to pick up with inflation falling for the sixth month in succession in March paving the way for an end to the prolonged squeeze on wages.
The Consumer Prices Index (CPI) rate dropped to a new four-year low of 1.6%, from 1.7% in February, according to the Office for National Statistics (ONS).
CPI has not been lower since October 2009, when it stood at 1.5%. The latest fall in inflation was widely expected by economists. It is likely to herald an end to a six-year period when pay growth has been lagging behind the rise in the cost of living, effectively shrinking workers’ spending power.
Chancellor George Osborne said: “These latest inflation numbers are welcome news for families.
“Lower inflation and rising job numbers show our long term plan is working, and bringing greater economic security.
“But there is still much more we need to do to build the resilient economy I spoke of at the Budget.”
Earnings have not increased at a higher rate than inflation since a brief spike in March and April 2010 and have not consistently been improving since 2008.
An end to the squeeze will be seen as a watershed moment in the recovery, and likely to be seized upon by the Coalition to blunt Labour charges that the economic upturn has yet to benefit ordinary working families.
The latest figures showed pressure on households was partly eased by food and non-alcoholic drink inflation falling to a new four-year low of 1.7%. It was last lower, at 1.3%, in February 2010.
But a greater downward pressure on inflation came from fuel pump prices.
Petrol was unchanged from February to March this year compared to a rise of 2.2p per litre at the same period in 2013. Diesel fell by 0.4p compared with a 1.9p rise in 2013.
Clothing and footwear prices increased by a lower rate than last year, with much of the downward effect from women’s fashions.
Upward contributions to inflation came from factors including higher bills for overnight hotel stays, and more expensive alcoholic spirits. A separate measure of inflation, the Retail Prices Index, which includes housing costs, fell to 2.5% in March from 2.7% in February.
And a new measure of inflation, CPIH, which also includes housing costs, fell to 1.5%, down from 1.6% in February.