State of the Region 2012: Confidence key amid uncertainty

THE majority of region’s businesses are not expecting to see the UK economy revive in a meaningful way this year.

Nearly half  (45%) of those surveyed in TheBusinessDesk.com’s annual State of the Region survey are less confident than they were going into 2011,  while a similar proportion, 42%,  are expecting things to stay the same.

Just 13% are expecting to see an upturn in the economy, down from the 37% of North West respondents who took part in the survey last year.

The State of the Region survey 2012, which was completed by hundreds of business people across the North West, Yorkshire and West Midlands.

The survey, run for the third year, was compliled with support from lead sponsor DLA Piper, and supported by PwC and the CBI.

To read and download a full, detailed, report of the findings click here

Despite the gloomy outlook for the economy, more than half of people see government spending cuts as stabilising and “painful but necessary”.

An overwhelming majority,expected bank lending levels to remain the same (57%) or increase (23%) this year with only 20% saying they expected bank lending to fall.

Commenting on the outlook, Jonathan Watkins, corporate partner, DLA Piper in the North West said:  “As 2011 drew to a close it became increasingly evident that hopes for a 2012 recovery were looking to a false dawn.

“Less than 10% of business leaders predict an economic upturn over the next 12 months and almost half believe that conditions will worsen.

“The Office for Budget Responsibility (OBR) recently revised its forecasts to predict that the UK should not expect to see a return to its pre-recession peak until early 2014, whilst the National Institute of Economic & Social Research estimates a 70% risk of a double dip recession.

“However, in the face of this grim realism businesses are showing a determination to reassess their strategies and to take decisive action rather than ‘wait it out’ until conditions improve around them.

“66% declared their intention to engage in some form of transactional activity in 2012, with approximately a fifth expecting to make acquisitions and another fifth intending refinancing or fundraising activity.

“Attitudes towards the Coalition Government show a slight improvement from last year. More than a quarter of respondents reported that the Government had performed better than expected (36% North West).

“This is perhaps a reflection of certain measures within the Chancellor’s Autumn statement aimed at encouraging growth through investment in infrastructure and the regions, which were welcomed and supported by local business leaders,” he added. 

Andy Parker, corporate finance partner at PwC in Manchester said: “Most private companies in the region are expecting the situation with regard to access to finance to remain the same during 2012, but 23% are expecting it to improve.

“While access to finance remains an issue, 20% of private companies in the region say they are likely to consider an acquisition in 2012 and slightly more are expecting to refinance some or all of their debt.

“Given the sluggishness of the wider economy, acquisitions will form an essential part of corporate growth strategies in 2012 and beyond but, with currency and banking crises impacting across Europe, companies must ensure they secure their debt facilities to enable growth to continue. 

“Competition for acquisitions will come from private equity, where there remains a lot of uninvested capital, and overseas buyers which recognise good value in UK companies.”

Case Study

MARK Schaefer owns Altrincham-based Spectrum Plant,  a small firm selling and hiring wood chippers and other machinery.

He said: “I’m pretty bullish about the opportunities for my business this year – machinery was one of the first sectors to go into recession in 2008, and for several years people have had their budgets cut as they opted to repair rather than buy new.

“After a certain time it becomes less economic to keep repairing and a lot of the people I’m talking to are quite confident about this year and are thinking about updating and investing in new equipment, which is good news.

Turning to the wider economic picture, he said: “There’s without doubt some very scary stuff going on in Europe and in some parts of the service sector, but I think there are signs in industry that the dominoes that fell first – machinery and construction – are picking themselves up.”