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7 March 2001

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Business confidence stalls as export orders hit high


The highest level of export orders for three-and-a-half years has been recorded by British companies against a backdrop of stalled business confidence and continuing under-performance in the manufacturing industry, according to the latest survey conducted by the Institute of Directors (IoD).

However, the Institute - which has 900 member in its Eastern Branch which covers Cambridgeshire - believes the loss of confidence is due to seasonal factors and does not detract from a picture of continuing economic growth.

The IoD believes the Bank of England will need to raise interest rates at least once more to suppress the inflationary impact of Chancellor Gordon Brown's injection of 43 billion into government spending over the next three years.

The survey reveals mixed fortunes for companies in the south region which includes Cambridge compared with the Midlands region which includes Peterborough. Although a balance of 79 per cent of firms in both regions believe they are performing well this actually represents a fall from 89 per cent for the Peterborough region and from 86 per cent for Cambridge compared with the last survey's findings in April.

The balance of companies that are more, rather than less, optimistic about their prospects in the next three years fell from 50 per cent three months ago to 44 per cent in Peterborough and from 61 per cent to 52 per cent in Cambridge.

There was also a serious drop in the balance of companies working at full capacity in the Peterborough region - down from minus 18 per cent in April to minus 35 per cent this quarter. In contrast, the Cambridge region experienced an improvement from minus nine per cent to minus five per cent.

The Cambridge region also led the nation for exports with 18 per cent reporting above average orders against seven per cent with below average. In Peterborough and the rest of the Midlands region the comparative figures were 16 per cent above average and 11 per cent below average.

The top two factors limiting company output over the next three months continued to be a shortage of skilled staff (identified by 43 per cent of directors) and a lack of orders (named by 38 per cent).

Commenting on the figures, IoD Eastern Branch chairman Stepahnie Smye said: "The modest weakening in overall business performance can mainly be explained by seasonal factors while export orders were at their firmest for three-and-a-half years.

"The Chancellor's Comprehensive Spending Review will have an inflationary impact which could trigger the Bank of England to raise interest rates at least once more. As a result, manufacturing exporters will continue to take the brunt of problems caused by a strong pound against the still weak Euro."

July 2000

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