A year of inspid growth or a land of opportunity? To kick off our guide to 2012, we asked business leaders and advisers to put their neck on the line
Economists tell us that 2012 is going to be another sluggish year, with minimal growth. The staggered impact of public sector cuts, ransacked consumer finances and concerns about Europe’s ability to take control of its debt crisis have become part of the new ‘normal’ business environment, where confidence is low and decisions are delayed.
When we asked a selection of business leaders from Yorkshire and Humber for their outlook on the year ahead, it’s fair to say that their forecasts were cautious at best, and downright bleak at worst.
This pessimism is backed up by a variety of economic reports. The latest monthly Business Trends report from accountancy firm BDO, for example, indicated a “pretty bleak” outlook for early 2012, with three indices – output, optimism and employment – falling below the “crucial” 95.0 mark.
But dig a little deeper and there are a plethora of opportunities that could come to fruition forYorkshire and Humberside this year. Our heritage in manaufacturing, robust financial services sector and efforts to create a renewable energy hub all point to a better future.
Insider's Expert Panel
- NI: Nick Ivel chief executive, Costcutter Supermarkets Group
- JP: Jeff Pearey head of Leeds office, Jones Lang LaSalle
- RM: Richard May Sheffield office managing partner, DLA Piper
- WH: Wayne Hiley head of debt finance, north, Barclays Corporate
- DB: David Buckley senior partner Yorkshire, Ernst & Young
- LH: Lord Haskins of Skidby chairman, Humber local enterprise partnership
- ME: Mark Edmonds managing director, Gripple
- MJ: Jason Stowe managing director, Wilton Developments
What worries you most about Yorkshire and Humber’s regional economy?
JP: I think there’s a great deal of realism in the region and to an extent we are fortunate to be cushioned from the highs and lows of every property cycle. We are seeing a steady improvement in demand for offices, but we must be pragmatic about the strengths of our region. The prospect of an wider north/south divide could be an area for concern. This was an area the government seemed keen to redress until recently by directing the public sector workforce out of the South East but this impetus appears to have been lost.
RM: Lack of IT infrastructure, particularly rapid broadband access, and skilled resources are the biggest worries in my mind. These issues can’t be fixed quickly or cheaply but need time, attention and financial investment if they are going to make a difference.
WH: The eurozone news flow and the fiscal contraction in the UK are the macro situations that will significantly effect the local economy. Given these events are not new, many of our customers are doing what they can to prepare for a long-lasting period of low growth. Clients also expect the local economy to be less public sector focused, the hope being that the private sector will step up to fill the gap. Specifically, our research indicates that corporates in the region are concerned about education and infrastructure – two areas that clearly need the support of the public sector to thrive.
DB: The negative impact is likely to result in much-reduced demand on the eurozone for exports from the UK in 2012.
JS: My biggest fear for the Yorkshire and Humber economy is that some of our towns and cities will get left behind in the flight to quality. The strong towns are getting stronger and, as a result, there are a lot of places we won’t consider investing in. You want to be where the activity and investment is and that means Leeds and Sheffield are growing stronger at the expense of others.
ME: I’m actually quite excited about the Yorkshire and Humber economy. The Chancellor’s announcement of up to 100 per cent capital allowances in the Sheffield city region was a really encouraging and intelligent move. Gripple will be investing more than £2m this year; a decision we might not have taken quite so readily had the capital allowances not been forthcoming. There's also the £950m Regional Growth Fund for growing companies. I think the Chancellor has been dealt a very tricky hand, which he is playing pretty well.
Do you think the Yorkshire and Humber economy will grow in 2012? If so, what will lead our economic recovery?
JP: Although the economic outlook looks uncertain, the UK is better placed than the eurozone to ride any economic storms, and Leeds continues to perform well as the engine room of our region. Enterprise zones and local enterprise partnerships are being hailed as key drivers for our markets in the coming years.
RM: There remains a big push on the manufacturing sector as we look towards economic recovery; hopefully it can continue to its bid for growth. There’s a strong skills base and some world-class names in the region, so Yorkshire has the opportunity to continue to influence the agenda, but relying on manufacturing output alone will not be enough. We need to continue to nurture other traditional and emerging sectors if we're going to build our economy.
WH: This part of the UK is filled with successful international businesses. Hence, growth will be correlated to global events with our main trading partners. We also benefit from a diverse mix of companies – the challenge will be for businesses in sectors where there’s an opportunity to grow to have the confidence to invest.
DB: This year is likely to continue being tough, with a flat performance in the service and manufacturing sectors. Most businesses are talking in cautious terms. On a brighter note, Yorkshire businesses tended to react early to the downturn of 2008 and most have refinanced and have a plan A, B and C. Budgets will depend on demand from the wider economy.
LH: If we can keep up the pressure on encouraging inward investment to the region, especially for foreign companies seeking to reap the advantages of setting up in one of the enterprise zones. Industry and commerce has to take the lead in strengthening the regional economy. By providing the goods and services that domestic and overseas customers want, this will help to create jobs, which in turn will provide greater disposable income levels locally.
JS: We are seeing an upturn in activity, and from a personal point of view we are positive. However, the biggest problem is people saying “can we just wait another year” and putting their plans on ice. That is stopping the region going forward and the uncertainty is perpetuating the problem. The problem is that people think they can’t get it wrong if they stick where they are.
ME: Modest growth will be a fantastic achievement. I expect that export-led manufacturing will lead the way. The UK economy represents only 4 per cent of the world’s gross domestic product, so if we can get a bigger slice of the other 96 per cent with world-class products and services made in the region, I think we'll do OK.
Also in: January 2012
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