1. Greater Manchester Quarterly Economic Survey

2. ECONOMIC OVERVIEW Christian Spence Head of Research & Policy
We reiterate that there is no evidence in the historic data of the UK’s many devaluations that these have, or will, provide a net positive impact either to net UK trade or to the aggregate position of the UK economy. The UK has long run a trade deficit and, more recently, a large current account deficit, meaning that the negative impacts of a weak currency will outweigh the positives overall.
Greater Manchester Chamber of Commerce’s Manchester Index™ nudged up in the third quarter of 2017 to its highest level in two years caused by improved conditions for the manufacturing sector, including strengthening demand within the UK market, a more robust international order book and increased investment levels and profitability expectations.
The result of the UK’s general election in June and the slow progress being made in the negotiations with the European Union have, in our judgement, increased the downside risks to the UK economy, and this is reflected in our revised forecasts for growth next year.
Our judgements on future growth rates continue to be heavily predicated on two major factors: our expectations of future business investment levels and the extent to which Brexit negotiations are influencing intentions for the next two years, and the rate at which inflation will continue to outpace pay settlements, reducing household incomes and softening consumer demand.
The latest data from the influential Greater Manchester Chamber of Commerce Quarterly Economic Survey (QES) shows a steady performance for Greater Manchester businesses in the third quarter of 2017 with manufacturing seeing its highest domestic demand and strongest overseas orders position for over three years. This data has led to the Manchester Index™ rising in Q to 30.3 from 27.3 in the previous quarter.
Labour Market
On aggregate, the employment landscape continues to perform well, with the labour market remaining the best performing aspect of the UK economy over the past few years. Unemployment nationally is now at a 42-year low and employment rates at the highest since records began, albeit with significant shifting towards self-employment over that time.
The update to the Manchester Index™ suggests growth in Greater Manchester in this quarter of around four per cent per year, though with rates of growth of the service sector slowing, our key judgement remains that risks are weighted to the downside for the coming quarters and the outturn for the year as whole in Greater Manchester will likely be closer to three per cent.
Domestic Demand
Employment intentions remain high and have strengthened further over the past quarter, though recruitment difficulties also remain elevated for all sectors. With unemployment levels this low and net migration levels falling after the referendum decision and considerable uncertainty coming from the government’s deeply worrying thoughts on future migration policy, recruitment difficulties are likely to worsen over future years.
The survey data shows manufacturing businesses experiencing increased growth rates in the domestic market whilst construction and services show a moderate softening compared to the previous quarter. It is too early to tell how much of this may be driven by import substitution caused by the relative weakness of Sterling but it is our judgement that any benefits from this will be lower than conventional wisdom dictates.
The latest data from the Greater Manchester Chamber of Commerce Quarterly Economic Survey and the Manchester Index™ leads us to leave our forecast for UK growth in 2017 unchanged at 1.6% but to downgrade our expectations for 2018 from 1.5% to 1.2%. At a Greater Manchester level, our forecast for growth here is revised down slightly from 3.25% to 3%-3.25% for 2017.
Inflation & Prices
Despite this stronger position for manufacturing and, whilst softer for other sectors, the levels of growth remain indicative of above-trend growth, we are concerned that the latest data shows that these levels are restricted to the largest companies, with those of over 250 employees reporting the best performance. Growth levels in SMEs are markedly lower with micro-sized business reporting no growth on the quarter.
The depreciation of Sterling since the EU referendum vote continues to have an inflationary impact on the UK economy. Whilst both official and QES data suggest that the worst effects for importers have now passed (though are certainly not yet complete), prices for consumers will continue to rise, with import inflation taking up to two years to pass through to the real economy.
International Trade
CPI inflation at 2.9% is further constraining real wages and has resulted in household spending slowing, savings levels falling and credit levels increasing. It remains unclear at this stage how large this effect will be over the coming quarters, though the aggregate position is markedly less positive than three months ago.
UK export volumes have seen increases over the past five quarters as the depreciation of Sterling allows UK firms to adjust prices and/or take additional profits, and the survey data supports this positive with order books for the final quarter of the year strengthening. Nonetheless, we continue to urge caution in the overly positive effects that many commentators expect to see from this currency-driven boost to exports.
Economic Forecasts

3. DEMAND All sectors show steady growth …
Domestic demand holds broadly level except for manufacturers who report a strengthening of position this quarter.
Order books for Q4 remain healthy, with again a marked improvement for the manufacturing sector.
Export volumes continue to improve supported by a weak currency, though this will have little effect on the UK’s net trade position.
Order books for overseas deliveries also strengthen, raising expectations for next quarter’s data.
... with manufacturing more positive

4. LABOUR MARKET Employment growth continues …
Employment growth increased in the latest data for the manufacturing sector, improving the employment rate further
Expectations for employment levels for next quarter remain high which may not be achieved because of the labour market position.
High shares of firms are attempting to recruit in the latest data …
… but a majority of firms continue to report difficulties in filling jobs.
... but recruitment difficulties remain high

5. CONFIDENCE & INVESTMENT Confidence improves …
Confidence levels remain stable across all sectors.
Profitability expectations for the manufacturing sector continue to strengthen supported by weak Sterling.
Capital investment levels continue to grow, particularly in manufacturing to meet the increased demand.
The challenges of recruiting, particularly for manufacturers, is driving further investment in training.
... and investment strengthens

6. COSTS & PRICES Inflationary signs start to soften …
The survey data suggests, in line with the official data, that the worst of the inflationary impact has passed, but expectations remain elevated.
The improvement in demand conditions for manufacturing has increased the share of firms operating at full capacity.
Pay settlements remain high in the construction sector where a supply-side shortage and high demand collide. For other sectors, though slow, the trend is upwards.
Raw material prices are still adversely affected by the currency position, and this will take more time to fully feed through to consumers.
... but remain elevated with materials and wages increasing

7. BACKGROUND & METHODOLOGY
Greater Manchester Chamber of Commerce is the largest Chamber of Commerce in the United Kingdom, providing business support services to over 4,800 members who collectively employ over 400,000 people, around one-third of Greater Manchester’s workforce.
Forming part of the British Chambers of Commerce’s national survey, Greater Manchester is one of the single largest contributors to this important body of evidence. As the principal national business survey, and the first to be published in each quarter, its results are closely watched by both HM Treasury and the Bank of England’s Monetary Policy Committee. Having been the first survey to call the last two recessions, the data revealed by it is timely, accurate and invaluable for anyone wishing to understand the subtle shifts in the economic climate for businesses in Greater Manchester and beyond.
Recognised as a leader in its field, Greater Manchester Chamber’s reputation in government circles has grown locally and nationally. Serving the area of greatest economic intensity outside London and the South East, the Chamber is the primary body for business support, policy, representation and networking.
The collection period for this survey was Monday 21 August to Wednesday 13 September 2017 inclusive. A total of 391 businesses, together employing 76,304 people responded to the survey.
This report has been researched, written and compiled by Christian Spence, Head of Research & Policy. If you require any further information about the production or detail of this report, please contact Christian on (0161) or
The aim of the Chamber is to support businesses and to help create the best climate for the region to prosper. This is achieved by ensuring that those taking decisions on key issues such as transport, taxation and business regulation hear the voice of our members. The representation of our members’ views is central to the work of the policy team at the Chamber; these views are gathered in a range of ways including our local councils, policy committees, sector councils, the main Chamber council, focus groups, meetings with politicians, consultations and, of course, this Quarterly Economic Survey (QES).
Net balance figures referred to throughout this report are determined by subtracting the percentage of businesses reporting a decrease in a factor from the percentage of businesses reporting an increase. The broad manufacturing definition includes the agriculture, energy and water, construction and manufacturing sectors.
Copies of this and previous reports can be downloaded from the Chamber’s website at with wider economic analysis from GM Chamber at