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Investment peak for region's firms

Monday 7 January 2013 5:00

North East firms are investing more than at any time since the recession began, according to a North East Chamber of Commerce (NECC) survey.

The organisation’s Quarterly Economic Survey, QES, also shows a significant rise in the number of companies increasing staffing levels throughout 2012 continuing into the fourth quarter, reflecting the downward trend in regional unemployment statistics.

But, while the first half of the year saw the largest increase in business optimism since 2008, a slowdown in manufacturing growth and export orders appears to have impacted regional optimism slightly and orders fell into the negative in the second half of 2012.

The QES, produced in partnership with Barclays, is a trends survey that shows the health and direction of the North East economy. Measured across 11 separate indicators, any score above zero indicates trading conditions are improving.

NECC director of policy, Ross Smith, said: “There is a marked increase in results for investment plans. Despite sales and orders looking a little weaker, businesses are reporting investment plans growing more quickly than at any point since before the recession began

“We shouldn’t read too much into one quarter’s figures after such a prolonged period of weak investment. But we know a number of businesses have decided they cannot put off investment in vital equipment and machinery any longer, and perhaps the launch of the Funding for Lending scheme is also helping.

“If businesses are starting 2013 with greater confidence to invest, and greater confidence they will secure the funding to do so, that must bode well for the year ahead.”

The Quarter 4 QES also demonstrates that regional service sector growth continues to outpace the North East’s successful manufacturers, for the second quarter running.

“The pattern of manufacturing growing much more strongly than services we saw in 2010 and 2011 has evened out,” said Smith. “Service sector firms have begun to grow much more quickly, while manufacturing has found it tougher to keep up the strong gains of 2010 and 2011.

“Cashflow across the board continues to be very weak and energy costs remain a major concern for members, as previous fears over fiercely fluctuating exchange rates appear to have calmed.

“Overall the survey shows that pre-recession growth remains out of reach for the economy, though some individual firms are seeing significant success. But the continuing positivity on workforce numbers seen throughout 2012 and the recent upturn in investment plans shows that confidence is creeping back and augers well for a successful 2013.”