Held on Friday, 25th November 2022 from 8:00 – 9:30, Virtual Meeting
Business Sector Updates
Education
Industrial action across a number of sectors has had an impact upon education with possible action within the sector a possibility. These have been largely around pay. It has been a difficult time financially as University fees are fixed by government, so increased costs have occurred against a fixed income. The University of Worcester medical building is due to be launched in the next few weeks and there have already been thousands of applications from International students. Overall, student numbers are growing, and from recent graduates over 1000 newly qualified individuals are entering the workforce in Worcestershire. Resources have been added to encourage these graduates to link in with local employers to help fill recruitment and skills gaps locally. The University has also joined with the Small Business Charter to help to grow the programme locally.
Finance
The focus has been on the recent budget and changes in tax. There have been a lot of changes to the R&D tax regime which is affecting SMEs and large businesses. Business activity has been good across the country, which is positive for the local economy. There are however workforce shortages with a number of people leaving the profession. Internal training programmes are being offered in order to retain staff. With regards to debt management there is cash liquidity in the system with layering being used for deposits. Some debt repayment is taking place to reduce loan costs. Lending, which had been reduced does seem to be picking up recently. There has been an increase in regulation and opportunities regarding UK export finance.
Insurance
Wage inflation is causing challenges and adding to the labour shortages. The industry is still battling with flexible working challenges. Insurance premiums remain high and sometimes it is a struggle to obtain cover. Under insurance is also becoming an issue. Regulation is increasing and a disproportionate amount of time and staff involvement has been needed just dealing with the regulator.
Power/Utilities
There has been good growth in the sector driven by increasing electric vehicle charging. Recruitment has been positive both locally and slightly further afield due to the implementation of flexible working. Some improvement has also been seen in the candidates applying for vacancies. New office space is still an issue. There are a number of market challenges including the procurement of materials. Advanced procurement has been considered but then storage becomes an issue. Distribution networks are also struggling with this and therefore work may drop off due to a lack of materials. Distribution network operators are doing a lot of work on facilitating changes on the sustainability agenda. There are currently challenges with re-enforcing the power load in geographical areas and from April the government will be dealing with this. A lot of applications are expected on the back of this and therefore implementation timescales may increase.
Food, Drink, Hospitality & Agriculture
There had been a Christmas rush although it started later than in previous years. It was uncertain how busy the sector would be over the period, with concerns over spending due to the cost-of-living crisis. Good news was that the sector had been busy with increases noted on the previous year (although Covid was a factor then). Pricing was a challenge, with for example average bottle packaging doubling in price in 2023. This would likely result in increased consumer prices. There were also huge packaging shortages. The hospitality industry would highly likely find January and February difficult with key challenges being utility costs and labour shortages. Alcohol duty was due to rise 12.6% in February 2023 although this had not been confirmed yet. Future changes around ABV% and associated different duty rates were also causing uncertainty.
For one business a team had been employed in Poland to help with export challenges, but this had meant having one less person locally. This had, however, led to an increase in export sales and the employment of a new export sales director.
A number of breweries had gone out of business in the past year and more were expected to be lost in 2023. The type of brewery ceasing to trade were typically the smaller artisan ones, but the number of breweries in the UK across the board were down by 20%, all due to rising costs casing price increases. It had also been difficult to get contracts for local growers and a lot of those were on the edge of going out of business if process do not improve in 2023. Egg production was also a challenge with issues again around pricing and supermarket sharing of indexes with growers.
With regard to new products, locally produced produce was being welcomed (also supporting the carbon reduction agenda) and it was hoped that this would lead to a return to UK v overseas production.
Retail
Shipping costs were way down from a high of $20,000 per container to $2,500. Exchange rates have dropped though, so prices will rise. Stock levels are good and generally businesses had seen an upturn of approximately 10%. Turnover following covid had grown and levels of employment were also up. Retailers are concerned about the future and longer-term orders and not being placed in volume. Retail businesses have weathered these storms before although the Ukraine war has seen challenges on an unprecedented level.
Manufacturing
Thye marketplace was currently buoyant and businesses are still comfortable about their 2023 projections as clients still seem to have cash to purchase. There are however, long lead times and employment is still patchy. Some companies have issues around the scaling down of production due to a lack of staff, while others do not have challenges in this area. The situation appears to be far stronger than for European colleagues, which shows how robust UK industry can be. Energy costs are still a huge challenge and government support for the sector is negligible, with an example being the approach to packaging tax. This is a circular economy and the government landscape and lack of clarity affecting business and business planning, especially on large scale infrastructure projects.
The support for mental health within companies is something the sector can be proud of.
2022 has been a good year, but there was a degree of uncertainty for 2023, particularly around public funded contracts. There was a difficult balance between inflation and labour retention. Supply chain issues had been reduced, particularly in the electronics markets. Lead in times were not quite at pandemic levels and there was more certainty, which allows for future planning. Pharmaceutical and electrification markets remain strong.
There has been increased supply with strong order books, although this is offset against utility and recruitment costs.
Legal Services
All areas are currently busy, which is unusual during a period of uncertainty. There is not necessarily good news for all clients or within all sectors as there has been a decline in family law work. Challenges remain in regards to staffing and recruitment and there is a prevalent skills gap within the industry. Some changes are being made to encourage more entries. Challenges also remain with regard to flexible working policies, as employees can draw larger salaries from bigger cities, but remain working from home at their own location. The sector is expecting to see less work in the area of corporate law (merges and acquisitions) but more employment law work due to the EU law bill.
Housing
This remains a heavily regulated sector with preventative measures continually being worked on. The rent cap imposed by government was usually CPI linked and has been capped at 7%, but against rising costs this presents a business challenge. Poverty alleviation was a huge part of the work of the community housing sector, and new home construction has been slowed due to rising costs and challenges with the acquisition of sites. This area is due to be revisited within the next 12 months as it is expected that prices will go down. There have been recent success with recruitment, especially in the roles of gas engineers and electricians.
Transport
Fuel prices continue to rise and fall erratically, which makes huge changes in pricing within the industry. Insolvency also seems to be increasing and vehicle availability is also an issue. The availability of drivers has normalised but not all vacancies are being attempted to be filled. There are early signs of a reducing market and this is supported by the views of online retailers. The sector is ‘hunkering down’ for a tough year.