29th July 2011, 1:28pm
Spending cuts, energy costs and credit squeeze are hitting business confidence, survey shows
Business performance charts Almost two years after the recession officially ended, fewer than one in five businesses say its effects are over for them, according to a major survey of companies in the Lincolnshire region.

The impact of public spending cuts, the rising cost of energy and the continued scarcity of credit have all hampered business recovery during the past year, according to the Lincolnshire Economic Snapshot Survey.

The survey is undertaken every two months by the Lincoln Business School at the University of Lincoln in conjunction with the Lincolnshire and Rutland Employment and Skills Board. The questionnaire provides a regular ‘temperature-take’ of the local economy by asking businesses to give their perspective on current trading conditions.

Analysis of data collated during the first year of the study presents a picture of fragile business confidence.

Although the UK officially left recession - defined as two consecutive quarters of negative growth - in January 2010, fewer than 20% of businesses surveyed believe the recession is over for them. The proportion of businesses who think the worst is over has climbed slightly in the past year, from just 7% in July 2010 to 14% in May 2011.

Yet signs of optimism evident in late 2010 and early 2011 appear to be faltering. The proportion of businesses that feel that trading conditions are improving had grown from 24% in July 2010 to 39% in March 2011. However, this fell back to 27% in the latest survey. The overall proportion of businesses that say they are expanding the activities in their business, and that their business is attracting new customers, has fallen over the year. Only 41% now say they are expanding the activities in their business, compared with 60% in July 2010.

Public sector spending cuts have been a key concern for businesses throughout the year. Around two thirds of the sample has consistently reported that the cuts are likely to adversely affect their business. More than half of respondents have reported that customers are taking longer to pay throughout the period, although this has declined slightly from 66% in July to 56% in May.

Access to finance has also been problematic for most businesses throughout the period. The proportion of businesses that feel that finance has become easier to obtain has fallen from 10% in July last year to just 3% in May 2011.

The survey has also revealed how specific issues, such as the severe winter experienced at the end of 2010, have impacted on trade.

In the January survey, businesses were asked about how the recent cold weather conditions had affected their business. Almost two thirds said the weather had affected the day-to-day operation of their business, and 42% said it had resulted in a fall in trade.

In the March survey, businesses were asked about the effect of oil price rises on different areas of their business. Oil prices were shown to have the greatest impact on transport and logistics, with 89% of businesses reporting major impact or some impact on their business.

The effect of price rises on general energy use was reported as having major impact or some impact by 77% of businesses.

Liz Price, Senior Research Fellow in the Lincoln Business School at the University of Lincoln, said: "The results highlight the fragility of business confidence during the recovery. The key issues facing businesses over the last year have included access to finance, public sector cuts and late customer payments. A number of events beyond the recession – such as adverse weather conditions and rising oil prices - have also affected business performance. These in turn have affected businesses’ perceptions of the economic recovery and their overall level of confidence. The UK economy has now been in recovery for almost two years, and the findings reinforce the slow and prolonged nature of a return to strong GDP growth."

To take part in the Lincolnshire Economic Snapshot Survey, or for more details on the survey results, email: economicsnapshot@lincoln.ac.uk
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