After a widespread decline in business confidence last quarter, indicators of concern have returned to longer-term trends of steady decline.
Across all indicators, the proportion of organizations reporting higher levels of concern has declined by an average of -12.8% annually.
This shows that more organizations feel empowered to address the challenges they face than this time last year.
Despite improved confidence, companies are still reporting difficult operating conditions. Long-term challenges are impacting the ability of companies across all sectors to grow, as ongoing workforce issues and reduced cash flow limit business ambitions.
Recent Chamber surveys have shown that improving confidence is accompanied by a decline in investment. This suggests that organizations have limited resources to expend in response to short-term challenges.
Limited growth capacity makes it difficult for regional companies to find creative, innovative solutions to longer-term challenges and respond to new opportunities.
Business conditions are particularly challenging for the region’s international trading companies, as export sales and orders are significantly in negative territory. Manufacturing companies in particular report significant declines in both international and domestic trade indicators.
Chamber president Andrew Haigh and chief executive of Newcastle Building Society said: “The inclusive, sustainable growth we need as a region requires investment, and lower investment indicators are an example of the ongoing pressures facing organizations.” Ongoing staffing issues are also creating difficult conditions for the organizations in our region.”
Less than half of companies said they would be at full capacity in 2023, and more companies reported headcount declines rather than growth in the quarter.
However, there is some optimism around recruitment as more companies expect their headcount to grow over the next 12 months. The results also suggest that the labor market is easing, which could lead to more companies being able to fill vacancies.
Andrew added: “There may be unforeseen challenges that require the same resilience, innovation and creativity that has been demonstrated time and again across the region as organizations have adapted to the impact of Brexit, the pandemic and the cost of living crisis .”
As well as improving confidence, reducing pricing pressures will also unlock longer-term growth capacity for companies across all sectors.
Companies’ biggest concerns this quarter are inflation, labor costs and interest rates. Energy prices are no longer among the top three concerns for North East businesses for the first time since 2021, after posting sustained quarterly declines throughout 2023.
John McCabe, chief executive of the chamber, said: “With a clear message to the government, opposition parties and local politicians, we can ensure our members’ collective voice is heard by key decision-makers ahead of important national and local elections in 2024.”