International Uncertainty
With businesses already facing rising energy prices, the situation in the Gulf was a major topic at the event, which revealed the results of the Chamber’s first Quarterly Economic Survey of the year and the latest data from The Growth Company.
Chris Fletcher, Executive Director of Skills Policy, Greater Manchester Chamber of Commerce, opened the event by highlighting the volatile economic situation with Brent crude oil at $100 a barrel - the highest level since 2022 - and CPI inflation predicted to range from 2.7% to 5% depending on whether oil prices remain high. He pointed out that Greater Manchester was particularly exposed due to its manufacturing, logistics and aviation base. Meanwhile, lower income households were disproportionately affected by the rising prices and even higher earners were reporting that family days out were becoming too expensive.
Subrahmaniam Krishnan-Harihara, Director of Business Policy and Research, Greater Manchester Chamber of Commerce, said: “With the ink barely dry on the Spring Statement, the economic landscape has shifted. While the Chancellor focused on 'stability', the recent surge in global oil prices driven by escalating tensions in the Middle East threatens to reset the inflation narrative. Sustained high energy costs can affect business margins and could force a rethink in the Bank of England to keep rates higher for longer.
Service Sector Growth
The Quarterly Economic Survey (QES) showed the service sector continued to see the economy through tough times with a second quarter of growth in domestic sales, while manufacturing faced the most challenges and stresses. The construction sector has also experienced a downturn as the public sector pipeline faltered due to the cost of government debt. International trade figures also revealed exports of services increasing but a drop in goods exports.
Overall, Subrahmaniam said there had “a slight uptick” in the GM Index, which is based on QES data, from 14.9 to 15.4, which he attributed to the improvement in the service sector.
Price Pressures
Sixty percent of manufacturers reported they might increase prices again even before the Middle East conflict caused a rise in oil prices. Fuel and utility cost were highlighted as concerns for all businesses and shipping costs were predicted to rise because of the situation in the Gulf.
Rupert Greenhalgh, Head of Business Intelligence, the Growth Company, said: “Rising costs remain the main pressure on businesses, and the oil price shocks are yet to really show in any survey results. However, improved cash reserves and steady sales performance point to continuing underlying resilience, alongside growing demand for support in planning, skills and innovation.”
Subrahmaniam added: "Despite the headwinds, Greater Manchester remains resilient and a growth leader. The Chancellor’s commitment to investing £2.5 billion in emerging technologies like AI and quantum computing and the £2.3 billion pot for the new City Investment Funds could support growth in our city region.
Key Issues
The presentation was followed by a Question-and-Answer session with a panel of experts, including:
- Dr Nicola Headlam - Independent Economic Advisor
- Dr Sofia Sanchez - Senior Lecturer in Economics, Manchester University
- Emilie Smithies - Relationship Director, NatWest Venture Banking
- Matthew Allen - Lecturer in Economics, University of Salford
Topics discussed ranged from energy security, the effect of the crisis in the Middle East on aviation fuel, the need for greater use of nuclear power in the UK and the amount of investment in Manchester compared with London.