Manufacturing in Lancashire recovering best as economic survey shows affects of virus on commerce

The impact of COVID-19 restrictions on the county’s businesses has been highlighted in the results of the latest Quarterly Economic Survey showing a varied picture with manufacturing showing clear signs of recovery while the service sector continues to struggle.

Conducted by the three Chambers of Commerce in Lancashire, the QES shows how businesses performed in the fourth quarter of 2020 compared to the previous quarter.

Looking at everything from sales to recruitment needs and business confidence, the survey is a key indicator of the health of local business and accompanies a national survey from the British Chambers.

Following a significant decline earlier in the year following the first lockdown, the manufacturing sector in Lancashire has seen two quarters of recovery across all metrics. Sales have grown in both the UK and abroad, with orders for the next three months also increasing. Although those declaring an increase in employment numbers reduced slightly over the last quarter, expectations of an increase in numbers over the next quarter grew.

The balance of firms reporting increased domestic sales increased from +13 to +25; with domestic orders balance growing by twenty-five points from 0 to +25.

Firms reporting increased export sales reversed the recent trend of stagnation and contraction, growing from -22 to +22. The same happened with the balance reporting improved export orders, strengthening from -23 to +31.

Looking to the year ahead, the numbers of manufacturers expecting a better year in terms of turnover and profitability increased.

Nationally however, the balance of manufacturers reporting increased domestic sales increased only to -9 per cent in Q4 2020, up from -15 per cent in Q3 2020. The balance of firms reporting increased export sales increased to -8 per cent from -26 per cent in Q3

The Lancashire chambers said the difference in performance and confidence between manufacturing and the service sector was stark. As with manufacturing, the service sector suffered a serious downturn at the time of the first lockdown. Despite not showing growth, the numbers reporting decline reduced in the third quarter.

These tentative signs of recovery reversed in the face of tier 3 restrictions and the second lockdown being introduced across the county.

Indicators across all metrics show a negative trend for the sector. Confidence is low with more firms believing that 2021 will see turnover and profitability reduce than think it will improve.

Geoff Mason, policy manager at the North and Western Lancashire Chamber of Commerce said: “Given the difficult 2020 suffered by the service sector, it is deeply worrying that there is a feeling that 2021 may be worse. It is an indication that many see no path to getting out of the current cycle of restrictions, something the latest lockdown will not have helped.

“Continued support is essential for those businesses affected but people need to see a way out of the situation. Improvements to the track and trace system, mass rapid testing and the swift roll out of vaccinations are key to providing a roadmap to re-opening the economy.

“The new deal with the EU has no provision for service businesses. This is likely to have a detrimental impact on exports of services at a time when the sector requires increased opportunities to help them recover. We see that businesses allowed to remain open have been able to adapt and recover.

"The optimistic outlook of the manufacturing sector is a result of businesses being allowed to operate.They have had to work out how to comply with new working practices and markets. Given the opportunity to do so manufacturers have shown themselves to be extremely flexible and resilient.

“The same can be seen with some firms within the service sector too. While overall the picture is bleak, some areas seem to be flourishing. We have members working in PR, digital and creative reporting they have never been busier.”

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