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No let-up for Welsh business as recession sinks its teeth in further

Commenting on the Quarterly Economic Survey (QES) for Q4 2008, released today (Tuesday) by the British Chambers of Commerce (BCC), David Russ, managing director of the South Wales Chamber of Commerce, said:

“The QES results for Q4 2008 make for depressing reading. The feedback we have received from our members and companies in South Wales echoes the sentiment of the UK business community. This recession has snowballed faster than most of us would have expected and has dealt a significant blow to business confidence as we enter into what is likely to be a very difficult year for UK plc.”

The regional (South Wales) results show that optimism has continued to wane. Turnover projections were thwarted, with 40% of respondents reporting reduced turnover in Q4 (which is higher than the 32% that expected a decrease when surveyed in Q3). Cash flow issues continue to abound and 38% of businesses indicated that this was a major problem for them in Q4, which is up 10% on the Q3 results. In the Q3 2008 survey 11% of businesses expected to shrink their workforce in Q4, but 16% ended up doing so. This has resulted in more businesses (20%) anticipating having to make job cuts in Q1 2009.

David continues: “Our local survey, which contributed to the BCC’s national results, shows that the downturn continues to inflict damage over and above the expectations of Welsh companies. Keeping pace with the recession is a challenge for all businesses, but they mustn’t be left to fend for themselves. The government needs to ensure that the speed of change doesn’t result in more casualties than is necessary, by providing robust support for those companies that can be saved. This will ensure that businesses can avoid shedding jobs and will be in a good position to compete when they emerge at the other end of the recession.

“The length and depth of this recession will be determined by the extent of action taken by the government. While efforts continue to be made to free-up the availability of credit, more far-reaching and immediate steps need to be taken to reduce business costs. There must be a reintroduction of rate relief for businesses that have empty warehouses and offices, as this represents an unbearable overhead for companies that are already struggling. Moving forward there will also need to be a review of business taxes, with cuts being inevitable if we are to apply the brakes and avoid a long depression.”

Some key results from the Q4 2008 Quarterly Economic Survey (South Wales):

96% of respondents were SMEs employing fewer than 200 employees.
The majority (37%) of respondents reported that their UK order books had decreased, which was a similar level to that reported in the Q3 2008 results.
In the Q3 survey, 11% of Welsh businesses expected their workforce to decrease in Q4. However, 16% of respondents decreased their workforce in Q4. Because of this Welsh businesses have revised their expectations and 20% now expect their workforce to contract in Q1 2009.
38% of respondents reported worsening cashflow versus 28% in the Q3 report.
Businesses were fairly bullish in the Q3 survey, with a third of all respondents expecting to see turnover decrease in Q4. However, 40% of businesses reported a decrease in turnover.
Businesses taking part in the Q3 survey indicated that inflation was their biggest concern but this has been overtaken by taxation, with the majority (40%) of businesses placing this at the top of their list of concerns. Business rates, interest rates, inflation and the threat of competition all featured highly on this list too, with 35% of respondents showing concern over these external factors.