Export ‘powerhouse’ North-east set to outperform rest of UK in 2024

19/01/2024

HALF of companies in the North-east of Scotland expect their profits to grow in 2024 as the region looks set to outperform the rest of the UK, according to new report.

Growing international demand for goods and services from Aberdeen and Aberdeenshire is driving increased confidence among companies in the region.

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The North-east Quarterly Economic Survey, launched today by Aberdeen & Grampian Chamber of Commerce, in partnership with law firm Gilson Gray, benchmarks key indicators in the region’s economy against the wider UK.

The report reveals that companies in the region are bullish about their prospects this year as inflationary pressures ease.

Four key findings will be outlined and discussed at a special Chamber Breakfast Briefing in Aberdeen this morning.

They are:

(1) THE NORTH-EAST REMAINS AN EXPORT POWERHOUSE

The latest data, again, reaffirms the status of our region as an export powerhouse. 36% reported international sales growth in Q4 (28% nationally) and just 9% reported declining sales (v 24% UK wide). 

And 32% of North-east respondents are forecasting growth this year in overseas activity (26% UK) with just 10% of regional firms expecting this to decline (v 25% nationally).

(2) TURNOVER & PROFITABILITY OUTLOOK

North-east businesses are more confident than their UK peers about turnover and profitability growth in 2024. 58% expect revenues to increase (v 56% nationally) and 50% are forecasting profit growth (47% UK).

Almost one third (31%) of companies both in this region and across the country expect to see increased domestic sales into 2024. Interestingly though, just 19% of North-east firms expect to see a decline compared to 25% nationally.

(3) RECRUITMENT

Firms here growing faster, with 38% expecting staff numbers to increase in 2024 against 31% nationally.

And while 76% of firms nationally reported difficulties in recruiting suitable staff, this was lower in our region at 71%. 

However, while 51% of UK companies said they had difficulty in finding candidates for skilled manual & technical staff, this figure is higher in the Aberdeen region at 64%.

(4) COST PRESSURES REMAIN HIGHER IN THIS REGION

One of the most startling differences between the regional and UK data comes when we look at upward cost pressures on businesses. In almost every metric, North-east firms are feeling the heat more than peers nationally.

Most marked are fuel 66% (37% UK) and labour costs 79% (67% UK).

Inflation remains the largest growth constraint nationally although this is being felt marginally less in this region. However, North-east firms are more concerned about interest rates, taxation and business rates than the UK as a whole.

THE NATIONAL PICTURE

Only 24% of firms increased investment in plant/machinery/equipment during the quarter while 19% decreased spending on this. Most of the survey responses were already received before the Autumn Statement, so it will be interesting to see any impact from the announcement around full capital allowances expensing relief in the Q1 2024 data.

At a sector level, B2B/services businesses displayed significantly greater confidence and future investment intention than manufacturing, retail and hospitality firms- the latter continuing to fare very badly since the pandemic with nearly a third (32%) of respondents reporting a decrease in investment. 

Despite the recent slowing, inflation remains the biggest current concern for businesses with 58% citing this as an issue, however this is down from 80% a year ago. And recent better news on interest rates has seen companies concerned about borrowing costs reduce to 39% (from 45% in Q3).

Findlay Anderson, Partner, Head of Corporate at Gilson Gray
Findlay Anderson, Partner, Head of Corporate at Gilson Gray

REACTION TO THE FINDINGS

Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, said: “It is clear from the data we are seeing that there is a growing confidence among companies in the North-east.

“Almost three quarters of the firms we surveyed are exporting their good or services, underlining the global demand for our products and expertise.

“For all of the positives, it is very clear that the UK is still teetering on the brink of a recession. We need imaginative plans for enabling economic growth, something which needs to be front and centre of the forthcoming election campaign.”

Findlay Anderson, Partner, Head of Corporate at Gilson Gray, said: “It is encouraging to see a large majority of local firms reporting sales growth both domestically and internationally. The region’s strength as an exporter continues to position it more robustly than other parts of the UK and the report generally points to growing confidence in local businesses.

“However cost, payment and pricing pressures continue to be a challenge to profitability and businesses will require to retain a focus on strong rigours to navigate these factors during 2024.”

Shevaun Haviland, Director General of the British Chambers of Commerce, said: “Our data shows business confidence is growing, but real challenges remain in the coming year.

“Worries about interest rates and inflation remain at historically high levels, despite a slight easing of concern.

“The recruitment challenges many firms are facing underlines our calls for a skills plan from Government alongside an affordable immigration system.

“Investment continues to the Achilles’ heel for business. The Chancellor’s decision in his Autumn Statement to make full expensing permanent was very welcome. 2023 needs to be the year when companies are given further assistance to invest.

“In the noisy election year ahead, it is crucial politicians remain focused on growing the economy and helping businesses thrive.”

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