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Northern Society of Chartered Accountants

At the heart of northern business since 1882

Robust sales growth expected as business confidence remains high says Q1 2022 ICAEW UK BCM report 12 May 2022

The latest ICAEW UK Business Confidence Monitor (BCM): Northern England report sets out that at Q1 2022: Robust sales growth expected as business confidence remains high.

Robust sales growth expected as business confidence remains high

  • In contrast to the national trend, Northern England’s Business Confidence Index has risen very slightly from last quarter.
  • This is likely to be underpinned by expectations that domestic sales and exports will rise at the fastest rates across the UK in the year ahead.
  • Associated with this, employment is forecast to rise sharply and salary growth is expected to pick up.
  • Rising wages may also reflect increasing challenges caused by staff turnover and the availability of non-management skills. These have become the most widespread growing challenges for businesses.
  • Regulatory requirements and transport problems are also very prominent concerns. And supply-side disruptions have resulted in high input costs. Input price inflation is expected to outpace all other parts of the UK.
  • However, businesses are increasing their selling prices, profits growth is expected to be strong, and companies plan to increase capital investment at a faster rate than in any other UK nation or region.

The Business Confidence Index for Northern England remains well above pre-pandemic norms, at +31.5 in Q1 2022. This is one of only two regions, along with the West Midlands, in which the index has seen a slight increase from the previous quarter. And companies in the region are more confident than nationally.

Domestic sales and exports growth, and spare capacity

Sales during 2020 and the early parts of 2021 declined sharply as the pandemic caused a collapse in economic activity. Since then, demand conditions have improved, particularly in domestic markets. In the year to Q1 2022 domestic sales increased by 2.9%, which marks a return to pre-pandemic rates of growth. Export performance was more modest, with sales only 0.5% higher than the previous year. However, business sentiment is clearly being buoyed by the sales outlook for the year ahead, as companies continue to recover from the crisis. Both domestic sales (7.5%) and exports (5.9%) are expected to grow at faster rates than in any other UK nation or region. If achieved, these would be the strongest outturns seen in the region since the survey began in 2004.

Against that backdrop, the proportion of businesses operating below capacity has fallen to just 36% in Q1 2022. This is the lowest rate seen in Northern England since the beginning of the survey in 2004.

Labour market

Reflecting expectations of strong sales growth, businesses plan to start hiring at a faster pace. Following a rise in employment of 1.1%, year-on-year, in Q1 2022, staff levels are expected to increase by 3.2% over the next 12 months. This may also help to explain why businesses expect average total salaries to rise by a further 2.5% over the next year, after being lifted by a similar rate (2.6%) in the year to Q1 2022.

Business challenges

Rising average total salaries are also linked to challenges businesses are facing in the labour market. Labour-supply bottlenecks, as companies all try to recruit workers at the same time, are part of the story here. This issue has been exacerbated both by post-Brexit limits on the hiring of workers from the EU, and by people exiting the labour market during the pandemic.

Difficulties with the availability of non-management skills are now a growing challenge for 41% of businesses. This makes it the most widespread challenge in the region, the first time that this has occurred since the survey began. And difficulties in recruitment are also revealing themselves through 40% of businesses viewing staff turnover as an increasingly pressing issue, the highest rate ever reported in Northern England. Regulatory requirements are also a prominent challenge, with problems in complying with COVID-19 measures and new UK-EU trading arrangements both possible factors behind this.

The proportion of companies being increasingly challenged by transport problems (30%) is well above the region’s historical norms. This may reflect shortages in the supply of HGV drivers, and also freight capacity constraints as demand increases. Port delays due to Brexit could also be a source of difficulty for companies.

Another challenge coming to the fore is the availability of government support for business. Historically this has been a relatively minor challenge but it is now a more pressing issue for 27% of companies, the highest rate across all UK nations and regions.

Input prices, selling prices and profits

Businesses are also dealing with sharp rises in input costs. Input price inflation of 4.6% in the year to Q1 2022 was faster than elsewhere in the UK. And businesses expect a further 4.0% rise in the 12 months ahead, a stronger outlook than in any other part of the UK. Clearly this reflects the significant supply-chain disruptions that companies are facing, as well as a surge in the prices of components and raw materials. The region is also one of the more export-intensive parts of the UK, so it is possible that Brexit-induced trading frictions are pushing up costs for businesses.

However, companies do not intend to fully absorb these costs. Selling prices charged to customers are up by 2.2%, year-on-year, in Q1 2022 and a 2.9% increase is forecast for the next year. The expected outcome of this is that profits will rise by 7.2% over the next 12 months, as the impact of higher sales and selling prices more than compensates for the cost increases.


In terms of investment, the recovery in demand and emerging capacity constraints have caused businesses to upgrade their spending plans. After rising at an annual rate of 1.6% in Q1 2022, capital investment is expected to increase by 4.1% in the year to Q1 2023. This is the strongest growth outlook across all of the UK. Large scale industrial investments into the region from companies including Nissan and Britishvolt may partly help to explain this. The pace of growth in Research & Development (R&D) budgets is also expected to pick up to 2.4% over the same period, following a 1.0% increase over the last year.


Find out more about the ICAEW UK Business Confidence Monitor at icaew.com/bcm

About Northern Society of Chartered Accountants

Northern Society of Chartered Accountants (NorSCA) represents 4,000 ICAEW members and ACA students working in business and the finance profession across the North East of England, Teesside, northern Yorkshire and Cumbria.

We have been assisting businesses in the north of England and producing chartered accountants for over 140 years.


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