The resilience of North East business is being put to the sternest of tests

THE resilience of British businesses never ceases to amaze me.

Here we are, two years on from the onset of a pandemic which saw many firms shuttered for months and footfall drop to zero for some sectors.

We’re now in the midst of the worst cost-of-living crisis in a generation, with a war in Europe and supply chains stretched to their limits.

Yet throughout all of this the wheels of British industry have continued to turn, safeguarding services and livelihoods and serving their communities with distinction.

Make no mistake, these are tough times for businesses, just as they are for households.

Whether you’re holding the purse strings for a multinational business empire or trying to make ends meet within your family finances, it’s likely current cost pressures are biting deep – and impacting both your immediate and future spending intentions.

That’s why this is a perilous time not only for business but for the longer-term prospects of the North East economy.

Because even those who have defied the odds to keep their heads above water over the past two years are finding things tough right now.

As trading becomes more difficult so investment intentions falter – and the big ambitions we hold for levelling up, economic growth and a low-carbon transition all become markedly harder to achieve.

This is all backed up by new CBI data published over the past seven days. Take manufacturing, for example. While sector output has proven reassuringly resilient so far, growth in new orders is now slowing and optimism has fallen more sharply than at any time since the opening weeks of the pandemic in 2020.

Costs and domestic prices within the sector are to blame, having grown over the past quarter at the fastest rate since the 1970s.

The surging price of raw materials, energy and other inputs explains much of this rise but transport and labour bills are up too, highlighting how cost-of-living increases are squeezing on multiple fronts.

The upshot is investment intentions have weakened across the board. Money earmarked for new buildings, training, innovation or equipment – spending which was expected to add impetus to the post-pandemic economic recovery – is now on hold.

The retail sector too is beginning to see the effects of the squeeze on household incomes, with sales now sliding.

A sector which can serve as a barometer of household financial health saw its first fall in sales volumes in more than a year in April, according to our latest survey – a clear sign North East consumers are tightening their belts with higher energy prices and National Insurance rates hitting people’s pockets.

There is no quick fix. The war in Ukraine is only adding to the supply crunch and concerns over energy and food prices and the availability of raw materials, while inflation is expected to remain exceptionally high well into next year.

This cost-of-living crisis is going nowhere soon – but must not be allowed to stymie the country’s growth ambitions.

There are steps Government can take to help.

For businesses, ministers must look again at near-term support measures to help firms through this crisis. This week’s extension of the Energy Intensive Industries Compensation Scheme is welcome and can help maintain UK competitiveness, but a further priority should be to provide cashflow support for those struggling with wholesale energy costs via the Recovery Loan Scheme.

For families, the Government will need to keep a close eye on support for those households most vulnerable to higher energy and food prices.

Whether working to protect business confidence or bolster household spending power, nurturing every available opportunity to build growth is essential.

Targeting future growth must be the primary focus for Government and for business.

It is the only sustainable route to long-term prosperity and improved living standards.