QES Q1 2025 - Turnover and profit hopes hit as feared wage and NI rises bite
TAX increases, interest rates and business rates were still the headline concerns for Humber businesses in the latest Quarterly Economic Survey results for Q1 of 2025.
Rising prices were also a big concern this quarter, a figure borne out by comments in our State of Trade sessions at the Chamber’s Area Council meetings around the Humber region, which gives businesses of all shapes and sizes the opportunity to have their say and share their thoughts, good or bad, with their peers.
In the year’s first round of meetings, the message has been consistent and clear, the increases in the minimum wage, but particularly the National Insurance increases, are putting some well established businesses under considerable fiscal pressure.
This QES survey was carried out before the recent Spending Review, with the fieldwork conducted between 10 February and 10 March, but despite recent cuts in the Bank of England Interest rate, Humber businesses were sounding alarm bells about turnover and profit expectations.
More than half of firms (53%) said they thought their turnover would worsen in the coming months, with the balance figure dropping to –11, while profit expectations also remained well into negative territory at –39 points.
Only 20% of firms said they were working at full capacity, a slight improvement on the previous quarter, but 89 per cent of firms said they were concerned about pay settlements and 79% said they expected their prices would have to increase.
This of course, was before President Trump’s announcement on tariffs, which sent stock markets plummeting around the world with Canada, the European Union and China among the loudest voices promising retaliatory action, before he paused the increases for 90 days on all but China.
The UK seemed to fare better than many, with a 10 per cent tariff on its goods, but there were strong concerns for the motor industry, a larger exporter to the United States, which faced a 25% tariff on vehicles and the parts for them.
Business confidence was down, with fewer firms saying they were planning to invest in new plant or machinery, and similarly, investment in training also took a tumble, with 55% of companies saying they weren’t planning to invest in the next three months.
Turnover expectations were also in negative territory with 53 per cent of firms saying they thought their turnover in the comings months would fall, leaving the balance figure at –11.
On the domestic front, more firms said their orders had decreased, with the balance figure dropping to –37, while the Home orders showed a slight improvement, with slightly more firms reporting an improvement in their order books, with the balance figure improving slightly but remaining in negative territory at –27.
Export Sales and Orders both improved slightly, with the Export Sales balance figure improving to –38, and the Export Orders balance improving to –37.
Of the firms who had tried to recruit staff, 90% said they had difficulties.
Chamber Chief Executive, Dr Ian Kelly, commented: “This is yet another challenging set of figures for Humber businesses who could well do without having to deal with increased costs at a time of such uncertainty across the board.
“A lot of businesses who have just about been keeping their heads above water will find the extra coasts to their businesses a further challenge, and we can only hope that most will be able to deal with this latest test.
“The tariff issues will take some time to play out, but the UK Government is currently taking a sensible stance, rather than the knee-jerk reaction we have seen from some countries—a trade war will not help anyone.
We are already seeing a cut in investment and training, with firms expecting a drop in turnover and profits, so the prospects for growth in the current market seem to be limited at best.”
The Director General of the British Chambers of Commerce, Shevaun Haviland, said: “The national insurance rise has been an impending concern for months. From this weekend, it will become a toxic reality for millions of businesses across the UK.
“Our survey shows tax continues remains the top concern, with firms telling us they are planning to cut investment and raise prices, just to balance the books. In the past 24 hours exporting firms have been dealt a further hammer blow by US tariffs. The cost pressures for business at home and abroad are now huge.
“Sustained economic growth will only come through businesses, not government. While there were some limited announcements in the Spring Statement which we welcome – it is hard to get away from the bleak growth predictions.
“We urgently need the government to publish a wider tax roadmap, which includes national insurance, to give firms a direction of travel to lower cost pressures. Ministers must also focus on infrastructure projects and promoting exports, as a springboard for business growth.
“The Employment Rights Bill also threatens to fuel further costs and complexity on businesses at a very delicate time. While Government has listened and made some sensible changes – the legislation as it stands risks unintended consequences which will limit economic growth.
“The Government needs businesses to invest and grow to kick-start the economy. But unless swift action is taken to ease cost pressures and support firms, growth will remain elusive.”
