The economy has remained challenging during the first months of 2025 for East Midlands businesses, with four out of ten expecting profitability to worsen and half expecting to raise prices.
The East Midlands Chamber’s Quarterly Economic Survey for Q1 displayed a bleak forecast for the region.
Future pricing intentions
- Half of businesses (54%) expect to put their prices up. This figure has shown little sign of improvement from 56% at the end of 2024
- Labour costs are the biggest driver of the pressure to put prices up
Profitability
- 4 out of 10 expect profitability to worsen over the next 12 months. This figure has doubled from 2 out of 10 in Q3 2024
Recruitment
- 65% had difficulty finding suitable staff. The figure was 72% at the end of 2024
Top 3 worries of East Midlands businesses
- Corporate Taxation
- Inflation
- Business Rates
East Midlands Chamber Director of Policy and Insight Richard Blackmore said: “For businesses to be reporting such low levels of confidence in future profitability over the next 12 months is a stark reminder of how hard things are right now.
“If we look at the Quarterly Economic Survey data over the last six months, we see profitability expectation nosedive. On turnover, fewer respondents reported that they’re expecting turnover to improve over the next three months, so when we look at profitability and turnover expectation through the same lens, you get a fairly grim outlook.
“Businesses have faced challenging trading conditions for some time, navigating everything from inflation to soaring energy bills, but higher costs hitting from April will have added another layer of concern.
“Raised employer National Insurance contributions, for example, appear to have been a factor behind cautious spending plans, while the expectation of having to raise prices is still high. When you consider rising inflation, it’s not surprising that half of businesses are considering putting prices up. While that number has eased very slightly from six out of ten at the end of last year, but it’s still high.
“There was modest improvement this quarter in orders for overseas trade and a slight lift in investment intention for plant, machinery and equipment, but spending plans are still not very ambitious. 30% of firms have revised investment intention on those things downwards and that’s a huge change from just 8% last summer. With training it’s the same story – nearly a quarter of businesses have adjusted their spending plan downwards when it was just 5% last summer.
“With corporate taxation still the number one concern of East Midlands businesses, closely followed by inflation, you get a picture of the protective approach being taken, treading carefully to alleviate the effect of rising costs.
“When it comes to recruiting staff, there was a slight improvement in the number of businesses reporting difficulty in finding suitable candidates. That’s eased from 72% to 65% – but while that’s a step in the right direction, we’re still talking about the majority of firms, and it highlights the continued need to address skills investment.
“Amid so much economic uncertainty, full growth potential in the East Midlands is being held back. The discouraging outlook in these findings underlines the need for government to step up. The government’s spring statement and comprehensive spending review are opportunities to put supportive policies for businesses front and centre and it’s essential that happens.”
