Design experts elucidate Chamber of Commerce report

This month the British Chambers of Commerce business network published its results table for the second quarter of the financial year. Its results point to a fall in output from both the manufacturing and service sectors. The service sector has seen a larger decline in balances such as domestic sales and orders, cashflow, recruitment and training investment than the manufacturing sector.

The BCC’s table includes data taken from almost 4800 businesses from 12 regions including London, the North East and Wales. A total of 3409 companies employing 400 000 people in the service sector supplied data.

According to the BCC results, the export sales balance in the service sector has fallen eight points to 9 per cent – its lowest since 2005’s third quarter, and export orders fell four points to 6 per cent – its lowest since the third quarter of 2003. Profitability confidence has plunged 16 points to 1 per cent – a record low, last seen in the fourth quarter of 1990. Larger businesses in the UK look to be doing better than businesses which are smaller. The BCC results list companies in four sections: those with 1-19, 20-199, 200-499 and 500 and more employees.

The majority of design consultancies fall into the first or second group. Export orders for group one were down 1 per cent and up 7 per cent for group two, compared to a rise of 28 per cent for group four.

If some of the key balances, mostly in services in the UK, are at ‘a historically low level’ according to a BCC spokesperson, what effect does this have on the design industry?

Managing director at Elmwood Leeds and president of the Design Business Association Nick Ramshaw reckons, ‘design can help to raise confidence’ and may entice consumers back to spending. He disagrees with the idea that clients are less likely to retain design consultancies if the economy is weak because it is not easy to demonstrate design’s value for money. ‘It is by no means a straightforward case of all clients spending less,’ because, he says, businesses have to try hard to innovate and create their way out of trouble. According to Ticegroup chairman Ian Cochrane, consultancies that are able to pick up business which might previously have gone to advertising groups, have more chance of doing well.

Cochrane adds that as the results reflect the state of British industry and the UK market, this may suggest that creatives with overseas clients, or in larger or digital firms, are in stronger positions than designers in small consultancies whose work is limited to the UK, or those working in UK retail. He says, ‘Consultancies that have overseas clients should be safe as there is lots of activity in Eastern Europe and the Far East.’

However, while this may be the case in the global arena, Cochrane adds, ‘I do not want to be a prophet of doom, but I have noticed a number of projects in the UK being deferred’.

Cochrane says designers in the retail sector may be affected. ‘Consumer confidence has slumped due to a run of bad economic news which includes a weakening housing market alongside higher food and fuel costs,’ he says. He reckons larger pieces of strategic work might be suspended while clients cut spending and cites the problems at Marks & Spencer as an example. A reported £1bn revamp of M&S stores failed to bring in shoppers, he says.

Principal of Harvest Consulting Jim Surguy points out, ‘For the first half of this year, things in design have held up fairly well, but I have an uneasy feeling it is only a matter of time before the industry is affected.’

FALLING FIGURES

Services
• Sales in the UK in the service sector fell from a positive balance of 17% to a negative balance of -2%, the lowest since the third quarter of 1992

Manufacturing
• UK sales plunged 15 percentage points to -3%

• Export sales balance increased by 12 points to 28% putting it at odds with the weakening in this balance in the service sector

• Confidence in future manufacturing turnover dropped 11 points to 32%, its lowest since the fourth quarter of 2001