Manufacturers in Yorkshire have reported their highest exports in three years.

The latest Quarterly Economic Survey from the West and North Yorkshire Chamber of Commerce shows that manufacturers in the region showed the highest rate of export growth since the end of 2021, with domestic sales surging 17%, the highest level since the end of 2022.

However, while 41 per cent of firms cross all sectors expect to grow their profits in the coming months, the level of firms anticipating improved trading has begun to level off from previous surveys, with investment prospects also remaining flat. West and North Yorkshire also posted confidence levels lower than elsewhere in the country.

And, while official figures show inflation to be falling to within target range, it remains the chief cost pressure facing businesses, closely followed by interest rates and taxation.

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In addition, competition is cited as an increasing external negative factor by firms, suggesting economic activity is beginning to heat up.

Amanda Beresford, chair of West & North Yorkshire Chamber, said: “It is encouraging to see sales improving for our region’s firms, most notably for manufacturing businesses who are seeing increased activity, both at home and abroad. As a region with such a proud exporting pedigree, this is something to be celebrated.

“However, it is clear that many businesses are continuing to face significant challenges that are making investment in staff and infrastructure often very challenging.

Service sector firms also posted an improving picture on UK sales, up by two per cent. However, order books contracted slightly, having grown for the previous two quarters.

Overall, 42 per cent of manufacturers and 34 per cent of service sector firms improved their sales during the second quarter of this year.

Exports from Yorkshire manufacturers grew by 11 points, the highest rate of growth seen since the last quarter of 2021. Service sector firms, however, saw their sales plunge by 14 points.

Order books for overseas sales did grow for the service sector, up two points – the third successive quarter in which they rose.

On employment, around one in four employers in our region are looking to increase their headcount over the next three months. However, growth in businesses looking to boost their staff is beginning to slow.

Hiring intent is down 7% for service firms and 8% for manufacturers.

Labour costs remain the chief cost burden for businesses in our region and, as enthusiasm for taking on more staff oscillates a great deal as firms deal with a turbulent trading environment, the chamber added.

There was some good news in the manufacturing sector where there was a 12 per cent boost in the numbers of employers looking to grow their headcount.

However, the picture concerning investment remains challenging. While manufacturers saw a healthy 12 per cent increase in the desire to train existing staff members, the highest it has been for nearly a year, service sector firms saw a 9 per cent decrease in firms looking to upskill their workforces.

Capital investment fared worse, with a six per cent decline in the volume of manufacturing firms looking to buy in new plant or machinery. For service sector firms there was a more modest reduction of one per cent.

In total, 24 per cent of firms across both sectors are looking to make capital investments while 22 per cent have been looking at investing in training their staff.

Despite the headline rate of inflation having declined in recent months from the highs of late 2022, they remain the chief external cost pressure being faced by businesses. It is clear from employers in our region that reductions in the rate of increasing overheads is not something being experienced on the day-to-day basis.

Behind inflation, interest rates and taxation are the next most pressing issues being faced.

Elsewhere, only 29 per cent of manufacturers reported themselves as being at full capacity, a value that rose to 41 per cent of service sector firms and cashflow remains a stubborn problem for businesses across all sectors, with 26 per cent of service firms and 31 per cent of manufacturers reporting decreases.

Finally, after an optimistic six months, expectations on growing profits is either flatlining or decreasing. Service sector firms predicting an increase in profits in the coming three months fell by 17 points while the level of manufacturing businesses expecting higher profits remained on level pegging with Q1 of the year.

Expectations on turnover also went into reverse for both sectors.

Still, overall, 41 per cent of firms expect to improve profitability in the coming weeks, while 28 per cent expect to see them decrease.