Chris Holland checks how companies plan to approach 2011

As 2011 was heralded in with a spectacular fireworks display over London, the gloom merchants were reminding us what a tough year this is going to be.

The year kicked off with the rise in VAT to 20 per cent and the Coalition Government’s nasty austerity measures will start to bite, stretching personal and corporate budgets to their limits.

So, should we celebrate or dread the turn of another year?

Finance chiefs at major UK companies are optimistic over prospects for growth in 2011, but another report from a major bank points to a slackening of confidence among Yorkshire businesses.

The overall mood of local business people is summed up by Bradford Chamber of Commerce chief executive Sandy Needham as “cautious optimism”.

Feedback from the Chamber’s 1,100 member firms showed that most believed that, while the worst was over, the going would remain tough with plenty of challenges to overcome.

One key area of concern was for private-sector firms that have relied on public sector work to boost their turnover and keep busy.

With the Government’s public spending cuts due during 2011, this could dampen the chances of continued success for some companies, unless they can find alternative sources of work.

Sandy said: “If it was not for the impending public spending cuts, the mood among local businesses would be far more bullish.

“Many were forced to cut costs and reassess their operations during the recession, but most of that cost-cutting has been achieved. The underlying feeling is more optimistic, especially in sectors such as manufacturing which continues to perform well.

“But with around 30 per cent of Bradford companies relying to a lesser or greater degree on public sector contracts, the spending cuts are a cause for concern.

“It depends which sector you are in. Companies supplying the NHS should see spending generally maintained, but those in construction could suffer more as major projects are cancelled or delayed.”

According to accountancy firm Deloitte, confidence has bounced back among finance chiefs with fears of a double-dip recession fading.

Finance chiefs at nearly 100 leading companies said they were focusing on expansion strategies, including taking on new staff and undertaking capital expenditure.

Chris Powell, partner and head of Deloitte’s Leeds audit practice, said: “If 2010 was the year of balance sheet rebuilding and cost-cutting, then 2011 looks set to be the year in which corporates start spending again.

“A new emphasis on expansion by the UK’s large companies lends support to the idea that the recovery is likely to broaden out during 2011, aided by growth in private-sector hiring and capital spending.”

Local examples of hard cash being invested on future expansion plans include Haworth Scouring, where 16 new combing machines are being installed at the firm’s Cashmere Works in Bradford, which will feature innovative processing techniques.

It is part of a seven-figure investment programme by Haworth’s owner, Cottingley-based Curtis Wools Direct.

Haworth Scouring and Haworth Combing are the largest wool-processing operations of their kind in the world. Prince Charles had an extended tour of the company during his visit to Bradford in November in his capacity as patron of the Campaign For Wool, which aims to boost worldwide demand for the fibre.

The Campaign For Wool inspired joint managing directors Simon and Martin Curtis to make the latest investment.

Martin said: “We are making this major investment as we remain optimistic about the prospects for our business. The wool trade has been through some difficult times, but we see growth prospects not only in the UK but also in key export markets such as Italy, the Middle East and Eastern Europe.

“We have the capacity and skills to process and deliver wool to our customers when they need it and that reliability should help us develop our markets. There are also opportunities to fill the gap left by companies that have disappeared.”

Mr Curtis said it was hoped that the new combing machines would be fully operational by the end of March.

Also taking a positive view of the future is eight-man engineering firm Simon Healy Engineering Ltd on Wakefield Road.

The company has applied for planning permission to build a two-storey extension to its factory and offices to create a 7,000 sq ft base at the Napoleon Business Park.

Managing director Simon Healy, who started the general engineering firm about 25 years ago, said the expansion should lead to another two or three jobs being created at the company.

The firm is an engineering sub-contractor business working for customers in several sectors, including oil and gas. Mr Healy said not relying on one sector had helped the business ride out the recession and maintain production.

He said: “We saw business pick up in the middle of last year and have kept busy since. Most of our work is CNC computer-controlled and tailored to specific needs.

“The flexibility of working across different industries has helped ensure our workflow for, as one sector dips, others provide orders.

“The new extension is necessary as we have outgrown our existing space which we have occupied for the past nine years or so.”

According to findings by Yorkshire Bank, the county is a good place to start new ventures and grow businesses.

More than two-thirds of respondents described Yorkshire as a good environment for starting a new business and offered good prospects for business investment and long-term growth.

But a narrow majority believe it will become harder to start or grow businesses in the next two or three years.

Richard Norrington, regional director of Yorkshire Bank’s integrated financial solutions operation, said: “As well as actively experiencing healthy economic conditions, Yorkshire business leaders and entrepreneurs need to feel confident and believe the economy is moving in the right direction.

“Starting a business, or investing to take a venture to the next level, is an important milestone which requires a number of factors to be successful.

“Many businesses are considering their future growth prospects with a growing confidence. Although economic challenges remain, there will also be growth opportunities for strong businesses.”

Business support organisation Business Link Yorkshire, which will close in November, is seeing a growing number of inquiries from people looking to start low-cost enterprises from home.

Karen Marsden, head of the customer information centre, said: “We are seeing a trend in pre-starts wanting to set up service sector businesses, involving minimal overheads, such as accountants or virtual PAs.

“There is also an increase in individuals looking to set up on a part-time basis over a six-to-12-month period to test the water before committing to full-time.”

Job losses and public sector spending cuts are thought to be the key factors driving individuals to consider setting up on their own.

Business Link Yorkshire said more than 60 per cent of inquiries were from people considering starting a business, with access to funding remaining one of the key challenges they face.

The organisation has also seen a rise in the number of calls it gets from businesses asking about website development and online shopping.

A note of caution has been sounded by Lloyds TSB Corporate, which said renewed fears over domestic demand had dented business confidence in Yorkshire.

Its latest Business In Britain report showed that firms across the region were concerned about prospects in the coming months and planned to freeze investment and raise prices in the face of continuing economic uncertainty. Most still believe that export markets will be a source of future growth.

John Robson, Lloyds TSB Commercial regional director, said: “Businesses across Yorkshire have seen strong growth over the past six months and they were rightly confident about their prospects for the final months of this year. But this sense of optimism is starting to give way once again to concerns about domestic demand.”

“Businesses remain cautious about prospects for sales, orders and profits – and we are seeing that reflected in our index. Many businesses will be planning price increases to keep profits at current levels, but in general, local firms are evenly split on the chances for a profitable 2011. And it is still true to say that more companies are optimistic about sales, than not.”