Business activity rose in just over half of the UK’s nations and regions in July, the latest NatWest Regional Growth Tracker showed, with the survey indicating increased confidence towards future growth prospects in most areas.
The Tracker – which surveyed businesses operating in the manufacturing and services sectors across 12 regions of the country – “showed a rise in business activity in seven out of the nine English regions monitored.”
Business activity growth in July was “led by London and the East of England, with positive contributions also coming from the South East, North East, South West, West Midlands and East Midlands.”
Yorkshire & Humber was at the bottom of the rankings, ‘recording its fastest fall in output for six months.”
Activity was meanwhile down ‘slightly in Scotland, Wales and Northern Ireland.’
Sebastian Burnside, NatWest Chief Economist, said:
“There were pockets of solid business activity growth across the UK in July, namely in London and the East of England. In total, seven areas saw business activity rise in July, and several more were in or close to so-called recovery territory, with July’s performance either in line with or better than the trend over the past six months.”
They added:
“The results were achieved amidst a backdrop of demand headwinds and stubbornly high price pressures, with firms across the UK indicating growing challenges when it comes to winning new business, as well cost increases that continue to outpace the long-run average. Local job markets continue feel the effects of the recent instability and the rise in labour costs, with employment falling in most areas in July. Nevertheless, a rise in growth expectations across the majority of nations and regions suggests that there’s a sense among businesses that the worst of the disruption from the hikes in National Insurance and tariff uncertainty has passed.”
July saw broad-based headwinds to demand, with all parts of the UK recording lower intakes of new business.
For areas such as London and the West Midlands, the “decreases in inflows of new work were only marginal. There were more marked falls in the likes of the East Midlands and Yorkshire & Humber, however, which saw the steepest declines since December 2022 and October 2023, respectively.”
Challenging labour market conditions “persisted across most parts of the UK in July.”
Employment fell in nearly all areas, “dropping particularly sharply in Yorkshire & Humber and the North West. Northern Ireland went against the trend and recorded solid workforce growth, while Scotland also showed some resilience on the job front.”
The only exception was Scotland, where “backlogs rose – albeit only marginally – for the first time in over a year.”
The most marked drop in work-in-hand was “recorded in Yorkshire & Humber.”
Firms in Northern Ireland reported the “strongest cost pressures in July.”
The rate of input price inflation there was “unchanged from the month before and remained above its long-run series average.”
At the other end of the scale, the West Midlands “recorded the slowest increase in firms’ operating expenses, with the rise being the least marked for eight months.”
In a reversal of the situation in June, when there was “a broad-based easing of output price inflation, rates of increase in prices charged for goods and services ticked up in the majority of areas in July.”
Northern Ireland saw the fastest increase in output prices, “followed by the South West. Scotland meanwhile recorded the slowest, registering its softest rise for a year.”
The majority of the 12 UK nations and regions “monitored by the survey saw an improvement in business expectations for the year ahead.”
Firms in the South East were the most “optimistic about the outlook for activity, while those in the North East recorded the biggest upswing in confidence since June.”