Downturn shallow as new year sees slight drop in…

Downturn shallow as new year sees slight drop in regional business activity

The shallowest of downturns has been recorded in business activity in the Yorkshire and Humber region as the new year began.

January’s combined output for the manufacturing and service sectors fell just 0.1 per cent from December's 48.7 to 48.6, and while it was the fourth successive monthly reduction, business confidence increased and jobs growth returned.

Analysis of the NatWest Yorkshire & Humber PMI Business Activity Index saw little change, wit the decline the weakest seen in the contraction that began in October. And while the level of incoming new work fell, the future activity index hit an eight-month high to signal a strengthening of optimism among regional firms. In addition, the region posted the second-strongest level of confidence when compared against the other eleven monitored parts of the UK.

Malcolm Buchanan, chair of NatWest’s North regional board, said: “Yorkshire & Humber business activity continued to fall in January, extending the region's contraction that began last October. The region's economy is being pulled lower by challenging demand conditions, with firms commenting on generally subdued order intakes as clients retrench.

"That said, overall activity levels have fallen only marginally in each month of the current downturn, despite the survey data showing stronger declines in new order intakes over the same period. Backlogs of work have helped bridge the gap, with firms working through their incomplete business.

Malcolm Buchanan, chair of the NatWest North Regional Board. (NatWest)

"Nevertheless, there are encouraging signs. An improvement in business confidence was accompanied by a return to employment growth. Meanwhile, easing cost pressures adds to evidence that inflation may have peaked."

According to survey respondents, new product launches and the acquisition of new customers were cited as reasons to be upbeat towards the 12-month outlook.

Following a marginal decline at the end of 2022, the latest survey data highlighted a return to growth in private sector staffing levels. Where an increase in jobs was reported, this was linked to expansion efforts.

The trend contrasted with that seen for the UK as a whole, which showed stagnant employment levels in January. Only Northern Ireland and the West Midlands posted faster jobs growth than Yorkshire and the Humber.

Private sector companies continued to face intense cost pressures in January, with input prices rising sharply and at a pace that remained well above its long-term average. Increases in costs were primarily linked with greater salary and energy expenses, although some firms remarked on supplier price hikes. However, the rate of inflation eased to a 21-month low.

As a result, prices charged for goods and services provided by rose sharply in December. The rate of increase edged up slightly and was the strongest in three months. According to panellists, fees were lifted in line with increases in costs.

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