Business confidence is as low as it was during the height of the pandemic, according to a new NatWest survey.
The bank’s East Midlands Business Activity Index for May showed confidence dropping to its lowest since June 2020. It also said that productivity within East Midlands businesses continued to be affected by raising inflation, with growth at its slowest rate in the current 15-month sequence.
While some firms were benefitting from meeting order backlogs, others mentioned that hikes in prices and a drop in new orders were weighing heavy. Weak demand conditions were linked to lower purchasing power among customers and supply-chain disruption.
The East Midlands was one of only three UK regions to register a contraction in new orders, alongside the North East and Northern Ireland.
Output expectations among East Midlands private sector firms weakened in May, as the degree of optimism slipped.
Although there was a strong rise in East Midlands workforce numbers during May, the rate of job creation slowed to the softest since September 2021 as firms try to cut costs.
Input prices faced by private sector firms rose markedly midway through the second quarter, and were well above the recent trend. Average output charges quickened fractionally to reach a recent high that was sharper than the UK average.
John Maude, a member of the NatWest Midlands & East Regional Board, said: “May data signalled a notable loss of growth momentum across the East Midlands private sector, as the expansion in output slowed following the first contraction in new business since February 2021.
“Hikes in prices and uncertainty reportedly hampered client demand, with customer purchasing power reduced. As a result, business confidence slumped to the lowest since mid-2020.
"Cost burdens rose at one of the sharpest rates on record as higher fuel, material and wage bills drove inflation.
“Despite weak client demand, companies raised their selling prices at the fastest pace in 22-and-a-half years of data collection, as many sought to pass-through greater costs to customers."
