Business activity has picked up in the East Midlands despite inflation growing at an alarming rate, according to the latest business survey from NatWest.
The bank’s East Midlands Business Activity Index suggested a marked upturn in activity in February, with growth at its fastest rate for seven months.
Firms stated that greater new orders and stronger client demand following the easing of Covid-19 restrictions drove an expansion in output.
The marked expansion was broadly in line with the UK average and the steepest since July 2014, with new order growth put down to stronger client demand from new and existing customers. Both manufacturing and the service sector saw gains.
As a result, East Midlands firms indicated a strong degree of confidence in the outlook for output over the coming year during February, linked to hopes of an end to the impact of Covid-19 waves and a further uptick in client demand as restrictions end.
Businesses also registered a further steep rise in job creation thanks to greater new order inflows and the replacement of voluntary leavers.
Some companies noted, however, that challenges retaining and hiring staff remained. The rate of job creation slowed from January's peak and was slower than the UK average.
February data indicated a further marked increase in costs across East Midlands firms.
Although the rate of inflation was slower than last November's series peak, it was the third-steepest on record. Increased costs were linked to ongoing supply-chain disruption, higher fuel, material and transportation costs and greater energy bills.
Output charges across the East Midlands private sector rose at a marked pace during February.
John Maude, who sits on the NatWest Midlands & East Regional Board, said: “East Midlands firms indicated a marked upturn in output during February, as the region recovered further following the easing of Covid-19 restrictions. Client demand strengthened, as new orders rose at the steepest pace for over seven-and-a-half years.
"Challenges hiring and retaining staff remained, however, as the rate of job creation softened.
“This, alongside ongoing supply-chain disruption, had the adverse effect of adding pressure to capacity.
“At the same time, higher fuel, energy, material and transportation costs pushed input prices up, as the rate of cost inflation accelerated to the third-fastest on record.
“The Russian invasion of Ukraine is likely to push energy and fuel costs even higher over the coming months, with further pressure also placed on supply chains.
“Margins were squeezed, however, as selling prices rose at a softer pace."
