Last month saw one of the weakest business performances In the South West since the global financial crisis in March 2009, as firms reported ‘recessionary fears’ in new research.
Business activity in the South West firms contracted at the sharpest rate for almost two years with firms in the region pointing to recent political and economic uncertainty for the downturn.
Private sector firms operating in the region signalled a fourth successive monthly reduction in new work. Businesses reported reduced client confidence and spend, as the “gloomy” economic outlook prompted hesitancy, according to the research from NatWest.
The bank’s monthly survey found firms in the area generally anticipated an expansion of output over the next year, but the level of positive sentiment was unchanged in October from the record low reported in September.
While a number of firms expected market conditions and customer demand to improve over the next 12 months, many businesses expressed concerns over the deterioration in the economic climate, the cost of living crisis and rising interest rates.
Companies cited higher energy prices as a key driver of inflation, alongside greater costs for transport, raw materials, food and staff.
As part of efforts to pass on the burden of higher expenses to clients and to protect profit margins, South West firms raised their selling prices again in October.
Paul Edwards, chair of Natwest South West regional board, said: “Barring the pandemic lockdowns, this marked the weakest performance for the region since the depths of the global financial crisis in March 2009.
“Against a backdrop of rapid inflation and a cost of living crisis, rising interest rates and weakening demand the survey also showed that business confidence was stuck at a record low as recessionary fears set in.”
The study found there was a fractional rise in employment throughout the South West in October, following a slight reduction in headcounts during September. Staffing levels have now increased in 19 of the previous 20 months, as companies look to boost capacity and support higher workloads in future.
However Mr Edwards warned staffing levels in the area could come under “greater pressure” in the months ahead, unless there was a notable turnaround in conditions,
At the national level, business confidence slumped to its lowest since April 2020, but was still stronger than that seen in the South West.
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