After falling modestly in March, business activity across the South West private sector rose fractionally in April, according to the latest NatWest Growth Tracker.
The South West Business Activity Index — a seasonally adjusted index which measures changes in the region’s output of goods and services — rose from 48.5 in March to just above the 50.0 neutral value at 50.1 in April. Whilst an improvement from March, the reading signalled only a fractional rise in output that was slower than that seen across the UK as a whole.
April survey data pointed to a back-to-back fall in overall new business placed with private sector firms in the South West. Where lower sales were reported, companies often attributed this to low customer confidence and rising cost pressures, which were in turn linked to the Middle East conflict. That said, the pace of contraction eased since March and was only marginal. Average input prices rose to the greatest extent since July 2022, driving a steeper increase in selling prices. However, sustained optimism towards the business outlook supported the first rise in employment for a year-and-a-half.
Faye Long, Chair of the NatWest South West Regional Board, said, “The latest South West PMI data point to a relative improvement in performance in April — with key indices for business activity and new orders both moving up from March. However, relatively low customer confidence and sharply rising costs are dampening overall demand, as new orders fell overall. The Middle East conflict was widely linked to more intense cost pressures, with firms’ own expenses rising to the greatest extent in nearly four years.
“Nevertheless, it was heartening to see that business confidence regarding the year-ahead remained resilient while we also saw the first increase in employment across the region for a year-and-a-half. Notably, the only other UK region or nation to register higher staff numbers in April was the South East, with falls recorded elsewhere.
“So, while the current economic climate remains challenging, South West firms continue to expect growth over the coming months. Nevertheless, we will need to see cost pressures subside and improvements in customer confidence and sales before any sustained economic recovery takes hold.”
Upbeat forecasts
South West companies expressed strong confidence around the 12-month outlook for output in April. Notably, the degree of positive sentiment edged up to a three-month high and remained above the UK-wide average. Upbeat forecasts were often attributed to expansion into new markets, greater investment in marketing and new products, and hopes of increased spend in areas such as AI and defence. However, firms expressed concerns over the conflict in the Middle East and rising prices.
Performance in relation to UK
Output expanded across seven of the 12 UK nations and regions monitored by the survey, with the steepest increase seen in London. Business activity meanwhile stagnated in Northern Ireland. Of the four areas to register reduced output, the quickest decline was seen in Wales. Across the UK as a whole, new orders rose slightly after a marginal reduction in March.
For the full report for the South West click here.
Pictured above: Faye Long, Chair of the NatWest South West Regional Board
