South West growth slows in July as sales decline and firms cut jobs

Business activity growth in the South West slowed to a five-month low in July, according to the latest NatWest South West Regional Growth Tracker, as firms reported a renewed drop in sales and accelerated job cuts.

The headline South West Business Activity Index fell to 51.1 in July from 53.9 in June, indicating continued expansion for the seventh consecutive month—but at the weakest pace since February and only marginally above the 50.0 no-change mark.

Across the UK, business activity also expanded at a slower rate, though the national upturn was slightly stronger than that seen in the South West.

Companies that reported growth often attributed it to previously placed orders and new customer wins. However, subdued market demand and fewer new projects were cited by others as factors dampening performance.

The New Business Index signalled a fresh decline in new sales, with the rate of contraction the steepest since September 2023.

Labour Market and Pricing Trends

Staffing levels fell for the ninth consecutive month, with the rate of job shedding the sharpest since February. Firms linked the decline to cost-cutting efforts and redundancies.

Input costs continued to rise markedly, although the rate of inflation eased to a four-month low. Meanwhile, selling prices increased at a sharper and accelerated pace, as businesses sought to protect margins.

Faye Long, Chair of the NatWest South West Regional Board, said, “The tracker showed that South West private sector firms struggled to maintain growth momentum in July amid a slowdown in customer demand.

“The fresh fall in sales coincided with reports of squeezed client budgets and greater uncertainty over the economic outlook. Cost concerns were also evident among businesses, with efforts to reduce expenses driving a further reduction in staff numbers in July.

“Despite the current challenging demand environment, firms were more upbeat when looking ahead. Optimism regarding the 12-month outlook for output rose to the highest level in nine months, with firms in the South West also more positive than the average UK company. A rebound in customer demand, new product launches and increased investment were all expected to drive growth over the next year.

“While cost pressures remained sharp in the South West—and indeed across the UK—the rate of inflation softened for the third straight month, adding to hopes headline inflation will also ease. Nevertheless, firms continued to hike their selling prices in order to help support their margins.”

Regional Comparison

• New Orders: Declined for the third time in four months, with the steepest drop since September 2023. Squeezed budgets and weaker demand were key contributors.
• Business Confidence: Improved in July, reaching a nine-month high. Only three UK regions—South East, West Midlands, and North West—posted stronger optimism.
• Employment: Job cuts in the South West outpaced the UK average, with only the East of England, Yorkshire & Humber, and North West recording faster declines.
• Capacity: Unfinished business fell again, indicating spare capacity. The rate of depletion was solid and in line with the UK-wide trend.
• Prices: Input cost inflation matched the UK average and was the steepest since April. Only Northern Ireland saw a sharper rise in selling prices.