Business pick-up at end of year could be hit by new lockdown
BUSINESS activity started growing again in December and the rate of job losses slowed, according to new figures.
The modest boost, however, was tempered by the strict lockdown which came into force at the start of the year and which is set to push the country into a double-dip recession.
The latest seasonally adjusted NatWest East Midlands Business Activity Index suggested business output was up month-on-month in December – linked to stronger client demand and stockpiling by foreign clients in the lead up to Brexit.
Although only marginally, the rate of output growth was better than the UK average.
The December data signalled the sharpest increase in new orders received by firms operating in the East Midlands for three months.
In fact, the region bucked the national trend, which indicated broadly unchanged new business dealings.
However, bosses at East Midlands firms had slightly less upbeat expectations regarding the outlook for output over the coming year.
Although relatively strong, the degree of confidence was down on November’s recent high, and was lower than the UK average.
Optimism was driven by hopes of a relaxation of Covid-19 restrictions over the coming year – which obviously have not materialised – while Brexit concerns also weighed on sentiment.
Private sector firms in the East Midlands signalled an 11th successive monthly fall in employment during December.
That said, the rate of contraction in staffing levels was the slowest for some time and softer than the UK average.
The level of outstanding business at East Midlands firms increased for a second consecutive month at the end of 2020 – the quickest rate of growth since December 2018.
Some companies noted that the rise was linked to greater new order inflows but reduced capacity due to the pandemic. The region contrasted with the UK average, which signalled a solid decline in backlogs of work during December.
The December data also indicated a marked rise in input prices for companies in the East Midlands – the fastest growing in inflation for over a year and more than the UK average.
Companies surveyed commonly stated that higher input prices stemmed from increases in raw material and freight costs, as shipping issues pushed supplier prices up. Output charges went up marginally.
John Maude, who sits on the NatWest Midlands and East regional board, said: “The East Midlands private sector ended 2020 on a better note, following a lockdown-related contraction in activity during November.
“Despite reports of stronger client demand and customer stockpiling, the output expansion was only marginal overall as the pandemic continued to weigh on client spending.
“Encouragingly, the reduction in employment slowed to only a fractional pace as firms required greater capacity.
“Any moves towards stabilisation in workforce numbers will likely be constrained by further Covid-19 restrictions, however, as business confidence took a hit following tighter social-distancing measures.
“Difficulties sourcing raw materials and greater freight costs pushed input prices higher, as the rate of cost inflation soared.
“Although firms brought to an end a three-month sequence of decline in selling prices, the rate of charge inflation was far outpaced by the rise in cost burdens.”