Shortages and costs take toll on regional business
REGIONAL businesses have faced a fresh decline in activity amid ongoing shortages and cost constraints, latest research shows.
The North East economy registered a further loss of momentum in November, with business activity in contraction territory for the first time in nine months, the latest NatWest Regional PMI data shows.
The headline NatWest North East Business Activity Index — a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors — pointed to the quickest reduction in local output since January.
The index fell from 51.2 to 49.6 in November – and the North East was the only region to see decline, with growth sustained elsewhere.
Those who took part in the survey linked the fall to severe material shortages, with some also commenting that labour shortages contributed to the downturn.
Companies based in the region saw another monthly increase in new work during November, taking the current stretch of expansion to nine months. The rate of growth accelerated from October and reached the fastest for three months, with firms linking the upturn to stronger client confidence.
That said, local companies recorded the weakest rise in new business of all regions that reported growth.
Private sector jobs in the North East increased in November, with the rate of expansion rising to its strongest levels since June 2015.
Firms said additional staff had been taken on to meet greater demand needs – yet job creation in the North East was the slowest of the 12 monitored regions for the sixth successive month.
For the seventh time in nine months, the rate of input cost inflation in the North East reached a new series record last month – and the region also saw a quicker increase in input prices than the national average – and almost two-thirds of survey participants reported greater expenses, citing higher energy, raw material and transport costs.
Prices charged for goods and services also rose further, taking the current sequence of inflation to 15 months, and the rate of increase was substantial and climbed to a new record.
Although private sector companies displayed strong confidence in seeing rising output next year, the overall level of positive sentiment slipped to the lowest since October 2020.
Growth projections were underpinned by predictions of new business wins and stronger demand, but they also highlighted concerns over ongoing staff and material shortages, as well as the long-term implications of Brexit.
Heather Waters, of the North Regional Board at NatWest, said: “North East businesses faced a fresh decline in business activity as raw material shortages and a lack of suitable staff began to bite in the private sector. Despite this, demand for goods and services continued to rise and reached a three-month high.
“The trend for new business was the second-worst regionally, behind Northern Ireland where a decline was noted. Positively, the rate of job creation was the quickest in over six years, yet was subdued compared to other parts of the UK. Charges levied by local private sector companies rose at a record pace due to an unprecedented increase in input costs.”