Key Findings
- Nine out of 12 UK nations and regions record growth of business activity in June
- London tops the growth rankings, ahead of Northern Ireland
- Yorkshire & Humber underperforms
Business activity grew in nine UK nations and regions in June, after having risen in all 12 in the previous month, the latest NatWest Regional Growth Tracker showed.
The NatWest Regional Growth Tracker Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.
The strongest rise in business activity in June was recorded in London (index at 56.1), which went against the general trend and saw growth accelerate from the month before. The South West (53.9) was the only other area where output rose at a faster rate. There were renewed falls in activity in both Yorkshire & Humber (47.7) and Wales (49.7), while the South East's (49.9) upturn stalled.
Sebastian Burnside, NatWest Chief Economist, commented:
"Our Regional Growth Tracker shows that most parts of the UK continued to see business activity expand in June, with one or two pockets of real strength. London and Northern Ireland topped the latest rankings, and it's these two that have recorded the strongest average growth so far this year.
"At the other end of the scale, the only notable decrease in activity at the end of the second quarter was seen in Yorkshire & Humber, which the Growth Tracker shows has generally underperformed for the best part of a year.
"Demand conditions varied across the UK in June. The number of nations and regions reporting growth in new business fell, although this masked some stronger performances, especially in Northern Ireland and London, but also in the North West and South West.
"Business expectations took a bit of a hit almost universally in June, reflecting uncertainty ahead of the general election. Encouragingly, however, most areas saw employment rise as businesses continue to forecast growth in activity over the coming year. Although neighbouring each other, the South East and South West are seeing contrasting trends in employment. The divergence, which began at the start of the year, has grown in recent months, with the South East seeing its strongest job creation in over a year.
"An acceleration in output charge inflation across most parts of the UK in June shows continued stickiness in prices, which might give policymakers some pause for thought on interest rate cuts."
Demand
The number of nations and regions recording higher inflows of new business fell from 11 (out of 12) in May to six in June – the fewest since January. Nevertheless, there were some strong and accelerated increases in Northern Ireland, London, North West and South West. The East Midlands and East of England saw the joint-fastest decreases in new work.
Outlook
Business expectations towards activity over the coming year remained positive but weakened in most cases in June. Only the South West saw an improvement. For the second time in the past three months, optimism was strongest in the South East. At the other end of the scale, firms in the North East were the least upbeat about the outlook.
Employment
The majority of nations and regions recorded an increase in employment in June, although rates of job creation were often only modest. The most solid rises in workforce numbers were seen in the South East and North East, with the rates of growth accelerating in both cases. Staffing levels fell in just three areas, namely the South West, East Midlands and West Midlands.
Capacity
Backlogs of work fell almost universally across the UK in June, in a sign that firms were generally completing orders at a quicker rate than they received them. The most marked decrease was in Yorkshire & Humber, where the rate of depletion was the quickest seen since last November. Northern Ireland recorded the only rise, its second in the past three months, albeit one that was only marginal.
Inflation
The highest rate of business cost inflation was recorded in Northern Ireland in June, the second month in a row in which this has been the case. The increase was slightly faster than in May, which was the theme in most areas. The South East and Scotland were two exceptions and recorded the slowest overall rises in input costs – the weakest for 41 and 40 months respectively.
June saw businesses across the UK raise prices charged for goods and services as they looked to pass on higher costs to customers. Furthermore, rates of output price inflation ticked up in the majority of cases and tended to be above their long-run averages. Firms in the North East recorded the sharpest rise in prices charged, followed by those in the South East.
