South West businesses have reported “broadly stable” levels of trading following months of decline, according to a new report from NatWest.
Research for the bank's South West PMI 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 - found the overall amount of new work placed with private sector firms in the region fell only slightly at the start of the final quarter of 2023. The survey found that while some companies had success in winning new business, others indicated that a general slowdown in market conditions had weighed on overall client demand.
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Business confidence picked up from September's nine-month low, with upbeat forecasts generally underpinned by hopes that customer demand would revive and boost sales. Planned company expansions were also mentioned by some firms. The study also found Private sector firms based in the South West lowered their staffing levels for the second successive month in October. Anecdotal evidence linked the latest decline in payrolls to softer demand conditions and the non-replacement of voluntary leavers.
Outstanding business at South West private sector businesses fell again in October, thereby stretching the current sequence of depletion to eight months. That said, the pace of reduction was the softest since April. Of all 12 UK regions, only London recorded a softer decrease in backlogs than the South West in the latest survey period. Where lower amounts of unfinished work were reported, firms often attributed this to reduced inflows of incoming new work.
The data pointed to a further easing of cost pressures across the South West private sector during October. Though sharp, the rate of input price inflation was the softest recorded since January 2021. Businesses mentioned wages, and the cost of raw materials, fuel and energy had increased. A slower, but still marked rise in operating expenses was also seen across the UK as a whole.
Paul Edwards, chair of the NatWest South West regional board, said: "Overall, the more stable picture is a positive development, but firmer demand conditions and a sustained improvement in sales will be needed to put the sector on a solid growth footing."
