Roadmap out of lockdown helps boost business confidence in South West

There is a growing sense of optimism among businesses in the South West as the roadmap out of lockdown and vaccination programme help boost market confidence.

Private sector activity increased for the first time in six months during March, according to the latest regional PMI data from NatWest, although the rate of growth was marginal and lagged behind that seen at a national level.

The increase in new orders marked the end to a five-month pattern of decline and was accompanied by growth in employment figures, with the rate of job creation the quickest seen since September 2017.

Anecdotal evidence indicated that companies increased their staffing levels due to bigger workloads and employees returning from furlough.

The NatWest South West Business Activity Index was above the 50.0 ‘no change mark’ for the first time in six months to signal a renewed expansion of business activity, although the UK-wide trend showed stronger growth of 56.4.

South West PMI Business Activity Index shows growth across the private sector during March – source – NatWest/IHS Markit

Commenting on the latest figures, Paul Edwards, the chair of the NatWest South West Regional Board, said: “The latest PMI data showed that the South West is starting to recover as the roadmap out of the lockdown and vaccine progress boosted market confidence and drove the first increases in output and sales since last September.

“However, rates of growth were not as strong as those seen at the national level, to suggest the region still has some catching up to do. At the same time, cost pressures continued to build, with both input costs and output charges rising at the fastest rates since early-2017 amid reports of higher prices for raw materials, transport and staff.

“Nonetheless, optimism towards the outlook remained historically sharp, and supported a renewed and solid rise in employment as companies anticipate busier months as we head into summer and restrictions are loosened further.”

NatWest’s findings reflected a lot of positive sentiment from businesses across the region, with many firms hoping the easing of Covid restrictions and return to normal business operations would lead to “a release of pent-up customer demand and drive an upturn in activity”.

As has been the case since last June, average input costs faced by South West private sector companies increased in March, while the rate of inflation quickened to a four-year high.

When explaining the latest rise in costs, companies often cited greater prices for raw materials such as metals, oil and components and higher staff costs. There were also mentions of increased shipping charges having pushed up expenses.

In line with growing cost pressures, prices charged for goods and services by firms in the South West rose at a faster pace in March, with the rate of inflation the sharpest seen since April 2017.

Improved demand conditions, rising costs and expectations of higher expenses in the months ahead all drove the latest upturn in selling prices, according to panel members.

Photo by Lowie Trevenna

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