Business Activity Bounces Back Across English Region

Steven Bobson, Europe & Americas Editor
September 11, 2012 /

All of the English regions except the North East saw higher levels of business activity during August, according to the latest Lloyds TSB Regional Purchasing Managers’ Index (PMI).

The latest index reading of 52.7 in August, up from 49.5 in July, indicated a solid expansion of output across the English regions as a whole, with the pace of growth the fastest for five months. The index is seasonally adjusted, with any reading above 50.0 signalling growth.

London led the way in August, posting solid business output growth that was the strongest since March. The capital was closely followed by Yorkshire & Humber, where business activity bounced back strongly after a decline seen in the previous month. Relatively solid growth was also recorded among companies in the West Midlands during August, while the North East lagged behind the rest of the English regions, with a marked drop in manufacturing production contributing to a sixth successive monthly reduction in regional output.

August’s survey generally presented a mixed picture of new business activity across the English regions, with only a slim majority recording an expansion. London saw by far the strongest rise in new work, helped by an acceleration in the service sector economy, while Yorkshire & Humber recorded a solid return to an expansion of new work. Of the four regions to register a drop in the volume of new business, the steepest decline was in the South West. Where lower levels of new work were reported, companies mainly cited clients’ concerns about the wider economic outlook.

This latest survey continued the trend that we have been witnessing for the last three months, with reductions in levels of outstanding business seen across the English regions. Anecdotal evidence from survey respondents suggested that subdued underlying demand in recent months had resulted in sufficient spare work capacity among businesses.

Companies across the English regions generally indicated a further modest upturn in employment in August, with job creation the strongest in the West Midlands and East Midlands. London followed in third place for employment growth, and the latest increase in workforce numbers within the capital was the most marked since June 2011, likely boosted by the Olympic Games and the associated influx of visitors.

August also saw an upturn in input cost inflation in the English regions from the three-year low registered during July. This mainly reflected higher service sector costs driven by rising fuel prices. Manufacturers meanwhile noted that lower raw material prices had helped reduce pressure on their cost burdens. London topped the ranking for highest cost inflation for the third month running in August, while only the East Midlands and Yorkshire & Humber saw lower input prices.

Rising input prices across most of the English regions contributed to increased output prices among private sector firms during August. However, strong competition for new business ensured that the rate of inflation in these regions remained marginal. Of the three regions to see a drop in average tariffs, the steepest rate of reduction was in the West Midlands.

David Oldfield, MD Commercial, Lloyds Banking Group, said: “The English regions saw a widespread rebound in business activity during August, which will raise hopes that last month’s decline will prove the exception rather than the rule for the latter half of the year.

“Service sector growth underpinned the overall business output expansion seen in August, especially in the case of the solid performances seen in London and Yorkshire & Humber. However, the rebound in activity was achieved largely without a significant boost from new business inflows, which in turn has seen job creation remaining relatively low.

“Local businesses looked to price discounting in order to attract client spending, and strong competition for new work suggests that this trend will persist for some time yet even if August’s upturn in cost inflation continues.”


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