Business activity increased across 10 of the UK’s 12 nations and regions in July, marking a sharp improvement from June when only three areas recorded growth, according to the latest NatWest UK Regional Growth Tracker.
The survey, compiled by S&P Global from responses to its UK Purchasing Managers’ Index surveys, found that easing cost pressures and improving business confidence supported activity at the start of the third quarter.
The Tracker’s Business Activity Index uses 50.0 as the dividing line between growth and contraction. Readings above that level indicate increasing output, while figures below 50 point to declining activity.
London recorded the strongest performance in July, with a reading of 55.3. The South East followed at 53.2, while Northern Ireland recorded 51.4.
Scotland and Yorkshire & Humber were the only two areas to experience falling output. Scotland recorded 47.3, while Yorkshire & Humber registered 49.1.
The figures represented a significant improvement from June. At that time, growth was limited to London, which recorded 54.1, the South East at 50.9 and the North East at 50.8. Northern Ireland had suffered the sharpest decline, with its index falling to 43.9.
The latest survey also found that cost pressures eased across all 12 regions during July. As a result, businesses generally increased the prices they charged for goods and services at a slower pace.
Business expectations also improved across most parts of the country, suggesting companies became more optimistic about activity over the coming year.
Sebastian Burnside, NatWest’s chief economist, said most areas enjoyed a positive start to the third quarter as output increased and price pressures continued to ease.
He said improving underlying demand had helped broaden growth across the country, while businesses in most regions were becoming more confident about the outlook.
The survey also found signs of stabilisation in the labour market. Workforce numbers continued to decline in many areas, but the rate of reduction slowed in most cases. Some regions even recorded increases in employment.
The findings could provide some encouragement for policymakers as they assess the UK’s inflation and interest-rate outlook. The Bank of England kept Bank Rate at 3.75 per cent at its July 30 meeting, with its next monetary policy decision scheduled for September 17.
Expectations for future interest-rate moves have shifted repeatedly as energy prices and inflation forecasts have been affected by developments in the Middle East.
The regional survey follows other reports showing an improvement in UK business confidence and a slower decline in job vacancies, particularly in the services sector.
The NatWest UK Regional Growth Tracker covers Scotland, Wales, Northern Ireland and nine English regions. Responses are collected during the second half of each month and measure changes in business activity compared with the previous month.
