Business confidence in the North-west has risen according to NatWest’s January Purchasing Manager’s Index (PMI) survey, despite the region seeing the slowest economic growth in a year, due to Covid-19 disruption from staff absences and rising inflation and supply challenges.
The high-street bank reported its Business Activity Index, based on PMI survey responses, fell to 50.8 points in the North-west (a figure of less than 50 indicates a contraction in the economic output) and is the lowest figure recorded since February 2021 when parts of the economy were closed by Covid-19 restrictions.
NatWest have attributed the slowdown in the economy in January to the high-rates of Covid-19 absences in workplaces, as well as rising cost pressures and shortages of materials on the manufacturing and construction sectors. While inflationary pressures on businesses appear to have eased since their November peak, the PMI survey reported that price growth remains at one of the fastest levels recorded over the past 25 years of the survey. Smaller and local manufacturers in the North-west also reported that they were worse affected by price rises compared to larger firms, although this gap was showing signs of closing.
Despite this, PMI survey respondents in the North-west reported rising levels of business confidence, with hiring intentions also continuing to rise in the region, with manufacturers and the service sector leading the charge in job creation. Employment growth rose for the first time in three months, with the North-west outpacing all other regions of the UK in the rate of job creation during January.
Richard Topliss, Chairman of NatWest’s North Regional Board, commented:
“Growth of the North West’s economy slowed at the turn of the year, as the region’s businesses faced multiple headwinds from material shortages, rising prices and the impact of the Omicron variant, not least on staff availability. Inflation remained a prominent feature of the survey, with historically high cost pressures leading many companies to raise prices charged for goods and services.
“Despite all the challenges facing local businesses, it’s encouraging to see that they remain optimistic about the outlook and are expecting a rebound in activity as 2022 progresses. This is helping to sustain a strong labour market recovery in the region, with employment growing at one of the quickest rates in the country.”