North East Economy Rebounds at Quickest Rate but Employment Fears Grow.
The NatWest North East Business Activity Index suggests business activity is recovering quickest in the North East. Business Live are reporting that activity in the North East saw the quickest re-bound in the country last month, a new study suggests, but concerns are growing that employment levels are not following.
Results from the NatWest North East Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the region’s manufacturing and service sectors – moved to an all-time high of 66.0 in August.
The improvement of conditions, which came as more businesses return to normality following the coronavirus lockdown, was the quickest among the 12 UK regions monitored by the survey.
But August also saw a further decrease in employment across the North East private sector, with firms reporting redundancies and the non-replacement of leavers due to the pandemic.
The survey results mirror similar findings in closely-followed reports on the state of the construction and services nationally, where a growth in business activity did nothing to halt a slide in employment levels.
This week’s publication of regional unemployment figures will now give a clearer indication of how the coronavirus downturn has affected job numbers in the North East.
Richard Topliss, chair of NatWest North’s regional board, said: “Business activity across the North East showed a record increase in August as more firms across the local economy – and their clients – reopened and ramped up operations following the lockdown.
“The results need to be viewed in the context of the unprecedented collapse in activity during the spring, but it’s nevertheless encouraging to see demand rebounding, and on a steeper trajectory than the rest of the UK.
“With a full recovery still a way off, many firms are overstaffed and having to cut back in order to stay afloat. Job losses have slowed, but the worry is that this might be the calm before the storm that could come with the winding down of the furlough scheme.”
According to the NatWest study, firms in the North East remained optimistic towards the outlook for activity over the next 12 months in August. But, having risen in each of the previous three months from a record low in April, the level of confidence eased midway through the third quarter – in line with the national trend.
Figures released at the end of last week showed that the UK economy grew by 6.6% in July as the financial recovery continued but began to slow.
Levels of business activity are still well below the pre-lockdown period, and analysts have warned that tougher times are coming after the end of “easy wins” from the easing of lockdown, and the winding down of the Government’s Job Retention Scheme.
A cross-party group of MPs has called for a “targeted” extension to the coronavirus furlough scheme to avoid mass long-term unemployment and putting hard-hit viable firms out of business if the worker support scheme comes to an abrupt end on October 31.