The latest NatWest North East Business Activity Index points to a number of worrying signs for companies in the region, where they expect the North East economy to return to growth as business confidence plummets.
The North East business sector returned to growth last month but signs are mounting of growing issues in the regional economy, according to a new survey.
The NatWest North East Business Activity Index , which measures the output of the region’s manufacturing and service sectors, rose from 48.4 in May to 50.9 in June, the first expansion in activity for four months. But the rate of growth was lower than in most regions of the UK, and firms reported increasing worries on rising costs, lower confidence and a slowing of new orders.
New orders fell for the fourth month in a row, with the latest contraction the fastest since May 2020, with firms saying that growing uncertainty surrounding Brexit issues and the cost of living was holding companies back.
The June data also highlighted an unprecedented increase in costs, with fast-rising wages, fuel and energy prices all weighing on businesses. The increase in cost burdens in the North East was the second greatest of the 12 monitored regions, behind only Northern Ireland.
Businesses in the region also reported falling levels of optimism, with confidence at its lowest level for 26 months and described by the survey’s authors as “historically subdued”. Again, the levels of business confidence in the North East were worse than all other regions except Northern Ireland.
Richard Topliss, chairman of NatWest’s North Regional Board, said: “North East private sector activity returned to expansion territory in June, with output rising for the first time since February.
“The rate of growth was only mild however, as firms noted that new business fell at the sharpest pace in just over two years amid weaker demand due to concerns about inflation, Brexit and the potential of a recession. Firms reported a record rise in cost burdens amid further surges in labour, fuel and energy costs, which contributed to a record increase in output charges for the fifth month running.
“The aforementioned downside risks weighed on business expectations for activity in the year ahead, as the level of positive sentiment fell sharply at the end of the second quarter. Local businesses were at their least optimistic in 26 months.”
A number of official releases in the coming 10 days will tell more on the state of the uk economy, including figures this week on spending patterns and the health of the business sector. Data on regional unemployment and the latest inflation levels will be released next week.