The headline NatWest Yorkshire & Humber PMI^® Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – signalled a fourth successive month of falling private sector output across the region.

However, having risen to 48.4 in November, from 45.2 in October, the headline index pointed to a contraction in activity that was modest and the weakest seen over the current sequence of decline. According to panel members, subdued demand conditions led output volumes to shrink, with the recent completion of projects and low client confidence reportedly restricting sales growth.

The seasonally adjusted New Business Index remained in sub-50.0 contraction territory in November, but rose to a four-month high, signalling a slower deterioration in demand for Yorkshire & Humber goods and services. Panellists commented on subdued market conditions, in part due to weaker client confidence.

As has been the case throughout 2023 to date, the trend in new business in Yorkshire & Humber was weaker than seen for the UK overall.

Private sector businesses across Yorkshire & Humber remained strongly optimistic towards the 12-month outlook for activity in November. Furthermore, the level of positive sentiment strengthened and was above the UK-wide average.

Expectations of greater new orders underpinned growth forecasts, in addition to new product launches and marketing initiatives.

The seasonally adjusted Employment Index moved back into expansion territory during November, posting above the 50.0 mark for the first time since August to signal renewed job creation across Yorkshire & Humber.

Increased workforce numbers locally contrasted with a fractional drop at the national level. Additional staff were recruited in line with business requirements, anecdotal evidence showed.

Companies in Yorkshire & Humber reported a further reduction in the amount of work pending completion midway through the fourth quarter. The decrease in outstanding business was sharp, despite easing from October’s near three-and-a-half-year record, and among the fastest seen of all 12 monitored parts of the UK. Operating expenses faced by private sector companies in Yorkshire & Humber rose in October amid reports of increased wage costs. That said, the rate of inflation slowed to a 39-month low. According to anecdotal evidence, pressures were alleviated by reductions in raw material prices.

Yorkshire & Humber firms’ operating expenses rose at a sharp and accelerated pace during November. According to respondents, greater insurance fees, wage pressures and supplier price increases led to steeper cost rises. The rate of inflation was the quickest in four months and broadly in line with that seen for the UK overall.

Private sector businesses in Yorkshire & Humber raised their prices charged once again in November, reflecting firms’ efforts to protect margins due to further increases in costs. The extent to which selling prices were raised was strong and the greatest since July.

That said, the local rate of inflation was among the weakest seen across the monitored parts of the UK, with only Wales, the North West and Northern Ireland posting slower rises.

Malcolm Buchanan, Chair of the NatWest North Regional Board, said: “The direction of travel was positive in November – the downturn in business activity once again lost momentum. However, Yorkshire & Humber continues to lag behind the UK as a whole, which moved back into growth territory for the first time since the summer.

“Disappointment on the output and demand front is being offset by positive movements in other areas, as businesses grew more optimistic towards the outlook for the next 12 months. Subsequently, we saw firms step back into hiring mode, as employment rose for the first time since August. It seems that companies do not expect the current weak patch to persist for long in 2024.”

Zunikh currently has an office in Sheffield and as such is constantly monitoring the market in Yorkshire (and nationally given we operate nationwide). That said, we believe it is important to look at local market predictions in the context of the national (and even international) landscape. This is because it is often the case that micro market conditions are driven by global events.

Noting that 2023 has been a particularly unusual year following on from Covid and with the continuing war in Ukraine, we expect that 2024 will see markets begin to settle. We can already see inflation beginning to ease and with this we expect that interest rates will slowly come down. Within the property market we anticipate that this will ultimately result in private sales picking up as consumers recover from higher costs of living and the cost of borrowing comes down. This will be aided by likely reductions in the costs of building and building materials, again attributable to the easing of inflation which may bring the price of stock down in the short term. Markets like Sheffield and South Yorkshire should benefit from this and housing prices may start to increase fractionally as demand for stock grows.

We also anticipate that build-to-rent schemes will continue to be popular amongst institutional investors in places like Sheffield and in the region generally given the strength of the rental market, however yields may start to drop as more consumers return to the private sales.

Our outlook for 2024 is generally positive and we expect Sheffield and the surrounding region to reap the rewards of this in due course.