Sunday, July 14, 2024

Yorkshire & Humber at foot of regional rankings in June as private sector output returns to contraction

The NatWest Regional Growth Tracker revealed that Yorkshire & Humber was once again the worst performer across the UK at the end of the second quarter as private sector output returned to contraction territory after briefly expanding in May.

The Headline Yorkshire & Humber 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 – fell from 50.5 in May to 47.7 in June, below the crucial 50.0 mark that separates growth from decline and therefore signalling a renewed downturn in private sector activity across the region.

After marginally rising in May, demand for Yorkshire & Humber goods and services returned to contraction at the end of the second quarter, in line with the trend seen in the 12 months to April this year. Survey respondents reported low client confidence and a hesitancy from customers to place orders. The decline in Yorkshire & Humber sales activity contrasted with a modest expansion across the UK as a whole.

Malcolm Buchanan, Chair of the NatWest North Regional Board, said: “Our Regional Growth Tracker once again highlighted weakness in Yorkshire & Humber’s private sector economy, with business activity and new orders shrinking in June after some improvement in May.

“Whether this could be a temporary blip due to the upcoming general election, which did cause growth momentum to slow across the UK more broadly in June, remains to be seen. However, the region has underperformed consistently for a while now, and business confidence slid to a 20-month low during the latest survey period.

“Nevertheless, there are positive takeaways. Employment growth strengthened to a seven-month high, with panel members citing recruitment drives and company expansion. From this, we can certainly deduce a feel-good factor in some parts of the local economy, which could help spur growth in the second half of 2024.”

Performance in relation to UK

Although the Future Activity Index remained well above the neutral 50.0 threshold, therefore signalling optimism on balance among Yorkshire & Humber companies, the level of positive sentiment fell to its lowest since October 2022 and was well below the UK average.

Political uncertainty weighed on confidence, anecdotal evidence showed, although some respondents remained hopeful of a further pick-up in the broader economy.

Job creation was sustained across Yorkshire & Humber in June. In fact, the rate of employment growth improved slightly and was the strongest since last November. Recruitment drives, company expansion, and the filling of vacancies underpinned hiring, said survey respondents.

Yorkshire & Humber was among the top performing parts of the UK in terms of workforce growth in June, ranking fourth out of the 12 monitored UK areas.

Operating costs at Yorkshire & Humber firms continued to rise at a sharp pace during June. Anecdotal evidence indicated that companies incurred greater expenses due to increases in commodity and shipping costs.

That said, the overall rate of inflation was broadly in line with that seen in May, which was the softest for seven months. The local increase in total costs was slightly below that seen for the UK as a whole.

Prices charged for Yorkshire & Humber goods and services increased in June, as has been the case in every month for almost four years. The rate of inflation quickened slightly to its strongest since March, but was the second-weakest seen across all 12 monitored parts of the UK.

Where charges were lifted, survey respondents mentioned the passing on of higher costs to their customers.

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