Business activity made a ‘positive start’ to the year, as 10 out of 12 regions in the UK experienced growth, a market report finds.
Employment numbers rose too, with London recording the strongest growth for employment, as more jobs were created than at any point for six months.
Whereas in Wales, the number of workers dipped in a generally promising period that either saw the number of workers rise, or if not, reduce at a slower rate than before.
London also experienced the biggest growth in business activity, scoring 58.3 on NatWest’s PMI (Purchasing Managers’ Index) report, which considers a score over 50 as a signal of growth. The West Midlands was the next leading region, recording 53.1 on the index.
NatWest’s index tracks the regional economic health published each month, considering the monthly change in the output of goods and services across the private sector.
Growth and job creation rate highest in London
Conversely, the North East experienced a slower output among the area’s businesses, with a rate of 47.3, but this was the smallest fall since August 2023. In Wales, the rate of activity steadied after four months of decline.
Further, input price inflation – the cost of materials bought by manufacturers – was below the average costs logged during 2023. This follows shop price inflation dropping to 2.9% from 4.39% between December and January, as retailers went big on New Year discounts following cheaper wholesaler costs to pay for.
The amount received by firms for the goods they sell (output or ‘factory gate’ prices) saw a ‘steep and accelerated increase’ in Scotland, which marked its fastest rise for four months.
In terms of a positive outlook among businesses, confidence was highest in the West Midlands, followed by the South East, while Northern Ireland had the greatest upswing in sentiment. On the other end of the scale, Scotland bucked the trend and recorded the lowest overall degree of optimism in the UK.
‘Renewed optimism’ among firms in most parts of the UK
Sebastian Burnside, NatWest’s chief economist, said: “Regional PMI data showed a positive end to 2023, but an even better start to the new year. We saw the broadest expansion in business activity since May last year, as renewed increases in the North West of England and Scotland in January took the total number of regions and nations reporting growth to 10 out of a possible 12.
“Still, across three-quarters of tracked regions and nations, the increases in costs were faster than the long-run trends. That was not the case for Northern Ireland, however, which saw its slowest rise in operating expenses in six months. With demand showing signs of improvement and price pressures easing, firms in most parts of the UK started the year with renewed optimism.”
Burnside added: “Although price increases in January were slower than seen on average over the past two years, in some parts of the UK rates of inflation are still running hot. It will be worth monitoring whether these inflation imbalances persist going forward, with the Bank of England (BoE) expected to start cutting interest rates later in the year.”