Latest News

NatWest South East Growth Tracker

14th August 2024

Activity rebounds as demand strengthens in July

• Renewed growth of activity and new business
• Fastest workforce expansion for 21 months
• Softest charge inflation for three-and-a-half years

The NatWest South East Growth Tracker pointed towards a bounce-back in activity from June’s slowdown. The headline South East Growth Tracker 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 – rose from 49.9 in June to 53.6 in July. Activity rose at a solid pace that was the quickest for three months in July. Survey respondents linked the renewed expansion to pent-up demand, including improved export sales.

July saw a renewed rise in new business placed at South East private sector firms following a month of decline in June. Some panellists linked the upturn to an influx of new orders and improved client interest, while others mentioned that demand had rebounded from a relatively quiet period in June.

Private sector firms across the South East continued to recruit additional staff in July, as has been the case since the start of the year. Panel member reports often stated that increased capacity was required to support inflows of new work. A number of businesses mentioned hiring staff on full-time contracts in particular.

South East firms were less aggressive in their price setting in July. Though still strong, charge inflation was the least pronounced for three-and-a-half years. Where firms opted to raise fees, this was partly due to the passing through of increased costs and wages in particular.

Catherine van Weenen, Territory Head of Commercial Mid Market at NatWest, said: “As suspected, the latest NatWest South East Growth Tracker revealed that the downturn in June, linked to the general election, was in fact short-lived. Both demand and activity rebounded at solid rates. Some businesses suggested there was pent-up demand, while others noticed increased interest from customers, some new. It was apparent from the data that firms in the South East feel confident about the future. The South East was the most optimistic part of the UK for a second month in a row. Cost pressures picked up slightly due to elevated shipping and wage costs, but nevertheless hiring activity increased to support new business inflows.”

Performance in relation to UK

Business activity growth in the South East was faster than the UK-wide rate, but conversely the local rise in new business was softer than average across the UK as a whole.

South East businesses opted to hire new staff in July. As well as being the strongest recruitment drive for 21 months, the local rate of jobs growth was faster than that seen at the UK-wide level.

The seasonally adjusted Outstanding Business Index for the South East posted just below the crucial 50.0 mark in July, to signal a further decrease in unfinished orders. The decline was only marginal and the softest in the current 14-month run of depletion. Firms reportedly had sufficient capacity to run down levels of work-in-hand. Of the 12 monitored parts of the UK, only London recorded a softer decline in outstanding business than in the South East, while Northern Ireland recorded an expansion.

The latest increase in cost pressures faced by South East businesses was the fiftieth rise in as many months. Wage and shipping costs were cited as the key drivers of inflation in panel member reports. Despite ticking up slightly, the rate of input price inflation in the South East was below its long-term average and the softest of all 12 UK areas. Meanwhile, output charges locally were raised at a similar pace to that seen at the UK level.

Businesses based in the South East were optimistic towards the year-ahead outlook for activity in July. The degree of confidence was its strongest for five months and the most upbeat of all 12 monitored UK areas for a second month in a row. The introduction of new products, growth expectations and hopes of improved economic conditions were all cited as drivers of positive sentiment.