A fourth successive month of south west region business activity decline hs been noted in a respected index. 

At 45.3 in November, the headline NatWest South West 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 the decline across the region.

Despite picking up from October's recent low of 42.3 to a three-month high, the latest reading was indicative of a sharp rate of contraction that outpaced that seen nationally.

Anecdotal evidence linked lower output to a weak economic climate, intense cost pressures and subsequent cuts to client spending.

Total new business placed with South West private sector companies continued to fall sharply in November. This was despite the rate of contraction easing from October's 21-month record. According to survey respondents, clients had cut back spending due to uncertainty around the outlook, rising costs and tighter financial conditions.

New orders also declined at the national level, though the rate of reduction remained softer than that seen in the south west.

After dropping to a record low in September and October, business confidence regarding output over the next 12 months improved in November.

The degree of positive sentiment was the highest seen in five months, albeit well below the historical series trend.

Firms were often hopeful that demand conditions will improve over the course of 2023, and that new product launches could also support growth.

However, a number of companies expressed concerns over the weaker economic climate, cost of living crisis and future consumer spending.

Although staffing levels across south west private sector firms increased for the second month in a row in November, the rate of job creation remained marginal overall.

The pace of payroll growth also remained weaker than that seen at the national level, despite the latter easing to a 21-month low.

While some companies expanded their workforce numbers due to efforts to fill long-standing vacancies and to enhance capacity, others noted that the non-replacement of voluntary leavers had reduced staffing levels.

The seasonally adjusted Outstanding Business Index signalled a reduction in backlogs of work at private sector firms for the fifth successive month.

The rate of depletion was the slowest seen since July and only modest. According to panel members, lower intakes of new business had enabled them to work through unfinished orders.

Across the UK as a whole, backlogs of work were broadly unchanged after a marginal upturn in October.

Latest survey data pointed to a renewed acceleration in the rate of input cost inflation across the South West private sector during November. Notably, the rate of increase was the steepest since July and rapid overall.

Where higher expenses were reported, companies often attributed this to greater staff, energy, raw material and food costs.

The rate of input cost inflation also quickened across the UK as a whole, and remained sharper than that seen in the south west.

As has been the case in each month since January 2021, prices charged by South West private sector companies increased in November.

In line with the trend for input costs, the rate of inflation quickened on the month and was the sharpest seen since August.

However, the rate of increase remained the weakest seen of all 12 UK regions.

Companies that raised their selling prices often linked this to the pass-through of additional expenses to customers.