Latest NatWest Regional PMI® data showed a rebound in business activity across nearly all parts of the UK in March, amid widespread reports of customer demand increasing in line with the easing of lockdown restrictions and ahead of further loosening in the months ahead.
Rising workloads and strong business optimism meanwhile supported an upturn in employment across the majority of UK regions, despite firms coming under increased pressure from rising costs.
The PMI Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.
Business activity rose in 11 out of the 12 UK regions at the end of the first quarter. Growth was led by the East of England, where it was a series record high (index at 60.9), ahead of the West Midlands (60.7) and Yorkshire & Humber (60.2) respectively. Northern Ireland* (49.7) recorded the only decline, though even here activity moved closer to stabilisation, falling only marginally and at the slowest rate for five months.
The majority of UK regions saw a rise in inflows of new work at the end of the first quarter. The strongest rates of growth were recorded in Yorkshire & Humber, East of England, South East and West Midlands, respectively. At the other end of the scale, firms in Northern Ireland and Scotland saw new orders move closer to stabilisation, with rates of decline easing notably since February.
The number of regions reporting higher employment increased from just three mid-way through the opening quarter to ten in March. This was the most since January 2020. Yorkshire & Humber recorded the strongest rate of job creation for the third time in the past four months, narrowly ahead of the North West. Scotland and Wales meanwhile saw further declines in staffing levels.
March saw backlogs of work rise in six of the 12 monitored UK regions, namely the East of England, West Midlands, South East, Yorkshire & Humber, East Midlands and Wales. Firms operating in the South West reported no change following a near two-and-a-half-year sequence of decline, while in all remaining areas the rates of depletion slowed and were generally only modest.
Firms in all parts of the UK faced a rise in cost pressures in March. Businesses in Northern Ireland and North East recorded the sharpest overall increases, with the rates of input price inflation at series-record highs in both cases. London remained the region least impacted by rising costs, though even here the rate at which operating expenses increased was at a 17-month high and above the series average.
Latest data showed a broad-based increase in average prices charged for goods and services in March, led by Northern Ireland. Here, the rate of inflation accelerated to a new series-record high and was notably faster than the next-strongest in the North East. Firms in London recorded a rise output prices for the first time since before the initial lockdown last March, albeit one that was only modest.
Yorkshire & Humber topped the regional rankings for business confidence for the second month running in March. Expectations did, however, dip slightly from February's series-record high, contrasting with improvements in ten of the other 11 regions. Sentiment remained weakest overall in Northern Ireland, despite having ticked up to a 13-month high.
*Northern Ireland coverage includes construction and retail. For all other areas, coverage is confined to manufacturing and services.
Sebastian Burnside, NatWest Chief Economist, commented: “The majority of regional economies started to see some real improvements in activity during March, as the easing of lockdown restrictions and the prospect of further loosening in the coming months lifted optimism and prompted an upturn in demand in most areas.
"More green shoots have started to appear across local labour markets as well. Out of the 12 regions monitored by the survey, the number reporting higher employment rose from just three in February to ten in March, with many even seeing strong rates of job creation.
"The general step-up in hiring activity reflects growing customer demand and increased clarity about the path to recovery. Firms in all parts of the UK are strongly optimistic about the outlook, with expectations in a number of regions either at or close to record levels.
"While Northern Ireland continues to lag behind all other areas in terms of activity and business confidence, a first rise in employment since the start of the pandemic was a sign that firms are gearing up for busier times ahead. English regions generally continued to outperform, with the East of England, West Midlands and Yorkshire & Humber the pick of the bunch, while encouraging signs for activity across Scotland and Wales were somewhat tempered by further job losses across both nations.
"We saw a further surge in firms' costs across all parts of the UK in March, though the impact is being felt particularly hard in Northern Ireland where both input and output prices are increasing at record rates. Even in London we have seen firms starting to raise charges for goods and services, in a sign of inflationary pressures broadening across the economy."