UK sees strong growth in business activity across all regions in May as COVID-19 restrictions ease.
14 Jun 2021
All regions and nations of the UK saw sharp increases in business activity in May amid the broad loosening of COVID-19 restrictions, latest NatWest Regional PMI® data showed.
Local labour market conditions meanwhile improved as firms looked to expand capacity to meet rising demand, with the survey showing the first universal increase in employment for more than three years. However, with the recovery came a further rise in price pressures, as two-thirds of the monitored regions saw record inflation in average charges for goods and services.
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.
The North West topped the regional growth rankings in May, registering an all-time-high Business Activity Index of 66.4, narrowly ahead of the West Midlands and Wales in joint-second place (both 65.5). Rates of expansion accelerated in nine out of the 12 monitored areas. Northern Ireland* (58.7) was at the bottom of the rankings but nevertheless saw output growth accelerate to a 40-month high.
Latest data showed a general rise in inflows of new work at firms across the UK, led by the North West. The region was one of five where the rate of growth reached a record high, the others being the West Midlands (ranked second overall), Wales, (third), Yorkshire & Humber (sixth) and Scotland (eleventh). Northern Ireland continued to trail behind, but nevertheless recorded its steepest rise in new business since January 2018.
May saw a broad-based rise in employment across the UK, the first time this has been the case since March 2018. Job creation was jointly led by the West Midlands and Yorkshire & Humber. Wales and the North East recorded only modest increases in workforce numbers, though in the case of the former it marked the first rise since February 2020.
All 12 regions recorded a rise in backlogs of work in May, up from ten in April and only the third time this has happened in the series history. The North West saw the steepest increase, narrowly ahead of Yorkshire & Humber and the West Midlands. Meanwhile, the North East and London saw only modest rates of growth in outstanding business.
Sharp and accelerated rises in input prices were a general theme across all UK regions in May. Firms in Northern Ireland continued to face the greatest pressure from increased costs, followed by those in the North East and East Midlands respectively. London remained at the foot of the rankings, though even here the rate of input price inflation was among the fastest in the series history.
The combination of improved demand and surging costs led businesses across all parts of the UK to raise output prices in May. Furthermore, in eight of the 12 monitored regions, the rate of output price inflation was at either a new or joint-record high. This included Northern Ireland, where charges increased at the same
sharp rate as seen in April. London meanwhile saw only a modest rise in output prices.
Expectations towards future activity were strongly positive across all parts of the UK in May. Businesses in the South East were the most upbeat, followed by those in the North West. Optimism did, however, wane in five of the 12 monitored regions. Northern Ireland closed the gap with the rest of the areas, recording the highest business confidence for over three years.
*Northern Ireland coverage includes construction and retail. For all other areas, coverage is confined to manufacturing and services.
Sebastian Burnside, NatWest Chief Economist, commented: “May's regional PMI surveys produced another set of eye-catching results, showing business activity rising sharply across every part of the UK, and in many cases at record rates.
"We also saw some convergence between the regional performances in terms of activity and business confidence with COVID-19 restrictions having eased across England, Scotland, Wales and Northern Ireland in May.
"It’s encouraging to see local labour markets now in recovery in all corners of the UK, with businesses encouraged by the improvement in demand and remaining confident of a bright outlook for the coming year.
“Rising price pressures remained a prominent feature of the survey data, however. In every region, we’ve seen an increased number of businesses reporting a rise in costs, which in the majority of cases has fed through to record rises in charges for goods and services.”