April saw notable increases in business activity across all regions of the UK amid the easing of COVID-19 lockdown restrictions, latest NatWest Regional PMI® data showed.
17 May 2021
Expectations among businesses of a strong and lasting recovery were meanwhile reflected in a general improvement in local labour markets.
However, the survey also revealed a further intensification of cost pressures faced by UK businesses, with charges for good and services rising steeply across most regions as a result.
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.
Growth in April was led by the West Midlands, where the Business Activity Index registered 65.9, closely followed by Yorkshire & Humber (64.3). A return to growth in Northern Ireland* (55.5) meant that higher output was recorded across all 12 regions of the UK for the first time in seven months. The lowest readings were recorded in the North East (55.2) and Scotland (55.4), though even here the rates of expansion were historically strong.
All 12 UK regions recorded increased inflows of new orders at the start of the second quarter amid easing lockdown restrictions and improving client confidence. The West Midlands led the way, registering a survey-record rate of growth. Northern Ireland and Scotland saw the first increases in new business for nine and eight months respectively, though they were still the two lowest-ranked areas for a fourth straight month.
There was a general improvement in labour market trends in April, with 11 out of the 12 monitored regions recorded higher employment, up from ten in March. Furthermore, almost all areas saw a faster rate of job creation, including the two standout performers, the North West and Yorkshire & Humber. Staffing numbers fell in Wales, albeit only marginally.
The number of regions recording higher backlogs of work continued to rise in April, jumping from six in March to ten – the most since May 2017. The West Midlands recorded the fastest rate of accumulation by a wide margin, though the increases in the East of England, Yorkshire & Humber and North West were also records for those regions. Declines were seen in the North East and London.
Input prices continued to rise sharply across all areas of the UK in April, with rates of cost inflation exceeding the historical series averages in all 12 regions. Furthermore, cost pressures generally intensified, including in Northern Ireland, which registered a record increase for the second month in a row and the steepest overall rate of inflation. The slowest rise in costs was once again recorded in London.
Firms in all areas raised average for goods and services in April, albeit to varying degrees. Northern Ireland recorded the steep rise, followed by the North East, reflecting the trends in underlying cost pressures. Similarly, the four regions with the slowest rates of input cost inflation also recorded the least marked rises in output prices, namely London, Scotland, the South West and Wales.
Businesses across all parts of the UK were strongly confident about the outlook for activity over the next 12 months in April. Firms in Yorkshire & Humber showed the greatest optimism for the fourth month running, with the South East and London close behind. Expectations in Northern Ireland were the highest for 14 months, but still lower than in any other region.
*Northern Ireland coverage includes construction and retail. For all other areas, coverage is confined to manufacturing and services.
Sebastian Burnside, NatWest Chief Economist, commented: “With Northern Ireland returning to growth in April thanks to the easing of COVID-19 restrictions, the picture across the UK is now one of a broad-based recovery in business activity.
"What's more, rates of growth were historically strong across the board, with firms in all areas seeing demand strengthening as confidence improved and parts of the economy reopened.
"There is a general sense of optimism among UK businesses towards future activity, which is underlined by a continued improvement across almost all local labour markets as more businesses start to hire again.
"However, with the upturns in activity and employment comes a further increase in cost pressures on businesses. Input prices are rising much faster than normal across all regions of the UK, but particularly in Northern Ireland and the North East.”