Key Findings

  • Business activity falls in all nations and regions bar London
  • Expectations towards future activity improve across the board
  • Rates of cost inflation continue to ease in most areas


Almost all UK regions and nations saw a decrease in business activity in January, latest Regional PMI® data from NatWest showed, as soaring inflation and tightening financial conditions strained demand for goods and services. More positively, there was an increase in the number of areas reporting higher employment, amid a broad-based improvement in firms' expectations for the year ahead.   

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.

London was alone among the 12 UK regions monitored by the survey in recording higher activity in January. The rate of growth in the capital was only marginal, however (index at 50.5 from 50.2 in December). There were renewed downturns in output in both Wales (47.7 from 52.0) and the North West (47.2 from 50.0), while the steepest decrease in activity was once again recorded in Northern Ireland* (45.3).

* PMI survey coverage in Northern Ireland includes construction and retail, as well as manufacturing and services.



Of the 12 regions and nations monitored by the survey, only four recorded higher inflows of new work in January, namely the South East, East of England, North East and London. Even here, however, the increases were marginal. Scotland meanwhile moved to the bottom of the rankings for new business, recording a marked and accelerated rate of decline.



Although rates of input cost inflation remained elevated by historical standards in January, they softened in most cases. Northern Ireland saw the most notable slowdown, though still recorded the second-highest overall rate of inflation behind the East Midlands. The least marked rise in costs was in the North West – its weakest for almost two years.  

Every nation and region monitored by the survey recorded a rate of output price inflation that was well above its long-run average. Moreover, faster increases were registered in nine of the 12 areas, including Wales, which topped the rankings for the fourth time in the past five months. The East of England saw the slowest rise in prices charged for goods and services.



Seven of the 12 regions and nations monitored posted a rise in employment in January, up from just four in December. Northern Ireland topped the rankings, registering its steepest rise in workforce numbers for six months, ahead of the West Midlands. The most marked fall in employment was in the North East, as had been the case in the previous survey period.

There was a broad easing of business capacity pressures across the UK in January, with all regions except London recording a decrease in backlogs of work. The level of outstanding business in the capital was unchanged from the previous month. Scotland recorded the steepest decline in backlogs, followed by Northern Ireland.      



January data showed a broad-based improvement in business expectations. The greatest increase in confidence was seen in the West Midlands, which also recorded the strongest overall optimism. Sentiment in Northern Ireland turned positive for the first time in nine months, although it remained lower than in any other region or nation.


Sebastian Burnside, NatWest Chief Economist, commented:

"It was a challenging start to the year for firms across the UK, with business activity falling almost universally on a regional basis in January. London was alone in recording an increase in output but only managed to eke out marginal growth, as demand for goods and services remained strained by a combination of high inflation, rising interest rates and customer hesitancy.

"However, the new year did bring increased optimism among businesses, who have seemingly been buoyed by a steady easing of cost pressures and greater calm in energy markets. January data showed that firms across the UK were more confident about their growth prospects in the coming year, hinting that any recession could be shallowed that first feared.

"Increased optimism among businesses was reflected in a greater number of areas seeing a rise employment in January. Though it has to be said that firms' willingness to take on staff isn't anywhere near the level it was at a year ago.

"On the price front, the data point to a degree of stickiness in core inflationary pressures, with most nations and regions not only seeing average prices charged for goods and services continuing to rise sharply by historical standards, but also at slightly faster rates than in December."




Read the full NatWest UK Regional PMI Report January 2023 (PDF 245KB).

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