• 11 out of 12 nations and regions record higher business activity in May.
  • Employment rises in most areas, though job creation generally slows.
  • Rates of output price inflation resume downward trends, but remain high


Business activity growth was sustained throughout most of the UK in May, with London the clear standout performer, according to the latest Regional PMI® survey from NatWest. Elsewhere, rates of inflation in prices charged for good and services slowed, although they remained elevated by historical standards due in part to the pass-through of rising wages.

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.

Almost all UK nations and regions monitored by the survey saw a rise in output in May, the only exception being Wales where the Business Activity Index dipped below the 50.0 no-change mark for the first time in four months, albeit marginally at 49.4. London (58.5) once again recorded by far the strongest growth rate, but one that was slightly slower than in April. In fact, only the West Midlands (54.2) saw an acceleration in the rate of expansion in business activity from the month before.



May saw an increase in new business in nine of the 12 monitored areas. Growth was strongest in London, where it reached the quickest for 14 months.

The rate of expansion in the capital far outstripped anywhere else, including the regions ranked second and third overall – the South East and West Midlands. Yorkshire & Humber, the North West and North East each saw slight falls in inflows of new work.



Rates of input price inflation generally remained above their long-run averages in May, in a sign of sustained strong cost pressure across the UK. The only exception was Northern Ireland, which saw operating expenses rise at the weakest rate for over two-and-a-half years and more slowly than in any other area. London saw the steepest rise in costs, but, like in most places, one that was slightly slower than in April.

After ticking up across almost every region and nation in April, rates of inflation in prices charged for goods and services resumed their downward trends in May. The South West was the only exception and recorded a rate of inflation that was unchanged on the month. Despite the slowdowns, output prices continued to rise sharply by historical standards, increasing fastest in the South East.



The vast majority of areas monitored by the survey recorded an increase in private sector employment in May. Scotland topped the rankings for job creation for the first time since June 2018, pushing Northern Ireland into second position. Only the North East and Wales saw decreases in staffing levels, and even there the declines were modest and marginal respectively.

Firms across the UK were generally able to keep on top of workloads during May, as highlighted by a decrease in outstanding business in all but two of the 12 monitored regions. The only exceptions were London and the South East, with the former seeing particularly strong pressure on business capacity. Companies in Wales noted the most marked drop in work-in-hand by far.



Business expectations remained positive across the board in May, although they weakened in three-quarters of the areas monitored. The West Midlands went against the trend and recorded the strongest overall optimism for the fifth month running. At the other end of the scale, firms in Northern Ireland* were the least upbeat towards the outlook, with sentiment there at a four-month low.

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


Sebastian Burnside, NatWest Chief Economist, commented: "The latest batch of regional PMI data showed business activity rising across almost all parts of the UK in May, but it also indicated that growth has become increasingly uneven. London reaffirmed its status as the fastest-growing region, far outpacing the next-best performer which was the South East.

Although job markets across the UK have slowed down compared to this time last year, we're still encouraged by the fact that most regions saw a rise in employment during May.

One of the consequences of the labour market strength is second round inflation effects. Workers are able to demand higher wages to cope with the rising cost of living, which is in turn leading companies to pass on higher operating expenses through further price increases and thereby keeping inflation higher for longer. And we're seeing this in the data.

Despite falling fuel prices, average business costs continued to rise at rates well above their historical averages in almost all areas in May, and that's largely down to wage pressures, according to reports from businesses. It isn't surprising to see London with the highest cost inflation, given its services dominated economy and relatively smaller exposure to the decline in manufacturing purchase prices we're seeing. Whilst coming down in most areas in May, selling price inflation is still elevated by historical standards as many businesses across the UK are able to push through higher charges for goods and services."





Noel Davies

Regional Campaign Manager

+44 (0) 7970 332 895



Download the May 2023 NatWest Regional PMI® (PDF 246KB)

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