Key Findings

  • Just two out of 12 regions and nations record growth in activity in August
  • Employment holding up in most places, but hiring easing
  • Rates of output price inflation generally slow


The latest NatWest Regional PMI® survey revealed a broadening decline in business activity across the UK in August, amid growing weakness in demand for goods and services. Whilst only a minority of regions saw employment fall, rates of job creation eased in most cases. Businesses' cost pressures generally remained high, linked in large part to rising wages, but the rate at which they increased prices charged for goods and services slowed in nearly all regions.       

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.

Of the 12 monitored regions and nations, only Wales (index at 50.5) and London (50.4) recorded growth in business activity in August. Even here, however, the rates of expansion were marginal. Output was unchanged in Scotland and the West Midlands, while all remaining areas recorded contractions. The steepest decline in activity was seen in Northern Ireland* (45.7), followed by the South West (46.7).



Nearly all monitored areas recorded a reduction in new business in August, in a sign of broad-based weakness in demand. The only exception was the West Midlands, which posted only a marginal rise in new orders that was the weakest for seven months. The greatest decline in demand was in the South West, where the rate of contraction accelerated to the quickest since November last year.  



In most cases, rates of input price inflation remained above their respective historical series averages in August. London once again saw the steepest rise in business costs, despite the rate of increase there easing to a 26-month low. Northern Ireland remained at the bottom of the rankings for input price inflation, with the rate there picking up from July's recent low but still firmly below its long-run trend.

Rates of output price inflation slowed in ten of the 12 monitored regions and nations in August, the only exceptions being Northern Ireland and Wales. The former saw the second-slowest rise in prices charged, ahead of the North West. Firms in the South West exhibited the greatest pricing power, although the rate at which they increased charges was the least marked for almost two-and-a-half years.   



The majority of areas recorded a rise in employment in August, although rates of job creation often slowed. Northern Ireland recorded the most marked rise in workforce numbers despite the pace of hiring there slowing to a seven-month low. The North East saw a notable drop in staffing levels, while there were more modest declines in the East Midlands, Wales and West Midlands.

As was the case in July, all 12 monitored regions and nations registered a drop in outstanding business in August. Moreover, declines deepened across the board.  Wales recorded the fastest overall rate of depletion, its quickest for more than three years, followed by the North West. At the other end of the scale, Scotland posted the smallest drop in backlogs, but its largest for three months, nevertheless.       



There were varying trends in business expectations, with confidence towards future activity rising in just under half of cases in August. The West Midlands topped the rankings for a second month running and saw sentiment improve to the joint-highest since January 2022. By contrast, the North East recorded the greatest loss of confidence as well as the lowest overall degree of optimism.  

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



Sebastian Burnside, NatWest Chief Economist, commented:

“Economic malaise is beginning to set in across a growing number of UK regions, with the majority reporting a decrease in business activity in August amid a near-universal drop in demand. Only a couple of areas have managed to keep their heads above water and record marginal growth, namely Wales and London, while activity levels across the West Midlands and Scotland stagnated.

"Employment has held up in most areas so far despite the downturns in business activity, with only the East Midlands, West Midlands, Wales and North East recording decreases in employment. That said, there are clear signs of a drop-off in hiring activity, with rates of job creation easing in most of the areas where employment is still rising.

"Businesses' cost continue to rise at a steep rate by historical standards, and nowhere is this more evident than in London, where the economy is dominated by the service sector and thereby more likely to feel the effects of growing wages. 

"Still, it's encouraging from the point of view of households and monetary policymakers alike that rates of inflation in average prices charged for goods and services continued to ease across most parts of the UK in August."




Noel Davies

Regional Campaign Manager

+44 (0) 7970 332 895



Download the August 2023 NatWest UK Regional PMI® Report (PDF 246 KB)

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