Business growth in NW outpacing other regions

Business activity growth in the North West accelerated for the third month running in September, as firms experienced a rise in new orders, according to the latest Lloyds Bank Regional PMI report.

The North West business activity PMI registered at 55.7 in September, which was higher than the UK average of 54.1 and above August’s reading of 55.1.

A reading above 50 shows growth in output, whereas a reading below indicates decline.

Compared to neighbouring regions, the pace of output growth in the North West was faster than what was seen in the North East and the West Midlands, but fell closely behind Wales and Yorkshire.

Firms continued to build capacity to satisfy growing new orders, although the pace of job creation in the region slowed to an 11-month low.

Business confidence remained positive in September with new product launches and company expansions planned by firms, although optimism dropped below average UK levels.

Meanwhile, the cost of labour and weakness of the pound resulted in higher input costs for firms. These increased cost burdens were partly passed on to clients through higher prices charged for goods and services.

The Lloyds Bank PMI, or Purchasing Managers’ Index, is an economic health-check of UK regions. It is based on responses from manufacturing and services businesses about the amount of goods and services produced during September compared with a month earlier.

Martyn Kendrick, regional director for the North West at Lloyds Bank Commercial Banking, said: “Momentum in the North West private sector continued at the end of the third quarter, with further solid increases in business activity and new orders.

However, the rate of jobs growth dipped to an 11-month low, while business confidence was among the lowest in its history. Behind the downward trend undoubtedly lies inflation, with both input and output price inflation at five-month highs in September. It remains to be seen how resilient client demand will be in both a strong inflationary and politically uncertain environment.

“As we enter the final quarter of 2017, businesses in the consumer goods and hospitality sectors will need to ensure they have the working capital necessary to take advantage of higher demand from events like Black Friday, Christmas and New Year.

“Last month our Working Capital Index report found that businesses in the North West have £60.5bn tied up in excess working capital, which includes assets like stock and invoices. Cash that’s tied up in working capital can be released and invested in creating more stock or building capacity to meet higher demand over the festive season.”