Economy enjoying strongest growth since September

GROWTH of business activity in the North West was the strongest since September 2014 in April, according to Lloyds Bank’s monthly PMI survey.

And another study – Business Trends Report – by accountants and business advisers BDO says the new Conservative has inherited a confident business community. But underlying fragility is a cause for concern for companies in the North West, it says.

BDO’s Optimism Index, which predicts business growth six months ahead, held firm this month at 104.7 pointing to strong confidence among firms in the region. This suggests businesses have been unruffled by Thursday’s election and are resilient in the face of Eurozone uncertainty.

Meanwhile, although Lloyd’s Bank’s PMI survey was optimistic, it said  the latest expansion figures posted below the UK average. New business rose at a sharp pace, albeit the weakest in three months.

In contrast, employment levels rose at a faster rate that was in line with the UK-wide trend.

On the price front, input prices rose for the first time since November 2014, although at a marginal rate.

The seasonally adjusted Lloyds Bank North West Business Activity Index posted at 57.0 in April, up from 56.7 in March, thereby signalling stronger growth in output in the North West.

The latest reading was the highest since September last year, although the rate of expansion was slower than the UK average for the seventh month in a row.
 
A rise in overall activity was matched by a marked increase in new orders at private sector firms in the North West.

Survey respondents mentioned improved marketing strategies, stronger client demand and new product launches as the principal factors behind the latest expansion.

But growth eased to the weakest in three months and was slower than the UK average.

Private sector firms in the North West hired additional staff in April.

Firms linked employment growth to higher workloads and prospects for future activity growth and the latest increase was in line with the UK average.

Subsequently, volumes of unfinished work were depleted in April, extending the current trend to three months. That said, the rate of depletion eased to only a slight pace.
 
Cost pressures were evident at North West private sector companies in April, as input prices rose for the first time since November 2014.

However, the rate of inflation was only modest and slower than the UK as a whole.

Output prices fell for the second time this year so far. Some panellists blamed increased competition driving down charges, while others mentioned lower raw material costs.

Lloyds Bank director for SME banking in the North West Martyn Kendrick said: “Business activity growth in the North West accelerated to a seven-month high in April.

“However, for the seventh straight month, output growth in the North West was slower than the UK average. In contrast, employment levels rose at a quicker rate that was in line with the UK as a whole. The price of goods and services declined for the second time this year so far, as survey respondents mentioned lower raw material costs and increased competition driving down selling prices.”

BDO’s report called on the incoming Government to  act quickly to put in place policies encouraging businesses to invest.

It said: “We would like to see the government permanently increase the annual investment allowance (AIA) to £5m, giving a real incentive for businesses to invest in the capital assets that will drive future growth, and give businesses the confidence to plan ahead.

” It should also consider a VAT zero rating of supplies to companies that export.  The UK currently allows manufacturers to zero rate their exports but not their suppliers.”

Tim Entwistle, partner and head of BDO  in the North West, said: “Ahead of the 2010 election our data showed high levels of business confidence, much like this time around. However this fell away not long after. To avoid this happening again, the new Conservative government needs to put firm actions in place to help businesses thrive.

“It is encouraging to see that businesses are feeling optimistic about the coming months in the hands of a new government, but the confidence that counts is the confidence that converts to businesses actually investing. Our new leaders must help with this by putting tangible measures in place that will encourage businesses to invest in training or research, technology and equipment to help improve productivity.

“The new government also has the opportunity to boost future economic growth by investing judiciously in our country’s infrastructure. I hope that they will take it.”