South West made ‘sizeable contribution’ to UK economic growth last month

The South West was one of two regions to lead national growth last month, according to a new report.

While March’s NatWest Regional Growth Tracker showed improved business growth in more regions of the UK at the end of Q1 – the majority are still being affected by wider economic uncertainty.

The Tracker – which surveyed businesses operating in the manufacturing and services sectors across 12 regions of the country from March 12 to 27 – showed London and the South West taking the lead, with improvements seen in the South East and Yorkshire and Humber.

The NatWest Regional Growth Tracker Business Activity Index is the first fact-based indicator of regional economic health published each month. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.

Of the 12 UK regions, only five posted above 50. The average across the UK for March was 51.5.

The key highlights are:

Demand

The strongest increase in underlying demand in March was seen in the South West, where inflows of new work rose for the first time in four months. New business also grew in London and Yorkshire & Humber, but it dipped in all remaining areas. Northern Ireland registered the steepest fall, but the rate of decline there eased sharply to the weakest in the year-to-date.

Employment

Although employment fell across the board in March, rates of job losses generally eased. Scotland and the South West in fact saw only fractional decreases in workforce numbers. The fastest fall in staffing levels was recorded in the East of England, though the pace of decline there was noticeably slower than the month before.

Capacity
A first decrease in backlogs of work in the North East for six months meant that all 12 UK nations and regions saw a reduction in March. Firms in Wales recorded the most marked drop in outstanding business, followed closely by those in the North West. The latest decline in London was meanwhile only fractional as work-in-hand in the capital came close to stabilising.

Inflation
Rates of input price inflation remained high in March, driven in large part by rising labour costs, though they eased from the month before in the majority of cases. Two of the exceptions were Northern Ireland and Scotland, which saw the quickest increases in firms’ operating expenses for 25 and 21 months respectively. Cost pressures were joint-weakest in the East Midlands and South West.

Northern Ireland recorded the steepest rise in average prices charged for goods and services in March, its fastest for two years, but it was one of just three areas where inflation accelerated from the month before. Firms in the South West were the least aggressive with output price increases, followed by those in the North West.

Sebastian Burnside, NatWest chief economist, said: “According to March’s report, London continued to lead in March, with the South West also making a sizeable contribution to UK economic growth. We saw growth broaden out slightly, as both the South East and Yorkshire & Humber enjoyed renewed upturns in business activity.

“Market conditions remain challenging and recent tariff announcements suggest we could see continued challenges in the coming months.

“Firms up and down the country are looking to control costs, which is feeding through to staffing decisions.

“Price pressures remain high across the board, though they did at least subside slightly in most areas in March, on the eve of the changes to national insurance contributions and national minimum and living wages.”