Business activity in region hit by latest lockdown

This is the region’s first decline in business activity since last May and is the quickest fall after seven months of recovery.

The headline NatWest Yorkshire & Humber Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – registered 44.4 in January, down from 53.8 in December.

The latest reading pointed to a renewed contraction in business activity at the start of 2021. The decline ended a six month period of expansion, which represented the early stages of a recovery after the initial coronavirus disease lockdown.

When asked about the latest downturn, panellists often mentioned the tightening of restrictions as the main factor.

New work received by Yorkshire firms fell for the first time in eight months during January. Anecdotal evidence indicated that the decrease was predominantly driven by the re-introduction of lockdown restrictions across the UK.

Despite this, the rate of reduction was the softest in any of the 12 monitored UK regions and moderate overall.

Sub-sector data indicated that a sharp decline at services firms more than offset further growth at manufacturers.

Despite the recent tightening of Covid-19 restrictions, private sector firms in Yorkshire remain optimistic about the 12 month business outlook.

The degree of positivity improved from December and was the strongest across any of the 12 UK regions. Panellists often noted expectations of a recovery in demand conditions when lockdown is gradually removed.

Following the first increase for 10 months during December, there was a renewed downturn in Yorkshire private sector employment during January.

The rate of job shedding was consistent overall, but slower than any recorded throughout 2020, when Covid-19 restrictions were first introduced. Underlying data revealed that the decline in employment was driven solely by the service sector.

Yorkshire firms recorded a decline in work outstanding during the opening month of the year. Although moderate overall, the rate of reduction was the fastest for seven months. When explaining decreases in backlogs, panellists often noted a deterioration in demand conditions.

Richard Topliss, chairman of NatWest North Regional Board, said: “The re-introduction of lockdown restrictions in the UK brought a fresh decline in activity for Yorkshire and Humber businesses during January.

“The latest tightening of measures saw many businesses temporarily close and workers being put back onto the furlough scheme. This was reflected by the downturns in new orders and employment. Given the face-to-face nature of many services, this sector was hit harder than manufacturing.

“However, in comparison to declines seen across the UK during January, the Yorkshire and Humber private sector has remained relatively resilient.

“Moreover, businesses remain very confident that conditions will recover as restrictions begin to ease.”