Business index figure falls back but still suggests growth

The headline NatWest Yorkshire & Humber Business Activity Index registered 57.3 in November, a decrease from 59.4 in October, but still indicative of sharp growth in business activity.
Heather Waters, of the North Regional Board at NatWestHeather Waters, of the North Regional Board at NatWest
Heather Waters, of the North Regional Board at NatWest

Yorkshire & Humber ranked fourth in the UK for output growth, surpassed only by the North West, Wales and London.

The combined output measure masked different movements at the sector level, as broadly stagnant output volumes at manufacturers contrasted with a sharp increase in activity at service providers.

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The survey signalled an improvement in demand among Yorkshire's private sector firms in November. The rate of growth was sharp and the strongest in five months.

This reflected strong sales performances at service providers as demand for manufactured goods was broadly stagnant.

Private sector employment across Yorkshire increased strongly during November. Greater recruitment was due to rising workloads, as well as efforts to boost capacity.

The seasonally adjusted Outstanding Business Index registered above the 50.0 no-change mark in the latest survey period, signalling greater pressures on operating capacities across Yorkshire.

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According to anecdotal evidence, a slight improvement in supply chain issues had supported the faster processing of orders in some cases, but there were still multiple reports of material shortages and delivery delays hitting efficient business operations.

Private sector companies in Yorkshire registered the fastest rise in their operating expenses on record (since 1997) during November, with rates of inflation quickening at both service providers and manufacturers.

Increased prices for a wide range of raw materials were exacerbated by rising energy and transport costs.

To combat rapid cost inflation and to protect margins, private sector companies hiked their prices charged for the provision of goods and services. The extent of the increase was the steepest on record, surpassing the previous high seen in October.

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The level of confidence towards future activity remained high during November, with the index recording well above the neutral 50.0 mark. Firms in Yorkshire & Humber were the most optimistic of the 12 monitored UK regions.

Strategic business changes, the continued economic recovery from the pandemic and stronger demand were all cited as reasons to expect stronger growth over the coming year.

Heather Waters, of the North Regional Board at NatWest, said: "At face value, a reading in the headline index of 57.3 suggests private sector business activity across Yorkshire & Humber is increasing at a sharp and healthy pace.

"In fact, of the 12 monitored UK areas, only three others saw quicker upturns – the North West, Wales, and London.

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"However, the survey did highlight some worrying trends beneath the bonnet. The biggest concern is regarding the wide divergence in performance by sector. Activity growth in November was wholly driven by services as manufacturing output was broadly stagnant.

"This pins the fate of the broader recovery in a precarious position as continued growth is dependent on one part of the economy given that the supply-related disruptions impeding manufacturers don't look like fading any time soon."