Growth of Yorkshire’s manufacturing and service sectors hits six-month low

The NatWest Yorkshire & Humber Business Activity Index, which measures the month-on-month change in the combined output of the region’s manufacturing and service sectors, fell further during August to 55.5, from 59.0 in July, marking successive declines and the lowest reading in six months.

Nevertheless, the survey data signalled a strong expansion in business activity across Yorkshire & Humber that was sharper than the UK average.

Of the 12 monitored UK regions, only Scotland, Wales and London registered stronger growth.

The survey showed a strong increase in new business at private sector firms in the region.

Manufacturers and service providers both registered growth in new orders, although expansions slowed in both instances. Consequently, the overall rate of increase softened and was the weakest since February.

Panel members said demand conditions remained strong as the end of lockdown measures continued to boost sales.

Staffing levels across Yorkshire & Humber increased during August, with the rate of jobs growth quickening since July. The increase in employment was sharp overall and broad-based across both manufacturers and service providers. Where an increase in workforce numbers was reported, firms linked this to efforts to boost their output potential and meet strong demand.

Private sector companies in the region recorded greater levels of outstanding business during August for a sixth successive month. Furthermore, the rate of backlog accumulation quickened since July and was sharp overall. Longer lead times due to supply chain disruptions, staff shortages and strong new order growth all contributed to the increase.

Private sector businesses in Yorkshire & Humber faced another month-on-month surge in input costs during August, although the rate of inflation eased for the first time since January. Sector data indicated that goods producers continued to face especially strong cost pressures, although sharp inflation was also evident at service providers. Price pressures were attributed to a wide array of raw materials, as well as increased shipping costs and higher labour expenses.

As has been the case since August 2020, the latest survey data signalled rising output prices across Yorkshire & Humber. The rate of charge inflation slowed to a three-month low, but remained steep and considerably stronger than the historical average. The increase in output prices was primarily linked to rising input costs, with firms passing these on to their clients.

Richard Topliss, chairman of NatWest North Regional Board, said: “Yorkshire & Humber’s economy remained in firm expansion mode during August, outperforming the UK as a whole and the vast majority of the other regions monitored by the survey.

“That said, there was a further slowdown in growth, which dipped to a six-month low. While robust demand conditions were a key factor supporting higher levels of business activity, some businesses mentioned that they were impacted by material and labour shortages.”

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James Mitchinson