Increase in output ‘weakest for nine months’

The latest LLoyds TSB Yorkshire & Humber PMI also revealed that companies reported a sharp decline in output prices.

Martyn Kendrick, area director for Lloyds TSB Commercial in Yorkshire, said that new orders grew at a healthy rate in May and supported a growth in activity.

However, he warned that this was possibly owing to lower output charges and “cannot be sustained by firms without a prolonged hit to profitability”.

He added: “Sector data from the latest surveys also showed divergences, with activity increasing among service providers, but output contracting among manufacturers.”

The Lloyds TSB Yorkshire & Humber Business Activity Index – which measures the combined output of the region’s manufacturing and service sectors – was 51.1 in May, down from 53.1 in April. Readings above 50.0 signal an improvement in activity.

The latest rise in output was only marginal and the weakest since August 2011.

Firms generally linked higher output to greater client demand. Around 35 per cent of panellists reported a rise in new work in May, with the overall increase in new business in Yorkshire described as “solid”.

However the report added: “In contrast to the accumulation reported one month previously, outstanding business at firms fell sharply during the latest survey period. Overall, work in hand fell at the strongest rate in 2012 so far.”

Employment in Yorkshire and Humber’s private sector increased in May, as many firms reported gains in new business.

“The latest rise in staffing levels was in line with the UK average and modest overall,’’ the report added. “Job creation was largely concentrated in manufacturing, however, as service providers generally reduced their headcounts during May.”

Another survey, which was also released yesterday, concluded that 89 per cent of SMEs (small and medium-sized enterprises) in Yorkshire believe there is still a north-south divide. The study by TalkTalk Business found that many northern firms believed they were less likely to benefit from Government funding and gain access to high speed broadband than their counterparts in the south.