This is why private sector economy growth slowed in Yorkshire last month

The private sector economy in Yorkshire grew at the slowest pace in over three years last month, amid a second reduction in new business seen this year, according to the latest NatWest Purchasing Managers’ Index (PMI) data.

Richard Topliss
Richard Topliss

Weaker activity growth and softer demand conditions translated to a subdued employment picture, with workforce numbers declining.

Amid reports of Brexit uncertainty affecting sentiment, business confidence dipped to a six-month low.

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Richard Topliss, chairman of NatWest’s North regional board, said: “Businesses operating in Yorkshire maintained a growth advantage over the rest of the UK during September.

“That said, activity increased marginally over the month, with the rate of expansion easing to the slowest in the current sequence of growth stretching back to August 2016.”

The NatWest Yorkshire & Humber Business Activity Index, which measures month-on-month changes in the combined output of the region’s manufacturing and service sectors, registered 50.1 in September, down from 51.7 in August.

The reading was the lowest recorded in the current sequence of growth stretching back to August 2016.

However, it compared favourably with the UK as a whole, which suffered its second contraction of private sector output in four months during September.

For the second time in the past seven months, new business at Yorkshire companies declined in September.

Weaker export sales coupled with ongoing Brexit uncertainty weighed on customer demand, according to respondents in the survey.

“Inflows of new business decreased for the second time in the past seven months, albeit only slightly,” Mr Topliss said. “Regional firms commented that Brexit uncertainty among customers had negatively affected demand conditions.”

A slight decline in new orders in the region came against a backdrop of faster fall observed nationally.

September’s survey data showed the second decline in regional employment this year.

Mr Topliss said: “Employment numbers in the Yorkshire private sector also declined during September, though the rate of job shedding was marginal and softer than the decrease seen at the UK level.

“As with new orders, panellists attributed concerns over the path to Brexit as the principal factor behind growing reluctance to take on additional staff.”

The level of unfinished orders among Yorkshire firms meanwhile declined at the joint-fastest pace since December 2012, as companies sought to reduce their backlogs.

Input cost inflation softened slightly, but remained historically sharp in September. Panellists cited increases in staffing and raw material costs, notably fuel, as well as a weaker pound as behind the latest rise in operating expenses.

Cost burdens in Yorkshire’s private sector have grown every month since April 2016.

Greater cost burdens were partly passed on to clients in the form of higher output charges.

Mr Topliss said: “On the plus-side, cost burdens rose at a softer pace in September, with the overall rate of input price inflation slower than that seen at the UK level.

“Meanwhile, despite easing to a six-month low, business confidence towards output over the coming year was strongly positive and above the UK-wide figure.”