Yorkshire business activity rises dispite reduction in orders

Scaffolding coming down outside WH Smith's on Fargate in Sheffield.
Scaffolding coming down outside WH Smith's on Fargate in Sheffield.
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Business activity in Yorkshire’s economy increased during March despite the first reduction in new orders in nearly three years.

Confidence among private business leaders improved to a three month high with the region’s firms forecasting a growth in sales demand for the year ahead.

However, according to research published today by NatWest, demand conditions worsened for the first time since July 2016.

Employment levels rebounded from the decline seen during February.

The figures were published in the NatWest Yorkshire & Humber Business Activity Index - a seasonally adjusted index that measures month-on-month changes in the combined output of the region’s manufacturing and service sectors.

The data remained at 52.0 in March, signalling a solid increase in business activity.

Moreover, it compared favourably with the UK-wide figure of 50.0 which signalled no-change in national business activity from February.

Sector data indicated that growth in the region was mainly centred on manufacturing.

While new business orders declined for the first time since July 2016, the rate of contraction was marginal and softer than that seen at the UK level.

Anecdotal evidence from panellists indicated that they had observed an overall weakening of demand conditions during March.

Employment among Yorkshire & Humber businesses returned to growth in March from February’s decline.

The rate of job creation was faster than observed at the UK level, though only modest overall.

The extra staffing capacity created in March enabled businesses to work through their unfinished orders.

The overall volume of incomplete business declined among Yorkshire & Humber firms for the sixth consecutive month and at the fastest pace in exactly five years.

Input price inflation in Yorkshire & Humber remained strong in March and was slightly quicker than in February. Higher raw material costs (notably fuel) and a weaker pound were listed by panellists as factors behind greater cost burdens.

In contrast, output charge inflation eased from February to the slowest since June 2016. Nonetheless, the rate of inflation was solid and faster than that seen across the UK as a whole.

Yorkshire & Humber companies were optimistic that output would increase over the next year, with the level of positive sentiment rising to a three-month high in March.

Investments in new equipment and expectations of higher sales growth were cited by panellists as reasons to be confident.

Richard Topliss, chairman for the NatWest North Regional Board, said: “Yorkshire & Humber’s private sector economy continued to expand solidly at the end of Q1 and compared favourably with the UK as a whole which registered no-change in output from February.

“Employment returned to growth following the first decline for almost two-and-a-half years in February. That said, demand conditions weakened with the first reduction in new business recorded since the aftermath of the EU referendum in July 2016.

“Despite the contraction in new orders, business confidence improved to the highest in three months as regional businesses forecast greater sales activity over the coming year