The latest NatWest UK Growth Tracker showed a rise in private sector output in ten out of the 12 nations and regions monitored. This was up slightly from nine in June. The Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.
Business activity growth was led by Northern Ireland for the second time in the past three months in July. Just behind it was the South West, which continued to gain momentum and recorded its steepest rise in output for more than two years. At the other end of the scale, Wales and the East Midlands both recorded modest reductions in business activity.
Sebastian Burnside, NatWest Chief Economist, commented: “July’s Growth Tracker report showed a rise in the number of UK nations and regions reporting higher business activity, marking an encouraging start to the second half of the year. Looking past the headline numbers, there were further signs of improvement.
“A notable increase in the number of nations and regions reporting greater inflows of new work in July was a sure sign of a pick-up in underlying demand, and it coincided with greater optimism towards the outlook almost across the board. Only Northern Ireland bucked the trend and saw a softening of growth expectations, although this could reflect the fact it had such a strong month in July.
“Northern Ireland not only recorded the fastest increase in business activity across the UK at the start of the third quarter, but also the most marked rise in employment.
“July also saw the highest number of nations and regions reporting increases in employment for over a year, with all but two of the 12 areas monitored seeing positive labour market performances.
“Price pressures are generally still above the long-run trend in most areas – and it will be interesting to see how this develops in the coming months following the first rate cut by the Bank of England in more than four years at the beginning of August.”
Demand
Latest data showed a rise in the number of nations and regions reporting higher inflows of new business, up from six in June to 11 in July. This reflected renewed upturns in the East of England, Scotland, South East, Wales and Yorkshire & Humber. The most marked increase in new work was recorded in the South West, where the rate of growth accelerated sharply to the highest since March 2022.
Outlook
Growth expectations generally improved across the UK in July. The only exception was Northern Ireland, which saw business confidence slip to a six-month low. Firms in the South East were the most upbeat about the outlook, as has been the case in three of the past four months, followed by those in South West. The biggest upswing in optimism was recorded in Yorkshire & Humber.
Employment
Northern Ireland topped the rankings for employment growth at the start of the third quarter, recording its fastest rate of job creation since April 2023. The North East posted the next-steepest rise in employment, followed by Wales. As was the case for business activity, the East Midlands was one of just two areas to see a decrease in employment, this time alongside the West Midlands.
Capacity
Not only did Northern Ireland once again record the only increase in backlogs of work of the 12 monitored nations and regions, but the rate of accumulation there accelerated sharply to the strongest in over two years. Firms in Wales recorded the most marked decrease in outstanding business, followed by those in Scotland.
Inflation
Most areas of the UK saw business costs increase at rates just above their respective long-run averages in July. This included the South West, which recorded the steepest overall rise input prices, albeit one that was the slowest for six months. As was the case in June, the softest rate of cost inflation was recorded by firms in the South East.
Relatively strong cost pressures, combined with improved underlying demand, led to a marked rise in average prices charged for goods and services in the South West – the fastest recorded across the UK in July. The North West posted the next-quickest rate of output price inflation. Northern Ireland registered the slowest increase and was one of seven nations and regions where the rate of inflation eased since June.
