Workforces expanding despite low confidence

Money Posted 08/05/19
While Brexit uncertainty continues to undermine business confidence in the South East, the latest data from NatWest also shows more positive signs for the region.

New data from NatWest has provided some encouraging insights on business sentiment in the South East, with private sector firms expanding workforces in March at the fastest rate in 10 months. Cost pressures in March were also at their weakest level since July 2016, although total output and new business remained fairly steady.

The NatWest South East Purchasing Managers Index is a monthly report compiled by the UK insights firm, IHS Markit, from responses to questionnaires sent to South East companies in the manufacturing and service sectors. Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month.

The report details how the volume of incoming new work received by private sector companies in the South East was broadly unchanged in March compared with one month previously. Stagnant inflows of new business were observed in both the manufacturing and services sectors, along with stagnant output levels overall. However, the South East fared better than the UK as a whole, where an outright contraction in new business was signalled.

The weakness in demand did not stop companies expanding their workforces. Private sector employment in the South East rose for the first time in 2019 so far, and at the fastest rate since May 2018. Moreover, among the 12 UK regions monitored, only the West Midlands and North West registered faster rates of private sector job creation than the South East in the latest period.

The rate of input price inflation slowed for the sixth consecutive month in March, to the weakest since July 2016. This took it slightly below the UK average for the first time in five months. That said, it remained above the long-run series average (since 1997). Consequently, companies continued to raise their own prices for goods and services, albeit to the weakest extent in 2019 so far.

Firms’ expectations for output over the next 12 months remained fairly positive in March, although Brexit uncertainty continued to undermine confidence.

Stuart Johnstone, managing director, London & South East, Corporate & Commercial Banking, said: “February’s rebound in growth in the South East private sector proved short-lived as output stalled in March. Over the first quarter as a whole, the sector had its worst period since the third quarter of 2016. Moreover, the trend in new business over the first three months of 2019 was the weakest since Q2 2009. That said, the employment indicator from the latest survey is positive, signalling renewed job creation in the private sector and at the fastest pace since May 2018.”

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