Lisa Phillips

East Midlands Output Growth Sustained in September

Stronger demand conditions, an upturn in new orders and a rebound away from pre-election uncertainty at customers seen in the previous survey period, led to a return to output growth in the East Midlands in August, according to data from the latest NatWest Growth tacker.

The NatWest East Midlands Growth Tracker – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – posted at 51.4 in September and dipped slightly from 51.9 in August. The latest data signalled a further modest rise in output at East Midlands firms, albeit one that was softer than in the previous survey period. Where an increase in activity was noted, firms attributed this to a sustained upturn in new business and persistent demand.

Businesses across the East Midlands recorded a second successive monthly rise in new orders at the end of the third quarter. The pace of growth was moderate and in line with the long-run series trend, despite easing from August's near two-and-a-half year high.

Private sector firms in the East Midlands registered another monthly fall in staffing numbers during September, thereby extending the current sequence of job losses that began in July 2023.

September data signalled stronger inflationary pressures across the East Midlands private sector. The acceleration in the pace of increase in costs was only slight, however, with input prices rising at one of the slowest rates over the past four years.

Lisa Phillips, Regional Managing Director, Midlands and East, Commercial Mid Markets, said: "The East Midlands private sector signalled a more promising end to the third quarter than the situation seen in July. Output and new orders continued to increase, with business optimism buoyed by sustained demand.

"Nonetheless, efforts to cut costs led to a further fall in employment. On a slightly brighter note, the pace of depletion in backlogs of work slowed to only a fractional pace, amid some signs of pressure on capacity emerging which could ease job shedding.

"Although one of the slowest in almost four years, input cost inflation quickened slightly amid higher wages and material prices. In turn, firms raised output charges at the sharpest pace in six months. Moreover, inflationary pressures in the region were the sharpest of the 12 monitored UK regions and areas."

 Performance in relation to UK

The rate of growth in business activity in the East Midlands was slower than the UK average.

In line with the trend seen at the UK level, the pace of increase in new business eased in September. Nonetheless, the rate of growth in new orders in the East Midlands remained slower than the UK average.

The pace of cost inflation was the sharpest of the 12 monitored UK regions, as firms cited higher raw material and software prices, alongside greater wage bills.

At the same time, East Midlands firms recorded a pick-up in the pace of selling price inflation for the second month running. Output charges rose at the steepest rate since March. The pace of inflation was historically elevated and, in line with the trend for input prices, was the fastest of the 12 monitored UK regions.

Companies reported cutting workforce numbers amid efforts to lower costs. The decrease was the fastest of the 12 monitored UK regions and areas.

That said, greater new order inflows led to a slower rate of depletion in backlogs of work in September. The pace of decline was only fractional and the weakest since October 2022 amid signs of pressure on capacity.

Although slipping to the lowest for three months, business confidence at East Midlands firms remained historically upbeat in September. A focus on proactive sales and marketing initiatives is expected to help boost output in the coming year, according to panellists.