North East employment declines as business activity stalls

Business activity in the North East remained largely unchanged in August despite the rest of the UK demonstrating robust growth.

In NatWest’s latest PMI survey, the headline North East Business Activity Index stood at 50.1 in August, down slightly from 50.2 in July.

The Index tracks changes in the combined output of manufacturing and services businesses in the region.

According to NatWest, the result was reflective of a renewed decline in new business inflows, paired with a weakness in demand that led to a decline in local employment for the second month running.

Contrasting figures emerged for the region at the sector level, with a contraction in business activity for the the services economy standing at odds with robust growth in goods production.

Elsewhere, the level of new business received by North East firms decreased for the third time in four months.

The drop was modest, but all other regions monitored by the Index displayed growth. Particularly robust order books were seen in the neighbouring North West and Yorkshire & Humber regions.

North East firms also continued to operate below full capacity, with a sharp reduction in the number of orders outstanding recorded in August.

As a result, businesses took steps to streamline their operations and employment declined. A rise in prices charged for goods and services across the North East, including fuel and raw materials, was also noted.

Richard Topliss, chair of NatWest’s North regional board, said of the findings: “The North East economy has stalled in the last couple of months, with firms in the region unable to achieve any meaningful output growth due in part to a soft patch in demand.

“Reduced pressure on capacity has afforded businesses the opportunity to streamline workforce numbers. Having seen employment rise in the four months prior to July, the North East has now seen back-to-back decreases in private sector jobs, with sustained strong cost pressures another factor forcing firms into retrenchment mode.”

He added: “The one positive takeaway from the latest data is that, despite the somewhat uncertain outlook, local businesses still foresee output levels rising in the year ahead.”