Rising demand in the South East of England has led to an increase in business activity for the fifth month in a row, according to the NatWest South East PMI.
The headline Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – increased from 51.4 in March to 54.4 in April, signalling a faster expansion than the UK average.
Private sector firms in the South East counties – Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Berkshire, Surrey and West Sussex – indicated a third successive monthly rise in new work intakes during April.
Moreover, the pace of expansion was the fastest in just under a year and solid overall. Those surveyed linked the improvement to an influx of new customers as well as marketing efforts. Despite accelerating, the local increase in new business remained slower than the UK average.
South East private sector firms continued to add to their workforce levels in April, as has been the case since the start of the year. Though modest, April saw the strongest jobs growth for a year.
April survey data indicated a further rise in average cost burdens faced by South East firms. Having picked up notably from March, the rate of cost inflation was steep and the most pronounced for eight months.
Catherine van Weenen, territory head of commercial mid market at NatWest, said: “The South East private sector continued to expand into the second quarter of 2024.
“Both activity and new business grew at sharper rates in April, in fact, at the most pronounced rates for nearly a year.
“The future also looks brighter as firms’ expectations for activity in the coming 12 months were upgraded.
“Moreover, we get further insight from anecdotal evidence as a number of companies across the South East expressed their plans for growth.
“To support greater output requirements, firms continued to hire additional staff. Though modest, April saw the sharpest jobs growth for a year.
“Looking to prices, inflationary pressure continued to build in April. Despite a spike in cost inflation, selling prices rose at a largely similar rate compared to March, indicating that firms are bearing some of the inflationary burden.”
Performance in relation to UK
Of the 12 monitored UK areas, only Scotland and Northern Ireland registered faster increases in payroll numbers than seen in the South East. Survey respondents reportedly added to staffing levels to support output requirements and business growth.
Companies across the South East continued to make inroads into their backlogs of work in April, thereby extending the current trend of depletion to 11 months.
While some survey respondents attributed the decline to subdued order numbers, others mentioned improved efficiency.
Though moderate, the decline in outstanding business was the softest since June last year. That said, the rate of depletion was sharper than the UK average.
The uplift in input prices in April reflected a combination of higher wage, fuel and shipping costs, as well as increased raw material prices. The local rate of inflation was subdued compared to the UK average, however.
Output charges set for South East goods and services rose again in April. Selling price inflation remained substantial at the start of the second quarter and largely consistent with that of March. The rate of inflation was, nevertheless, the softest seen in six months.
Survey respondents mentioned passing some of the burden of higher operating expenses to the customer, particularly higher labour costs. The local rise in selling prices was slightly stronger than that seen at the UK level.
The Future Activity Index picked up on the month, pointing to improved confidence among South East companies.
The reading remained well above both the historic and UK averages. According to anecdotal evidence, upbeat expectations towards the next 12 months were underpinned by forecast improvements to business conditions and firms’ growth plans.
