The headline South East Growth Tracker Business Activity Index – NatWest’s seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – fell from 51.2 in September to 49.8 in October, thereby marking the first below-neutral 50.0 reading for four months.
Anecdotal evidence was split between those companies that had raised activity in response to a pick-up in new orders and those that had seen demand soften and therefore scaled back output.
The seasonally adjusted New Business Index posted just fractionally above the neutral 50.0 mark in October, thus indicating broadly unchanged levels of incoming new work at South East firms.
There was a second successive drop in employment levels at South East private sector businesses at the start of the final quarter. According to anecdotal evidence, the decrease reflected a combination of staff leavers and lower new work intakes.
Firms in the South East remained optimistic towards their growth prospects in October. Increased marketing efforts, general growth expectations and hopes of improved market conditions were reasons cited for confidence. The degree of positive sentiment fell notably on the month to its weakest for nearly a year but was nevertheless stronger than the series average.
Catherine van Weenen, territory head of commercial mid market at NatWest, said: “The South East private sector entered the final quarter of the year with new business enjoying some level of growth.
“With that, firms opted to keep activity levels broadly consistent on the month. Given that businesses had been running with excess capacity for some time, October saw employment levels reduced in an attempt to realign headcounts to workloads.
“The job shedding seen in the region was consistent with that seen at the UK-wide level. As for prices, firms in the South East enjoyed slightly softer cost pressures in October.
“Both the rates of cost and charge inflation recorded locally were slightly cooler than seen at the national level.”
Performance in relation to UK
Of the 12 monitored UK areas, only Yorkshire & Humber and Wales posted faster declines in activity than that seen locally. Regarding new business, a fractional uplift in the South East compared unfavourably to moderate growth at the national level.
October survey data pointed to a sustained decrease in outstanding business at South East firms, thereby stretching the current run of reduction to nearly a year and a half.
The rate of depletion was solid and broadly consistent with the national average. The reduction in backlogs was largely a result of lower levels of incoming new business, according to panel member reports.
With that, job cuts were sustained in October. The rate of job shedding was the fastest seen in 2024 so far, moderate and slightly faster than the UK average.
Businesses’ operating expenses increased again in October, thus marking nearly four-and-a-half years of inflation.
Elevated costs associated with wages, raw materials and rent were cited as the main drivers in anecdotal evidence. That said, cost pressures cooled on the month and were among the softest of the 12 UK areas.
Accordingly, private sector companies in the South East were also slightly less aggressive in their price setting in October. The rate of charge inflation eased to the softest since January 2021 and was broadly in line with the UK average.
Where an increase in fees was reported, firms largely linked this to the passing through of costs to customers, in particular surrounding wages.
Finally, of the 12 monitored UK areas, only the North West posted stronger optimism than the South East.
