The April NatWest South East Growth Tracker saw business activity slip back from March’s recent improvement.
Firms have reported that increased global economic uncertainty, particularly related to US tariff announcements, is significantly impacting demand across various regions. This is reflected in observations of reduced client activity and overall caution towards spending.
The headline South East Business Activity Index was posted at 48.6 in April. Although the reading was back in contraction territory following one month of growth in March (51.6), the rate of decline was only modest.
The survey was conducted after US tariff announcements on 2 April, which, at the time, saw minimum tariff rates of 10% applied to imports into the US, as well as higher so-called ‘reciprocal’ tariff rates on a number of countries. A subsequent announcement on 9 April saw a 90-day pause on most higher tariff rates.
The level of employment across the South East economy decreased for an eighth straight month in April.
While panellists frequently linked the downturn to the non-replacement of leavers, others noted challenges in finding suitably skilled staff.
A number of firms were also carrying out cost management initiatives to offset the rise in National Insurance contributions. The rate of reduction was sharp and broadly in line with the average seen over 2025 so far.
South East private sector firms were confident of a rise in activity over the next year, with the respective index firmly in positive territory in April.
New product launches and firms’ expansion strategies were expected to be conducive to growth. Some panellists also noted upbeat demand forecasts in their reports.
That said, the region’s level of confidence faded to its weakest for five years amid worries around the global economic climate.
Sebastian Burnside, NatWest chief economist, said: “The tracker this month reflects the challenges that economic uncertainty can create for UK businesses of all scales.
“South East private sector firms reported a challenging start to the second quarter, with demand for goods and services falling amid a backdrop of economic uncertainty and rising prices.
“The South East posted a slight decrease in activity, following a month of growth in March. The downturn in output was broad-based across 11 of the monitored UK areas, with only the South West bucking the wider trend of contraction.
“It’s encouraging that firms are still looking to the future with some optimism, although growth expectations are lower than they have typically been in the past.
“Rising labour costs have added to pressure on businesses, following April’s increases in National Insurance contributions and minimum wages.
“As firms look to mitigate rising costs, we’ve seen a greater focus on workforces and average charges increase at a faster rate. Labour markets in all areas of the UK have felt the impact to some degree in recent months, with only Scotland avoiding a fall in employment in April.
“We cannot ignore the backdrop during which this survey was carried out, but regardless, as we’ve seen in the past, UK business is resilient and can always offer reasons for optimism throughout.”
The headline figure is the Business Activity Index, calculated from a single question that asks for changes in the volume of business activity compared with one month previously.
It is a diffusion index, which is the sum of the percentage of ‘higher’ responses and half the
percentage of ‘unchanged’ responses.
It varies between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The higher above 50, the faster the rate of growth signalled.
