April sees another near-universal increase in business activity across the UK

Business activity continued to rise across almost all UK nations and regions during April, latest Regional PMI^® survey data from NatWest showed. Just half of areas saw an increase in employment, however, with businesses facing a sharp, wage-led rise in costs.

The PMI Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.

Nearly all nations and regions recorded a rise in business activity for the second month running in April. London (index at 57.4) continued to lead growth, recording its steepest rise in output for three months, ahead of the West Midlands (55.5) and Northern Ireland* (54.5). As was the case in March, only Yorkshire & Humber (47.3) saw activity decline, albeit with the rate of contraction there easing from the month before.

Ten of the 12 monitored UK nations and regions saw a rise in inflows of new business in April, indicative of improved underlying demand. London overtook Northern Ireland at the top of the rankings having recorded its strongest increase in new orders for three months. Decreases were meanwhile seen in Yorkshire & Humber and the East of England.

Once again, there were mixed trends on the employment front in April. Northern Ireland topped the rankings for job creation for the second successive month, with Scotland also seeing a solid rise in workforce numbers. However, decreases were recorded in half of the monitored areas, the steepest of which was registered in the West Midlands.

Backlogs of work continued rising in London during April, the fifth month in a row in which this has been the case. They also increased in Northern Ireland for the first time in a year. In all other areas, there was a lack pressure on business capacity as outstanding business fell once again. The most marked decline was recorded in Yorkshire & Humber.

April saw a broad-based increase in cost inflation across the UK as many businesses faced a rise in staff pay. In all areas, input prices rose at rates well above their respective long-run averages. Firms in the South West recorded the strongest increase in operating expenses, followed by those in London. The least marked rise was in Scotland.

The fastest rise in output prices in April was recorded in the North East, where the rate of inflation hit an 11-month high. Scotland likewise saw a sharp and accelerated increase in prices charged. That said, most other areas recorded slower rates of output price inflation, including the lowest-ranked region, the North West.

Sebastian Burnside, NatWest chief economist, commented: “Most areas of the UK are enjoying a revival in business activity, with growth even accelerating in most cases in April.

“Yorkshire & Humber is the one area where we are yet to see the economy kick into gear, though the region’s firms are optimistic about their prospects for the coming year, as is the case across the UK.

“Whilst there are generally positive signs for activity and demand, hiring remains somewhat lacklustre. Just half of the 12 nations and regions monitored by the survey saw employment rise at the start of the second quarter, which equated to broadly no change at the UK level.

“Businesses appear to be taking a more cautious approach to hiring, at a time when costs are continuing to rise relatively sharply, not least due to staff pay increases. April’s near-10% jump in the National Living Wage, and the expansion of its coverage, has lifted rates of business cost inflation once again. Slower increases in prices charged for goods and services in April will be music to the ears of policymakers, but they will be keeping their eyes firmly on these numbers going forward should the economy continue to pick up speed.”