Companies in the West Country are hiking the price of goods and services in response to “cost burdens”, a new report has revealed. Many of the region’s firms are facing increased operating expenses, according to the latest NatWest research, while at the same time seeing new orders fall.
The South West Growth Tracker 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 – rose from 49.7 to 50.2 in January.
The headline figure highlighted a largely unchanged level of business activity among private sector firms in the region, with some companies suggesting new business gains and tech investment had resulted in output growth. According to the data, there was a slower contraction in sales and a recovery in business confidence, but backlogs and employment decreased further.
New orders placed with private sector companies decreased for a second month in January, but was in line with the UK average. Local companies said the fall in new orders was connected to interest rates and public policy concerns among customers.
Business sentiment recovered from December’s two-year low, with a larger proportion of the region’s companies forecasting output growth in the coming 12 months.
Faye Long, chair of the NatWest South West Regional Board, said: “The results for January showed tentative signs that December’s weakness was just a blip. Local firms saw a slower decline in new orders that was marginal and output volumes stabilised.
“Local firms hiked their fees further, not only due to rising cost burdens at present but also amid future increases in wage costs. The rate of charge inflation was the highest in nearly a year-and-a-half and the strongest of all 12 UK nations and regions. Perhaps, expectations that demand will improve in the coming months encouraged firms to share cost burdens with their clients.
“The Bank of England’s interest rate cut last week means that policy is now less restrictive, with further loosening expected in the year ahead.”
The South West ranked fourth in the UK for sales trends, with quicker declines noted in eight other areas monitored. The rise in output seen in the region was accompanied by growth in London, the North East and Wales.
Private sector employment in the South West decreased for the third month in a row during January. The rate of charge inflation also reached a 20-month high last month, and was the steepest of all areas of the UK. Local companies reported the pass-through of current and future increases in freight, material and wage costs to clients.
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