Contraction in South East business activity ‘remains modest’ for January

While business activity continues to drop in the South East, private sector firms across the region are retaining a positive outlook as the contraction “remains modest”.

The headline South East 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 – posted at 48.2 in January, down slightly from 48.4 at the end of 2024.

Job cuts are still fairly common – typically as part of cost-cutting initiatives or in anticipation of the increase to national insurance – though the rate of reduction eased on the month.

However, new product launches and growth forecasts linked to strong pipelines and increased marketing efforts have given rise to an overall optimism from businesses.

Catherine van Weenen, territory head of commercial mid market at NatWest, said: “The trajectory of the South East private sector remained little changed entering the new year, as declines in activity and new business remained only modest.

“Encouragingly, the region looked to the future with greater optimism than on average across the UK.

“South East firms’ increasing ability to finalise orders amid a sustained period of workforce reduction could also reflect some productivity gains.

“The region was not alone in experiencing noticeable cost pressures in January, as input price inflation came in level with the UK average.

“Seeking to protect margins, firms passed on raised costs to their clients in the form of hiked charges, reflecting some confidence in demand conditions.

“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.”