Slower expansions in new business and output in West Midlands
The NatWest West Midlands Growth Tracker showed a softer improvement in operating conditions locally, with a slower and only fractional increase in new business restricting output growth. Business confidence remained historically high, but job shedding intensified and price pressures gathered pace.
At 51.6 in June, the 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 – highlighted growth for the ninth consecutive month. However, falling from 54.2 in May to its lowest in 2024 so far, the headline figure pointed to a softer and only modest rate of expansion. Panellists noted that delayed project starts, the loss of existing customers and slow business decisions dampened demand and subsequently output volumes.
Although new orders placed with private sector companies in the West Midlands continued to increase, the pace of expansion softened to the weakest in three months and was fractional overall. Anecdotal evidence indicated that growth was constrained by political uncertainty and subdued demand conditions.
June data showed another decline in private sector jobs. According to monitored companies, shortages of new work and the loss of contracts put pressure on headcounts, with voluntary leavers not being replaced. There were also mentions of cost considerations and staff leaving in search of higher pay elsewhere.
Companies indicated a further increase in their operating expenses, which they associated with higher food, insurance, labour, material and shipping costs. The overall rate of inflation was sharp and quickened since May. In line with an intensification of cost pressures, there was a quicker increase in selling prices.
Dipesh Mistry, Chair of the NatWest Midlands and East of England Regional Board, said: “The latest Growth Tracker data for the West Midlands again showed rising levels of new business and output at local firms. Growth trailed behind the national average, however, as demand was reportedly constrained by public policy uncertainty. Still, expectations that interest rates will start to come down and that market conditions will improve after the general election continued to support business confidence. Inflationary pressures remained high, however, a key reason behind another round of job shedding as firms opted to not replace departing staff.”
