August sees universal rise in UK business activity

In a significant turnaround for the UK economy, business activity rose across all 12 UK nations and regions in August 2024, marking the first universal increase in three months, according to the latest NatWest UK Regional Growth Tracker.

The Business Activity Index, a key indicator of regional economic health, showed a reading above 50 for all areas, signalling growth. This broad-based expansion highlights a recovery from the uneven performance seen in recent months, with only ten regions recording growth in July.

Regional highlights

Northern Ireland led the way in business activity growth for the third time in four months, closely followed by the South West. The North East saw the slowest rise in output and was one of the two regions, along with London, that experienced a softer pace of growth compared to July.

“Renewed upturns were seen in the East Midlands and Wales, although it was Northern Ireland that remained the brightest spot in terms of outright growth.

“Business optimism generally softened in August, following a post-election bounce in growth expectations in most areas in July. Nevertheless, sentiment towards future activity remains positiveacross the board, which is helping to support labour market conditions. Only the East Midlands and West Midlands recorded decreases in private sector employment in August, and the decline in the latter was marginal,” Burnside added.       

“Alongside broad-based growth in business activity, it was encouraging to see price pressures ease in most areas, in what is a near-perfect scenario for the Bank of England’s policymakers. This will be something to watch going forward as we look to assess the direction of travel of inflation and the timing of further interest rate cuts.”

Employment and capacity

The job market saw encouraging signs, with employment rising in ten out of the 12 regions. Northern Ireland recorded the strongest job creation, reaching its fastest pace since April 2023. The North East also saw a solid increase in employment, while the East Midlands and West Midlands experienced slight declines.

In terms of capacity, most regions continued to see a reduction in outstanding business, with Wales recording the steepest decrease in backlogs. Northern Ireland was an outlier, with a third consecutive monthly rise in work-in-hand, defying the broader trend.

Inflation trends

Inflationary pressures showed signs of easing, as input cost inflation slowed in nearly all regions. The only exception was Wales, where operating expenses remained unchanged from July. The South East and West Midlands reported the weakest rise in costs, while Northern Ireland faced the strongest cost pressures.

Output price inflation also moderated in most regions, with the South West seeing the most significant easing, although it still recorded the fastest overall rise in prices.

Outlook

Looking ahead, while growth prospects remain positive across the UK, the degree of optimism has weakened in most regions compared to July. The North East, in particular, recorded the weakest sentiment, while the South East remained the most optimistic about future activity.

For further details, download the full report here.