Business activity in the South West saw a slight increase for the second consecutive month in February, despite ongoing weak demand conditions. The region’s firms reported a further decline in new business while grappling with rising input costs, which led to accelerated staff cuts. However, there was a notable improvement in optimism for the year ahead, with firms more confident about future output growth.
According to the South West Growth Tracker Business Activity Index, the region’s business activity stood at 50.2 in February, unchanged from January. This indicates a slight increase in output, which many businesses attributed to investments in new sites and the launch of new projects. The index tracks the month-on-month changes in output across the South West’s manufacturing and service sectors.
Despite the overall increase in activity, South West private sector firms reported a third consecutive month of declining new work in February. While the decline remained mild and consistent with January’s figures, it highlighted persistent challenges in the market. Factors such as muted market conditions and tighter client budgets have dampened demand. However, some businesses indicated that successful marketing campaigns and slight improvements in client spending helped mitigate the downturn.
Looking ahead, firms in the South West expressed increased optimism for the next 12 months. The region’s business confidence reached its highest level in four months, outpacing the UK average. Planned expansions, new product releases, and expectations of higher customer demand all contributed to these more positive growth forecasts.
Faye Long, chair of the NatWest South West Regional Board, commented on the data: “While February saw a slight uplift in business activity, demand conditions remained sluggish overall. The current climate remains subdued, with further job cuts, but it’s encouraging to see business confidence rebound. Notably, South West firms are among the most optimistic in the UK, with only those in the Midlands more upbeat about the year-ahead outlook. Inflation remains a key concern, with price pressures continuing to stay at historically high levels.”
The report suggests that while the South West region is experiencing mild growth, the broader economic challenges, including inflation and cautious consumer spending, continue to impact business conditions.
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