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1:02 AM 14th January 2025
business

North West Regional Growth Tracker Reveals Business Activity Falls In December But Is Expected To Grow In 2025



Image by Gerd Altmann from Pixabay
Image by Gerd Altmann from Pixabay
According to December’s NatWest Growth Tracker survey results, firms in the North West were optimistic of a return to growth of business activity in 2025, following a slowdown seen throughout the final quarter of 2024.

The headline North West Business Activity Index came in at 46.9 in December, from 47.7 in November. It has now registered below the 50.0 threshold that separates growth from contraction for three months in a row. The latest reading was the lowest recorded for almost four years.

Despite the slowdown during the final quarter, the index's average in 2024 (51.7) was higher than that seen in 2023 (50.0).

Local businesses remained optimistic of a rise in activity in the next 12 months, and confidence even ticked up slightly since November. Those that were upbeat about the outlook commented on opportunities from new and improved goods and services, alongside a boost from greater marketing efforts.

Local firms were more aggressive with their price increases during the final month of 2024. The rate of inflation for average prices charged for goods and services ticked up to a five-month high and moved further above its historical average.

After a strong first three quarters of the year, the North West private sector economy saw a persistent slowdown in the three months to December. Positively, however, firms are still optimistic of activity levels rebounding in 2025, despite the disappointing end to last year. Mirroring the situation for the UK as a whole, local labour market conditions have started to cool, with employment down for the third month running in December. Businesses are saying that this is partly a reaction to the upcoming increases in the minimum wage and employers' NI contributions. At the same time, prices charged for goods and services have started rising at a faster rate in recent months, adding to signs of stubborn inflationary pressures.
Malcolm Buchanan, Chair of the NatWest North Regional Board.


Performance in relation to UK

Output fell across both the manufacturing and services sectors in the North West, underlying data showed, amid reports of weaker demand and a general loss of confidence and momentum in the economy. The drop in business activity in the region contrasted with slight growth across the UK as a whole (index at 50.4).

That said, the degree of positivity among firms in the North West towards future activity broadly matched the national average.

The amount of new business received by firms across the North West private sector decreased for the second month in a row in December. Prior to November, inflows of new work had risen for ten straight months. The latest decrease was the most marked since November 2022 and attributed by surveyed businesses to a loss of confidence in the market and customers reining in spending. There were also mentions of high prices and competition from abroad.

Business costs continued rising steeply across the North West private sector economy during December. Wage and salary increases were a key factor, according to reports from surveyed businesses, as was a weakening of the pound against the US dollar. Although the rate of cost inflation ticked down from November's seven-month high, it remained above the long-run trend level.

The rate of output price inflation was meanwhile the second-fastest among the 12 nations and regions monitored by the survey, surpassed only by that recorded in the North East.

December saw a further decrease in the level of employment across the North West, thereby extending the current sequence of decline to three months. Furthermore, the rate at which workforce numbers fell accelerated to the quickest since September 2023. Reports from surveyed businesses highlighted the influence of weaker demand, but they also indicated that some jobs had been cut ahead of increases in the minimum wage and employers' National Insurance contributions.

The decline in headcounts in the North West was slower than seen across the UK as a whole, however.

Firms were able to reduce workforces due to a lack of pressure on business capacity, which was underlined by falling backlogs of work. December's decrease in outstanding business was in fact the sharpest recorded for more than a year and one of the quickest nationally (behind only those seen in Wales and Yorkshire & Humber).