NatWest Regional Growth Tracker showed renewed increases in business activity across several parts of the UK, alongside a general revival of firms’ growth expectations for the coming year.
The Tracker – which surveyed businesses operating in the manufacturing and services sectors across 12 regions of the country – showed “improvements in growth expectations in every area, with that half of the 12 UK nations and regions covered by the report saw a rise in business activity in May.”
This positivity has had an “impact in terms of thoughts for the future.”
Business confidence towards future activity “improved across the board in May.”
The North West saw the greatest increase “in expectations since April, followed closely by London.”
The highest overall degree of optimism “was recorded in the West Midlands.”
Rates of business activity expansion were positive “for most of the country, including Wales which was the fastest growing area for May.”
London experienced its weakest performance in 30 months.
Employment proved challenging in “almost every region.”
The exception was Scotland which “experienced its first upshift in employment in six months.”
Commenting on the Tracker’s findings, Sebastian Burnside, NatWest Chief Economist, said:
“The rebound in business confidence in May suggests that firms might be in a stronger position for the next quarter. Certainly, a positive May has driven a sharp increase in optimism, reflecting the recovery from the wider economic uncertainty businesses were feeling across March and April. This latest survey data suggests businesses are taking steps to improve their productivity. Some of this is being driven by pressure from their bottom lines, specifically increased labour costs following April’s national insurance changes.”
They added:
“Nonetheless, it is positive to see that Scottish firms remain resilient and have experienced an uptick in their employment – the first of 2025. We’re still seeing businesses raise prices as they look to mitigate increased costs. Rates of inflation have pulled back from April’s highs, but cost pressures remain historically elevated.”
Of the 12 nations and regions monitored, “only Wales recorded an increase in inflows of business in May.”
Demand stabilised in the East of England, after “falling in the previous five months, but it decreased in all remaining areas.”
East Midlands recorded “the most marked drop in new work and was one of four regions where the rate of decline accelerated.”
The majority of areas saw a “decrease in employment in May.”
The steepest decline was seen “in the North West, where workforces have now fallen for eight months in a row, although the pace of job shedding there slowed compared to April.”
Scotland went against the trend and recorded “a fractional uptick in staffing levels, its first for six months.”
Backlogged orders (i.e. the volume of orders or projects awaiting completion) fell “across all 12 nations and regions in May, the third month in a row in which this has been the case.”
Pressure on capacity was weakest in the North West, where “outstanding business fell sharply and slightly quicker rate than in April. Firms in Scotland recorded the slowest fall in work-in-hand.”
The rate of increase in average prices charged “by businesses for goods and services slowed in all parts of the UK in May, following spikes in inflation in April.”
The greatest slowdown in output price rises “was seen in Wales, where it hit a five-month low.”
Inflationary pressures were highest “in Northern Ireland and West Midlands, respectively.”
Firms in the South West recorded the steepest “rise in input prices midway through the second quarter, followed closely by their counterparts in the East of England.”
At the other end of the scale, Scotland reportedly saw the “slowest increase.”
In all areas, rates of cost inflation eased compared “to April but remained above their long-run averages.”