New business wins drive SW economic growth

Private sector firms in the South West continued to recover from economic uncertainty in October, driven by the fastest gain in new business since the start of 2015, according to the latest Lloyds Bank Regional PMI.

The South West PMI® registered 53.6, down slightly from September’s 54.5 but still indicating growth in business activity. A PMI reading above 50 signifies growth in business activity, and the greater the divergence from the 50 mark, the faster the rate of change.

New business increased at a significant pace, and South West firms saw a large boost in backlogged work that was greater than all other UK regions with the exception of the East of England. Private sector employment levels also increased for the fourth month running.

However, input price inflation accelerated sharply, driven by the weaker sterling. This ultimately led firms to pass on part of their cost burden to customers in the form of raised prices.

The Lloyds Bank PMI, or Purchasing Managers’ Index, is the leading economic health-check of UK regions. It is based on responses from manufacturers and services businesses about the volume of goods and services produced during October compared with a month earlier.

David Beaumont, regional director for the South West at Lloyds Bank Commercial Banking, said: “The South West started the final quarter of 2016 on a solid footing.

“An easing in growth of output was expected following September’s slowdown in new business expansion, but a sharper rise in new work in the latest period and higher backlogs suggest that solid growth will be maintained in November.

“An unprecedented jump in cost inflation, linked to sterling weakness, has prompted firms to hike their prices and may explain the relatively subdued increase in employment compared to the strong trend seen over the last three years.”