South West growth momentum slows in September

The private sector in the South West lost growth momentum in September, with business activity and new orders increasing at the slowest rates in three months, according to the latest Lloyds Bank Regional Purchasing Managers’ Index (PMI®).

The South West PMI recorded 52.9 in September, down from 54.3 in August. The rate of expansion was weaker than the UK average. A PMI reading above 50 signifies growth in business activity.

Data showed that, despite September’s slowdown in growth, South West firms continued to take on extra staff.

The weak pound and salary increases continued to put pressure on local businesses with cost inflation reaching a six-month high. This caused firms to up selling prices for goods and services.

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 service providers about the volume of goods and services produced during September compared with a month earlier.

David Beaumont, regional director for SME banking in the South West at Lloyds Bank Commercial Banking, said: “Slower rises in both output and new orders at firms in the South West provide a cause for concern as we enter the final quarter of the year. Firms haven’t been helped by a recent pick-up in cost inflation, which they haven’t been fully able to pass on to clients given signs of demand softening. On a more positive note, however, employment growth picked up again. Stronger hiring suggests that local firms maintain some optimism that underlying demand will improve in the near-term. This is backed up by business expectations which picked up for the third month running.

“As we enter the final quarter of 2017, businesses in the consumer goods and hospitality sectors will need to ensure they have the working capital necessary to take advantage of higher demand from events like Black Friday, Christmas and New Year.

“Last month our Working Capital Index report found that businesses in the south of England have £120.6bn tied up in excess working capital, which includes assets like stock and invoices. Cash that’s tied up in working capital can be released and invested in creating more stock or building capacity to meet higher demand over the festive season.”