• Swindon & Wiltshire Economy
• Tuesday July 21 2026

Cooling cost pressures offer encouragement in the South West despite softer June trading

South West businesses faced a tougher trading environment in June as weaker customer demand weighed on activity and new orders, according to the latest NatWest Growth Tracker data.

The headline South West Business Activity Index – a seasonally adjusted measure of changes in the output of goods and services – fell from 49.9 in May to 47.6 in June, signalling a modest decline in activity and the fastest fall in output since August 2023.

New business also fell for a fourth consecutive month, with the pace of decline accelerating to its fastest since November 2022. Survey respondents pointed to ongoing economic uncertainty and tighter client budgets, which led some customers to delay committing to new projects.

There were, however, further signs of easing cost pressures. While input costs continued to rise in June, inflation slowed to a four-month low and remained below the UK average.

Businesses most commonly linked higher costs to wages, raw materials and energy prices.

Faye Long, chair of the NatWest South West Regional Board, said: “June was another challenging month for South West businesses, with uncertainty prompting some customers to hold back on spending and new projects. That fed through into weaker activity, fewer new orders and a softer outlook.

“The encouraging news is that cost pressures are continuing to ease. Both input costs and prices charged rose at their slowest pace in four months, offering some reassurance that the worst of the recent inflationary squeeze may be starting to pass. If that trend continues, it could help give businesses and their customers the confidence to invest and grow again.”

A stronger reduction in business activity was also recorded across the UK as a whole in June, though the rate of contraction remained marginal overall.

Across the 12 UK regions and nations monitored by the survey, only Northern Ireland recorded a steeper drop in sales than the South West in June. At the UK level, new work fell at a modest pace that was the quickest in almost a year.

South West businesses were less upbeat about their growth prospects for the coming year. Notably, the degree of positive sentiment edged down to the lowest seen in just over three-and-a-half years. Expectations also remained weaker than the UK-wide trend.

Firms often anticipated that greater customer demand, new client wins, planned company expansions and continued growth in technology-related sectors would support growth. However, there were concerns over the strength of future customer demand and tough market competition.

After falling only fractionally in May, employment at private sector firms across the South West declined solidly in June. Furthermore, the rate of job shedding was the most pronounced in the year to date and quicker than the UK average.

Lower headcounts were generally attributed to efforts to cut costs, which was done through company layoffs and the non-replacement of voluntary leavers.

Except for a slight increase in April this year, staffing levels have now fallen in each month since November 2024.

Although employment continued to fall, South West companies posted another decline in backlogs during June.

Some firms in the region noted that subdued intakes of new work had enabled them to work through existing orders.

The rate at which outstanding business decreased eased to a modest pace that was not as pronounced as that seen at the UK level, however.

In line with the trend seen for input costs, prices charged by private sector firms in the South West rose at the slowest rate in four months in June.

But the pace of inflation remained sharper than the historical average. Higher charges reportedly reflected firms’ efforts to pass on higher costs to customers.

The rate at which selling prices increased in the region remained slower than the UK-wide trend for the third month in a row, however.