• Swindon & Wiltshire Economy
• Tuesday January 14 2025
• Author Name: Peter Davison

South West businesses remain confident despite fall in activity

Businesses in the South West say they are confident that trade will increase in the next 12 months – despite a fall in business activity during December.

The latest South West Growth Tracker Business Activity Index from Natwest stood at 49.7 at the end of December – very close to the 50.0 ‘no change’ mark.

Local firms told Natwest’s researchers that output volumes were negatively impacted by the Autumn Budget, high borrowing costs, and cautious spending among clients.

December data highlighted a moderate decline in new business placed with private sector companies in the region, ending a one-year sequence of growth.

According to survey participants, client hesitancy, tamed consumer spending and the late-Autumn Budget announcement restricted sales.

Elsewhere, firms trimmed headcounts at the fastest rate in over four years and one that was sharper than that seen at the UK level. Panellists indicated that the upcoming rise in staff costs caused redundancies and prevented them from replacing leavers.

Not only did companies in the South West continue to report rising operating expenses in December, but also signalled the steepest increase for eight months. Firms reported having paid more for cardboard, copper, electrical items, energy, insurance premiums, plastics and wood.

However, South West firms remained confident of a rise in output over the course of the coming 12 months, as marketing efforts and investment were expected to drive growth.

Faye Long, chair of the NatWest South West Regional Board, said: “South West companies ended 2024 on a weaker footing than generally seen throughout the year, but they were optimistic regarding growth prospects in 2025.

“In their view, most of the weakness observed in December stemmed from the Autumn Budget announcement, which caused anxiety among clients and led them to restrict purchases.

“Local firms reduced output volumes and payroll numbers amid the upcoming increases in employer National Insurance and the minimum wage. Some panellists indicated that their suppliers are already charging more for inputs as a result of future increases in staff costs.

“A pick-up in cost pressures underpinned a sharper upturn in selling prices at a time when staying competitive is crucial to support sales.”

The drop in South West output was the slowest of the nine regions and nations where a contraction was recorded. Growth was sustained in London, the East Midlands and the North East.

Latest: South West business activity stabilises following December blip