• Swindon & Wiltshire Economy
• Monday September 14 2026

SW business activity shows signs of improvement – Bank of England

Business activity in the South West is showing tentative signs of improvement, but remains patchy as consumer weakness and a slumping property market offset gains in exports and some business services, according to the Bank of England’s latest Regional Agents’ summary.

Intelligence gathered in the six weeks to mid‑August and considered by the Monetary Policy Committee at its September meeting points to modestly firmer output growth, slightly better confidence and a small uplift in investment intentions – yet “significant pockets of weakness” persist.

Manufacturing is the standout performer, with export‑oriented firms in aerospace, defence and equipment for energy infrastructure and data centres driving a slight rise in output after last year’s contraction.

Business services are also firmer, particularly in IT, tax, employment law, restructuring and engineering consultancy, though growth is often fee‑led rather than volume‑driven. By contrast, construction remains weak, private housebuilding is “particularly weak” and commercial property activity is held back by high build and finance costs plus planning constraints.

Consumer spending is “little changed” and “moderate”, with households staying value‑driven amid squeezed budgets and geopolitical uncertainty.

Supermarkets report weak food volumes as shoppers trade down, demand for big‑ticket items tied to housing is soft, and hospitality faces “challenging trading conditions” despite some boost from hot weather and the World Cup.

New car sales are recovering towards pre‑pandemic levels, helped by competitively priced Chinese imports, while clothing and footwear have been stronger since spring.

Pay pressures are easing only gradually. The cumulative average 2026 pay settlement has edged up to 3.6 per cent from 3.5 per cent, mainly due to newly collected April data, and most firms do not expect to review pay again until 2027.

Contacts see next year’s settlements as broadly similar or slightly lower, with a potentially lower National Living Wage, a looser labour market and weak financial performance pulling down, while higher‑than‑expected inflation, union activity and some recruitment pressures pull up.

Input costs continue to creep higher as firmer energy‑intensive prices are only partly offset by weak demand and retail competition.

Materials inflation remains elevated, with double‑digit rises reported in plastics, fertilisers and some metals, while domestic manufacturers are passing through modest output price increases of one to five per cent.

Profit margins are “slightly less compressed” as firms secure efficiency savings and pass on part of the cost increase, though some further price rises may come in 2027 as hedges and fixed contracts roll off.

Credit is readily available but demand is cautious. Banks are competing aggressively for viable borrowers, distressed loans remain low and larger firms are deleveraging or refinancing early to benefit from the competition.

Lenders remain wary of smaller firms and sectors exposed to AI disruption, construction and hospitality with weak track records. Employment intentions are broadly flat, recruitment difficulties are a little below normal and modest spare capacity persists, with automation and AI reshaping roles but not yet driving broad headcount cuts.