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North East business activity returns to growth in September


Oct 3, 2017 #Business

Business activity in the North East rose for the first time in three months in September, according to the latest Lloyds Bank Regional Purchasing Managers’ Index® (PMI®).

The PMI reading for last month went above the 50.0 mark that separates growth in business activity from contraction, registering 51.9, up from 48.8 in August.

Regional goods and services output increased, but local businesses still reported a third consecutive month of job losses thanks to a lack of new work.

Customer demand in the North East remained fragile, with companies’ order books rising only slightly in September after declining in August and July.

Alongside this, the weakness of sterling and rising commodity prices caused business costs to rise, prompting North East firms to increase the prices they charge customers as a result.

The survey also showed that business expectations for output recovered only slightly August’s nine-month low.

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.

The North East findings are based on a range of questions posed to businesses across Northumberland, County Durham, Tyne and Wear and the Tees Valley.

Leigh Taylor, regional director for the North East at Lloyds Bank Commercial Banking, said:

“It was a mixed bag of results for the North East in September, with an improved headline PMI figure masking some discouraging signals. Although business activity returned to growth, rising for the first time since June, job losses continued to be seen across the region during the month. Sustained growth in order books and business activity is needed to convince local firms to take on new hires, particularly at a time when costs are rising month after month and there is uncertainty about the outlook.

“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 North East have £60.5bn 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.”

By Emily