The East Midlands economy continued to slowdown in October with business confidence at two-and-a-half year low, according to a new study.
The monthly NatWest East Midlands Business Activity survey also suggested while employment was still up, it was up at the weakest rate in 18 months.
The research – adjusted for seasonality – shows that business activity across the region has now decreased in each of the past five months, with the fall in the region sharper than the UK average.
The drop-off was blamed on a combination of falling demand amid deteriorating economic conditions as well as a lack of confidence in the economy.
It comes as the UK enters what experts say could be the longest recession in a century, with the ONS saying the economy shrank by 0.2 per cent between July and September.
That drop was lower than had been expected but was the biggest quarterly fall since early 2021 when the UK went back into lockdown to combat Covid-19.
A recession is defined as an economy shrinking for two quarters, and experts predict the downturn could stretch out for two years.
NatWest said the rate of contraction in the East Midlands was marked – faster than that seen in September and more pronounced than across the UK as a whole.
It said new orders decreased across both the manufacturing and services sectors.
A spokeswoman for the bank said: “Concerns around the impact of a wider economic downturn and inflationary pressures led business sentiment to fall to the lowest since the first wave of the Covid-19 pandemic in October.
“In fact, excluding March and April 2020, confidence was the lowest since the series began in July 2012.
“Those companies that remained optimistic regarding the year-ahead outlook based this on hopes of more stable economic conditions and new product launches.
“Although staffing levels continued to increase in October, the rate of job creation slowed to the weakest for a year-and-a-half.
“Continued efforts to rebuild workforces following the pandemic supported higher employment, but cost reduction strategies and difficulties recruiting staff limited the pace of jobs growth.”
The bank said some survey respondents said weak demand meant firms were often operating below capacity.
It said higher costs for energy, raw materials and staff contributed to a sharp increase in input costs, with the weak currency exacerbating inflationary pressures. As a result the cost of outgoing services and products was up.
Rashel Chowdhury, who sits on the NatWest Midlands and East Regional Board, said: “The East Midlands private sector endured a difficult start to the final quarter of the year, with a lack of confidence in the wider economy hitting demand.
“This lack of confidence was also evident at businesses themselves. In fact, outside of the first pandemic lockdown, sentiment was the lowest in more than a decade.
“There were also signs of job creation losing momentum as companies consider costs when making hiring decisions.
“Although employment continued to rise, the pace of growth was the slowest in a year-and-a-half.
“All in all, the latest survey results, suggest a challenging period for local firms heading to the year end.”
