A new survey suggests the North East economy has stabilised in recent weeks, albeit at low levels.
The NatWest North East Business Activity Index, which measures the month-on-month change in the region’s manufacturing and service sectors, rose to a score 49.8 in November, signalling a fractional reduction in output. That was the joint-slowest contraction of the 12 UK regions measured by the survey, though that still saw the North East the lowest ranked region nationally across 2022 as a whole.
The survey found that the volume of new work received by private sector firms in the North East fell for the ninth month running in November, with anecdotal evidence suggesting that economic uncertainty and high inflation are continuing to weigh on demand. The Future Activity Index remained below the no-change mark of 50.0 in November, meaning a fourth successive month of overall pessimism regarding the next 12 months.
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Employment across manufacturing and service sector companies in the North East fell for the sixth consecutive month in November while companies reported rising costs, extending the current inflationary sequence to two-and-a-half years.
Malcolm Buchanan, chair of the NatWest North Regional Board, said: “The North East economy showed signs of stabilising in November, with much slower declines in both output and new business than in October. On both scores, the North East registered the joint-best performance among the UK regions in November, alongside Wales.
“Sentiment remained negative as concerns over a recession and high inflation lingered, but firms were much less pessimistic in November. This may reflect the recent easing of inflationary pressures, although the increase in input prices picked up slightly halfway through the fourth quarter. This contrasted with a substantial slowdown in October, so the price indices will be closely watched over the winter as firms and consumers look for some respite from the cost of living crisis.”
Elsewhere, a separate survey reveals manufacturers in the North East are looking at a tough 12 months ahead, with the sector likely to contract in the face of a deteriorating economic outlook at home and abroad. The survey published by manufacturing body Make UK and business advisory firm BDO shows output in the North East manufacturing sector in positive territory for the last quarter of 2022 but forecast to drop substantially in the first three months of 2023.
Dawn Huntrod, region director for Make UK in the North East said: “There is simply no sugar-coating the outlook for next year and possibly beyond. Even for a sector as resilient as manufacturing these are remarkably challenging times which are testing even the best and most successful of companies to the limit.
“As a result, while the Chancellor has already brought in some welcome measures to help ease the cost pressure on companies in the short term, it may not be too long before we see him having to bring more firepower to ease cost pressures.
“However, the bigger issue is that the UK risks sleepwalking into an acceptance that little or no growth is the norm. Government needs to work with industry as a matter of urgency to deliver a long-term industrial strategy that has growth at national and regional levels at its heart.”
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