NatWest UK Regional Growth Tracker – Dec 2024
The North East and London were once again the two standout performers in terms of regional business activity growth in December, according to the latest NatWest UK Regional Growth Tracker.
Higher business activity was recorded in three of the 12 nations and regions in December. Alongside the North East (index at 55.1) and the capital (54.2), the only other area to see an increase in output was the East Midlands (50.7), although the rise there was modest. Elsewhere, the North West and Scotland (both 46.9) recorded the greatest slowdown in business activity, followed by Northern Ireland (47.7).
The Business Activity Index is the first fact-based indicator of regional economic health published each month, tracking the monthly change in the output of goods and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled.
Sebastian Burnside, NatWest chief economist, commented: “London was the UK’s most consistent economic performer as 2024 came to a close and the North East was on an improving trajectory for the second half of last year.”
“Northern Ireland enjoyed excellent growth in 2024 and placed second behind London for its performance across the year as a whole. Furthermore, Northern Ireland was the only area to see a rise in employment during December, with labour market conditions generally cooling across the UK in line with rising labour costs and less optimism towards future growth prospects.”
“Business costs rose more quickly across three-quarters of the UK’s nations and regions in December, underpinned by increasing wages and salaries. With these costs expected to rise further in the coming months as the announced increases in employers’ national insurance contributions and the national minimum wage come into effect, firms’ growth expectations are subdued by historical standards in most parts of the UK.”
Demand
Demand showed signs of slowing down in most areas in December. In fact, only the North East and London recorded greater inflows of new business during the month. The most marked decrease was seen in the North West, which saw a second straight monthly drop in new work intakes, and one that was the steepest since November 2022.
Outlook
There were varying degrees of optimism towards future activity across the UK’s nations and regions in December. Firms in the East Midlands were the most upbeat about the year-ahead outlook, having seen a notable rebound in confidence from the month before. Expectations deteriorated in the majority of areas, however, including Scotland which saw the weakest overall sentiment.
Employment
Employment growth in December was confined to just Northern Ireland. Workforce numbers fell in the remaining 11 nations and regions covered by the survey, marking the broadest decline in almost four years. For the fourth month running, companies in Wales recorded the sharpest drop in staffing levels.
Capacity
December data showed a general lack of pressure on business capacity, with most areas of the UK seeing decreasing levels of outstanding business (i.e. new orders or projects awaiting completion). Wales registered the sharpest overall reduction in work-in-hand, its greatest since September 2023. Firms in the North East went against the trend and recorded a modest rise in backlogs.
Inflation
Nine of the 12 nations and regions monitored by the survey recorded faster increases in businesses’ input costs in December. The quickest overall rate of inflation was in the North East, which also recorded the second-greatest acceleration from the month before behind the South West. Cost pressures were weakest in East of England, but even there they were above the long-run average.
Faced with strong cost increases and rising demand, firms in the North East raised prices charged for goods and services sharply and more steeply than those in any other area. Rates of output price inflation quickened in most nations and regions, including the lowest-ranked area for price increases, the West Midlands.
