Business activity across the UK’s 12 nations and regions continued its upward trajectory in September 2024, with all but one area recording growth, according to the latest NatWest UK Regional Growth Tracker. The report, a key monthly indicator of economic health, revealed broad-based expansion in most parts of the country, though growth rates generally slowed compared to August.
The Business Activity Index, which tracks the monthly change in goods and services output in the private sector, registered a reading above 50 in nearly all regions, signalling growth. A notable exception was Wales, where a slight decline in business activity broke a streak of universal growth seen the previous month. Northern Ireland stood out, securing the top spot with its strongest rise in output since May.
Sebastian Burnside, NatWest’s Chief Economist, highlighted the growing divergence in regional performance:
“September’s Growth Tracker report showed greater variation in performance across the UK’s nations and regions compared to the situation in August when activity rose universally. Output still increased in almost all places, but at one end of the scale there was strong and accelerated growth in Northern Ireland and at the other end was a decline in activity in Wales.”
“At the same time, we saw some divergence in labour market trends, with only half recording a rise in employment in September, down from ten in August. It was a similar picture for business confidence, which, whilst generally remaining positive, decreased in just over half of cases,” he added.
“On the other hand, price pressures were remarkably consistent across the 12 regions in September, with rates of increase in average charges for goods and services all closely clustered around the national average, helping make the UK inflation story somewhat easier for monetary policymakers to read.”
Labour market and business confidence diverge
Labour market trends also varied significantly, with only half of the 12 regions reporting an increase in employment, down from ten in August. Northern Ireland led job growth for the third consecutive quarter, while Wales saw the sharpest, though modest, drop in employment.
Business confidence reflected a mixed picture as well. Over half of the regions experienced a decline in sentiment, though overall optimism remained positive. The South East was a standout, not only recording the highest growth expectations but also the largest upswing in business optimism.
Demand and capacity: regional differences
Demand for new business remained strong across the UK, marking the second consecutive month of broad-based growth. The South West took the lead, reporting the fastest increase in new work in over two years. In contrast, the East of England, Scotland, and West Midlands saw only marginal upticks in demand.
Capacity pressures also varied, with Northern Ireland and the South West seeing notable growth in outstanding business. However, other regions reported a reduction in backlogs, with rates of depletion easing slightly, particularly in Yorkshire & Humber.
Inflation pressures stabilise
Inflationary pressures showed a consistent pattern across the regions, offering some relief to policymakers. While eight regions experienced a slight acceleration in input costs, the rates of price increases were tightly clustered around the national average. The East Midlands recorded the fastest rise in both input costs and prices charged for goods and services, while the North West saw the slowest rise in costs, unchanged from the previous month. Interestingly, the gap between the highest and lowest inflation rates was the narrowest on record, reflecting a more uniform inflationary landscape.
Looking ahead
Despite the mixed results, business sentiment remained cautiously optimistic. The report suggests that while the UK economy continues to expand, regional disparities in growth, employment, and inflation will be key factors for businesses and policymakers to monitor in the coming months.
