Output rises in almost all regions in February, led by strong growth in London

Output rises in almost all regions in February, led by strong growth in London

London continued to lead UK regional growth in February, according to the latest NatWest Regional PMI® report.

Economic Analysis

10 March 2020


London continued to lead UK regional growth in February, according to the latest NatWest Regional PMI® report. Almost all regions in fact saw a rise in output, though only half recorded higher employment.

The PMI 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 growth signalled.

London remained by far the best-performing region for output growth in February, with its Business Activity Index recording 56.0 and staying close to January’s 33-month high. Wales (53.7) and the North West (53.0) meanwhile rose to second and third place in the rankings respectively, having each recorded a faster rise in output. Yorkshire & Humber (52.7) too saw a pick-up in momentum.

By contrast, growth slowed in the East of England (52.8), South East (52.6), East Midlands (52.1) and West Midlands (51.2). Business activity rose in the South West (50.2) and North East (50.1) – albeit only fractionally – for the first time in 12 and ten months respectively. Output in Scotland (50.1) broadly stagnated, while Northern Ireland (46.5) saw a further marked contraction.


London continued to top the regional rankings for new business growth in February, despite seeing the rate of increase ease sharply from January's 32-month high. In fact, all of the nine regions that recorded a rise in new business saw the rate of expansion weaken. There was a renewed decline in new work across the South West, while both the North East and Northern Ireland saw further marginal decreases.


London and Northern Ireland jointly led job creation in February. The number of areas recording higher employment fell from 11 in January to just six, as the South East, West Midlands, East Midlands, North West and Scotland all recorded renewed declines in payrolls. The East of England and Wales both saw faster employment growth, while Yorkshire & Humber registered a slower rise. The decline in workforce numbers in the North East eased to the weakest for seven months and was only marginal.

A slight rise in outstanding business in London contrasted with decreases in all other regions in February. Furthermore, in all cases except Northern Ireland and Wales, the rate of backlog depletion accelerated since January. The North East recorded the steepest overall drop in work-in-hand, as has been the case in each of the past seven months. The West Midlands and South West also saw notable declines.


February saw a broad-based increase in average prices charged for goods and services. Inflation picked up in the majority of regions, with the East Midlands recording the fastest rate. In the case of the North East, it was the first rise in charges for seven months.

The strongest cost pressures continued to be faced by businesses in the Northern Ireland, where the rate of input price inflation accelerated to a five-month high. Just three other regions recorded faster increases, including second-placed East Midlands. At the other end of the scale, cost inflation slowed sharply in Yorkshire & Humber and the North West to the weakest for three and 44 months respectively.


The majority of regions registered an improvement in business confidence towards future output in February. The biggest gain was in the East Midlands, which topped the rankings ahead of Yorkshire & Humber and the South West. Northern Ireland was one of four areas (alongside Wales, the West Midlands and North West) to see a drop in expectations since January, and returned to the foot of the table.

Sebastian Burnside, NatWest Chief Economist, commented: “The number of UK regions reporting growth of business activity reached the highest for 16 months in February, in what was a further sign of a post-election recovery in demand. London in particular has seen a turnaround in fortunes over the past year and continued to see the greatest improvement in terms of output, but solid growth was also seen across the likes of Wales and the North West.

“The post-election bounce in hiring lost some momentum in February, with the number of region’s recording higher employment dropping from 11 in January to just six. This tallies with the evidence from the surveys that, in most regions, firms appear to be already operating below full capacity.

“It’s important to note that the results from February’s survey, which included an improvement in business confidence across the majority of UK areas, show the state of affairs prior to the escalation of the coronavirus in Europe [February data were collected 12-26 February]. How the spread of the virus has affected businesses at a regional level will be highlighted by the PMI surveys over the coming months.”

Read the latest NatWest UK Regional PMI®.

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