An influential business survey has pointed to fresh concerns over the health of the UK economy after recording a third successive drop in activity.
The NatWest North East Business Activity Index, which measures month-on-month changes in the region’s manufacturing and service sectors, slipped to a score of 48.4 in January, the fastest contraction in private sector activity for 12 months.
The North East was the only one of the 12 monitored regions and nations of the UK to register lower output at the start of 2022.
Many of the companies surveyed pointed to rising Covid-19 cases related to the Omicron variant as a drag on business, while firms in the North East also highlighted rising costs burdens.
Average prices charged for goods and services in the North East increased for the 17th month running and businesses noted a broad stagnation in employment levels.
The index is the latest report to point to growing problems in the North East economy.
Richard Topliss, chairman of NatWest’s North regional board, said: “Private sector firms in the North East reported a third consecutive contraction in business activity in January, as the Omicron variant impacted the local economy sharply.
“Both activity and new orders fell, the latter for the first time since last February and at the sharpest pace for a year. As raw material and labour shortages remained marked, North East based businesses reported another upturn in average cost burdens, the second-fastest in the survey history.
“That said, prices charged for goods and services rose at the slowest pace for five months. Business optimism regarding the year-ahead outlook for activity strengthened to a three-month high amid hopes that the latest wave of infections would pass and trigger a quick rebound in activity and demand.”
The NatWest data has come a few weeks after the most recent quarterly economic survey from the North East England Chamber of Commerce found that businesses in the region ended 2021 in better shape than they started it, but that many had growing worries over inflation and energy prices.
Separately, economic forecasts from ‘big four’ accountancy firms EY and KPMG for the North East mixed optimism with notes of caution over slow growth rates.
All eyes will now be on tomorrow’s unemployment figures as the latest indicator of the region’s recovery from the pandemic.
Last month the North East regained its unwanted title of having the highest rates of unemployment in the UK, with a particular growth in joblessness among women.