Finance

Labour and material shortages restrict North West economic growth

The North West’s economic growth slumped to its slowest rate since February last month – due to shortages of labour and raw materials.

According to the latest Regional PMI data from NatWest, private sector business activity in the North West continued to expand in September, but growth was constrained by supply bottlenecks and staff shortages.

The PMI Business Activity Index tracks the monthly change in the output of goods and services across the private sector. A reading above 50 shows growth, with higher numbers signalling faster expansion, while anything below 50 shows contraction.

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In the North West, that figure stood at 54.9 in September – down from 55.3 in August, signalling growth for the eighth straight month – but at its slowest rate since February.

NatWest said that where companies reported greater activity, they linked this to improved demand conditions and an associated increase in new business.

Richard Topliss, chairman of NatWest North Regional Board, said: “Business activity levels continued to recover at companies across the North West in September, but the PMI data indicated that the pace of growth softened further.

“It’s unsurprising to see growth slowing down after the initial reopening phase in the summer, but at the same time, businesses are telling us that supply bottlenecks and labour shortages are also holding back activity.

“These imbalances across supply chains and in labour markets are continuing to lead to price pressures, and we’re seeing this reflected in a record rate of input cost inflation in the North West.

“Still, local firms remain strongly optimistic about the outlook for activity in the coming year, and they endeavour to boost operating capacity by taking on more staff.”

Data from the PMI pointed to a seventh successive monthly rise in new work intakes at North West companies. The pace of expansion was solid but eased to the weakest in the aforementioned sequence.

Where growth was reported, panel members mentioned improved demand from domestic and international clients. However, anecdotal evidence suggested that the upturn was restricted by shortages of labour and raw materials.

NatWest said North West firms remained “strongly confident” that output would increase over the course of the coming 12 months, as the recovery from the pandemic was predicted to continue.

Panellists said they expect to gain market shares, improve productivity, launch new products and services, and boost investment as demand conditions continue to strengthen.

The overall level of confidence was down only marginally from August, thereby remaining well above its long-run average.

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