The latest data for Yorkshire & Humber is a stark reminder that we are facing difficult times with growing economic uncertainty not going away any time soon. This has a serious knock on effect on business confidence which in turn impacts negatively on the growth potential in the region.
Richard Topliss, Chair of NatWest North Regional Board, commented: "The Yorkshire & Humber private sector registered a notable slowdown in growth at the start of the third quarter as the cost-of-living crisis, subdued client confidence, ongoing supply issues and rapid energy price inflation all weighed on the economy.”
"Of concern will be the decline in private sector order books, highlighting the damaging impact that high inflation is having on demand. Confidence in the outlook has deteriorated, with business optimism slumping to its lowest level since the early stages of the COVID-19 pandemic in 2020.”
Business confidence and outlook
On a positive note firms in Yorkshire & Humber were more optimistic than the other UK regions monitored but having said that confidence has dropped to a 27-month low in July.
Supply issues, high prices, the prospect of a recession and high interest rates were notable causes in the lack of confidence as budgets are being squeezed to cope with the current economic climate.
Manufacturers and service companies highlighted a lower intake of new work which signalled the first drop in demand for goods and services since early 2021. Experts believe other sectors are experiencing sluggish market activity.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, commented: “Demand for consumer facing services such as restaurants, hotels, travel and other recreational activities is collapsing under the weight of the cost-of-living crisis, with demand for business services also coming under pressure amid concerns over rising costs and the darkening economic outlook.”
Inflation
UK inflation is currently sitting at its highest rate in more than 40 years. Increases in energy, transport and raw materials are putting considerable pressure on private sector companies in Yorkshire & Humber.
Worryingly enough the Bank of England has warned that little can be done to stop the UK falling into a recession as the war in Ukraine continues. The economy is expected to continue shrinking until the end of 2023.
The government must look at introducing monetary policies to curb the flow of inflation to offset the cost of living crisis as it hugely reduces the spending power of businesses and households alike.
Dr John Glen, Chief Economist, Chartered Institute of Procurement and Supply (CIPS), commented: "Input costs continued to rise at a rapid rate this month with services businesses left with no choice but to pass the pain onto clients and consumers. While port disruption, Brexit paperwork and shortages all continue to play a role in driving inflation, the sector is relatively powerless in the face of ever-increasing energy bills. Services businesses will have their eyes firmly on the new Prime Minister this week as they hope for a policy driven solution to rocketing costs."
Employment
The data shows that staffing levels have increased for an eighteenth successive month in August albeit the growth has eased to its lowest since March 2021. Evidence suggests that this has been in response to increased workloads, understaffing and positive sales and strategic projections for growth have contributed to the need to hire new staff.
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