North East private sector expanded in December amid falling headcounts

The North East private sector returned to expansion territory in December, according to the latest regional PMI data from NatWest.

The headline NatWest North East Business Activity Index rose to 50.2 in December, up from 47.2 in November, as national coronavirus restrictions were eased.

Just 0.2 above the line which separates expansion from contraction, the reading suggests the North East was only fractionally in growth territory last month, and this is broadly in line with the national average.

Businesses surveyed in December said they were optimistic regarding activity over the coming 12 months.

Positive sentiment was underpinned by hopes that the rollout of vaccines would allow softer COVID-19 restrictions and a recovery in sales.

While remaining strong overall, the level of confidence eased slightly from the previous survey period, with the proportion of firms predicting a rise in activity falling to 54 per cent from 57 per cent in November.

The overall degree of business optimism in the North East was the weakest of all English regions.

Moreover, the region’s businesses continued to trim staffing capacity in December, citing increased redundancies and closure amid the negative impact of coronavirus on operations.

The rate of cuts eased from November but was sharp overall and stronger than the UK average.

Headcounts in the North East private sector have now fallen in each of the last 30 months.

Richard Topliss, chairman of NatWest North Regional Board, said: “North East private sector activity recovered from the decline seen in November, expanding fractionally in December as the national lockdown came to an end at the start of the month.

“However, with COVID-19 cases continuing to rise and tight regional restrictions introduced at the end of the lockdown new business declined again.

“Furthermore, businesses reported further job losses in the latest survey period.

“At the same time, a sharp rise in input prices in December were partially passed through to clients, with output prices increasing at the fastest pace for 19 months.

“Nevertheless, firms in the North East were optimistic regarding the year-ahead outlook for activity, with confidence underpinned by hopes that the rollout of approved vaccines would allow a broad easing of restrictions, in turn stimulating demand.”