Business activity across the East Midlands neared stabilisation during June, according to the latest NatWest Regional Growth Tracker, as the decline in new orders eased.
At 49.7 in June, the headline NatWest East Midlands Business Activity Index picked up from 49.3 in May to signal the slowest decrease in output levels since January. Although companies reported that economic uncertainty and lower new order inflows dampened activity levels, others saw some signs of improving demand conditions.
Nonetheless, a ninth successive monthly drop in new business weighed on hiring decisions, as employment was cut further. The modest decrease in new sales reportedly stemmed from economic uncertainty and the non-renewal of contracts. At the same time, business optimism dipped from May’s recent high and was historically subdued.
On a more positive note, inflationary pressures softened as input costs and output charges rose at weaker rates. Moreover, muted demand conditions led to the weakest increase in selling prices since January 2021.
Lisa Phillips, regional managing director, Midlands and East, commercial mid market, said “Although still signalling a decline in new orders, firms in the East Midlands recorded a near-stabilisation in output in June. A less marked drop in new sales coincided with further expectations of greater activity in the coming year.
“That said, cost pressures relating to the recent hike in the Minimum Wage and National Insurance contributions continued to influence business decisions, as employment fell at a solid pace and business confidence in the outlook was dented.
“On a more positive note, rates of increase in input costs and output charges softened. In fact, selling prices were raised to the smallest extent since the start of 2021 as firms sought to entice customers amid challenging demand conditions.”
Performance in relation to UK
The slight decrease in business activity in the East Midlands contrasted again with an expansion across the UK as a whole.
The pace of decline in new orders eased from May and was the second-slowest since December 2024. Nonetheless, the modest decrease in new sales reportedly stemmed from economic uncertainty and the non-renewal of contracts. Of the 12 monitored UK regions and nations, the East Midlands recorded the second-fastest fall in new orders (slower than only Northern Ireland).
June data signalled further optimism at East Midlands firms regarding the outlook for output in the coming year. Panellists stated that hopes of stronger demand conditions and planned product releases underpinned confidence.
The latest drop in employment extended the current sequence of contraction that began two years ago. The pace of job cutting accelerated and was slightly quicker than the UK average, as firms attributed the fall in headcounts to the non-replacement of voluntary leavers amid cost control measures.
Meanwhile, the pace of cost inflation softened to the weakest since December 2024 and was slower than the UK average.
