London maintained its position as the top UK region for business growth during August, according to the latest figures.
However the latest Lloyds TSB regional Purchasing Managers index showed that the pace of expansion in the capital slowed from the previous month.
The index, which measures the combined output of UK regional manufacturing and service sectors, fell to 53.7 last month from the July of 59.5.
When it came to employment, the month saw no change, ending a half-year of growth. The survey put this down to a trend for workers not being replaced when leaving firms.
However outstanding business at private sector firms in the capital increased during the month, bucking the trend across the wider economy.
Neil Mahoney, regional director for Lloyds TSB Commercial for London and the East, said: “August data showed activity growth in the London private sector losing momentum, with the month-on-month decline in the headline index the largest since data was first compiled in January 1997.
“Nonetheless, London continued to outperform the UK economy as a whole. The overall slowdown mainly reflected a downshift in new business growth, which in turn contributed to a stagnation of employment. On a brighter note, input cost inflation eased to a nine-month low, while output charges rose only modestly.”
Colin Stanbridge, chief executive of the London Chamber of Commerce and Industry (LCCI), said: “It is no surprise to see London remain the UK’s top growth area but unfortunately neither is it a surprise that the rate of expansion of the capital’s economy has fallen.
“Continually gloomy economic data is clearly creating uncertainty amongst firms and reiterates the need for a bold pro-growth agenda from the Government to provide confidence to the capital’s businesses.
“The good news is that, in our view, many of London’s businesses have the ability to expand, they are just understandably erring on the side of caution at present in this stormy economic climate.”
On a national level, the index fell from 54.6 to 50.9 – the lowest for more than two years which was only marginally above the 50-point mark that shows output is still expanding. The North East, North West, Yorkshire and South West all saw output fall for the first time in two years, according to the findings.
The survey – which involved 1,200 private manufacturing and services firms – comes in the wake of Chancellor George Osborne’s revelation that he will lower UK growth forecasts in late November.
Lloyds said the findings suggested that some firms were holding back on spending amid ongoing concerns over the economy and the eurozone debt crisis.