The headline NatWest London PMI Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – rose to 56.5 in November from 53.8 in October, to indicate an even sharper expansion in business activity across the capital.
The upturn was linked by survey panellists to a similarly robust rise in new business inflows amid mentions of greater client demand. The expansion helped to lift business activity across the UK into growth territory for the first time since July.
London private sector firms reported a sharp rise in new business inflows in the penultimate month of the year. The rate of growth picked up for the second month running and was the most marked since June. Panellists noted a rebound in client demand amid a more upbeat market.
As was the case in both September and October, London was one of two UK regions to post an increase in new business, the other being the West Midlands.
The Future Activity Index rose for the first time in three months in November, indicating a stronger 12-month outlook among London companies.
Anecdotal reports showed that confidence partly arose from expectations that interest rates have peaked, while investment in new products, greater marketing and export sales were also mentioned. The degree of optimism was the strongest since May and higher than the national trend.
November data indicated a slight upturn in staffing levels at companies based in London, marking the first month-on-month expansion since August. Surveyed firms highlighted that this was largely due to stronger demand, whereas some panellists made cutbacks in an effort to save costs.
Growth in the capital contrasted with a sustained drop in employment across the UK as a whole. That said, the latest reduction was mild and the slowest seen in the current three-month sequence.
The seasonally adjusted Outstanding Business Index was below the 50.0 neutral mark for the fifth month running in November, pointing to a drop in work-in-hand at London firms. Businesses noted that despite rising inflows of new work, they continued to have sufficient capacity to reduce backlogs.
There were also reports that hiring activity and improved supply positions supported backlog depletion. Although the rate of decline quickened from October, it was modest and much softer than the UK average.
The rate of input price inflation in the London private sector remained steep in November, as companies noted rising wage costs and higher energy prices. Moreover, inflation quickened slightly for the first time in four months and was the sharpest recorded out of the 12 monitored UK areas. The trend in the capital mirrored that seen across the UK, as cost pressures ticked higher for the first time since July.
Output prices at London private sector firms increased at a quicker pace in November, as shown by the seasonally adjusted Prices Charged Index rising for the third month in a row to its highest since April. The uplift in charges mainly reflected the passing on of higher salaries and rising input costs, according to panellists.
Similarly, the UK as a whole registered a faster uptick in charges midway through the final quarter. Once again, London recorded the sharpest rise out of the 12 monitored regions.
Catherine van Weenen, NatWest London and the South East Regional Board, said, “The sharp uplift in business activity in the capital was the main driving force behind UK growth in November, the West Midlands being the only other region to record an expansion. The latest survey data showed that output and new business rose markedly, leading to the first upturn in employment levels since August.
“While this was a promising sign for London-based companies, the latest pricing data pointed to an element of risk. Input cost inflation accelerated for the first time in four months, leading firms to raise their output charges at the quickest pace since April. The data suggests that the wage-price spiral observed in 2023 may have an additional twist, adding to inflationary pressures on consumers and businesses.”
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