Business activity in the North East has gone into reverse as orders and job numbers were hit by the latest coronavirus restrictions, a new survey has found.
The NatWest North East Business Activity Index for November – which measures the month-on-month change in the output of the region’s manufacturing and service sectors – fell from 52.4 in October to 47.2 in November, signalling a contraction of overall activity.
The latest reading was the lowest since May, and marked the first decline in output for five months, with the downturn in the North East above the national average.
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Companies cited the four-week lockdown in November and uncertainty on both further restrictions and the Brexit outcome as major challenges.
The rate of job cuts in the region was at its highest levels since July, and employment levels have now fallen for 29 months in a row.
But there was some signs of growing optimism, as 57% of businesses in the North East forecasted growth, compared to 39% in October, though this was below national levels.
Heather Waters, of NatWest North’s regional board, said: “Private sector firms in the North East recorded modest falls in both activity and incoming new business in November, as national restrictions to curb rising Covid-19 infection rates disrupted operations and weighed on client demand. Although not as sharp as those seen at the height of the pandemic in spring, the reductions ended a four-month period of rising activity and sales.
“Concurrently, businesses in the North East continued to reduce their staffing levels due to lower capacity requirements. Nevertheless, positive sentiment among businesses in the North East strengthened in November, with more than half of respondents forecasting an expansion of activity over the next year.
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“Upbeat forecasts were generally linked to expectations that market conditions will recover from the Covid-19 pandemic and restrictions will ease.”
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Separately, the North East has been forecast to be one of the regions with the slowest economic recovery from the coronavirus pandemic.
The annual Regional Economic Forecast from accountancy group EY said that the North East’s economy will be one of four regions not expected to return to its 2019 levels by 2023, while employment in the region will also be lower by 2023 than it was in 2019.
GVA is expected to see the equivalent of an average annual decrease of 0.29% between 2019 and 2023, while employment will decline by 0.4% a year over the same period, EY said, though Newcastle will out-perform the rest of the region and see growth.
Mike Scoular, EY managing partner for Newcastle, said: “Too often the North East finds itself towards the bottom of growth league tables and, as a region, we are often most affected by economic headwinds.
“I find the report’s analysis of the differences in make-up between neighbouring towns and cities particularly interesting and take heart from that – to me it paints a picture of a more diverse and mixed economy, which, as we all know, is a key ingredient for future economic stability.”