London remains UK’s strongest region as capital powers country out of recession
Business activity in London remained comfortably in expansionary territory, according to a new survey, providing the engine driving the country out of a recession.
Natwest’s London purchasing managers’ index (PMI) fell to 56.5 in February from 58.3 the month before. The 50 mark separates growth from contraction.
Despite the decrease, the figures still pointed to a “robust expansion in activity” with London remaining the strongest-performing region in the UK.
The survey showed that new orders increased for the sixth consecutive month, although at a slower pace than January.
Continued strength in new orders helped business confidence hit its highest level in two years with 63 per cent of firms forecasting that output would grow in the next year. Businesses expected to see an improvement in sales and stronger business investment.
However, firms faced stubborn cost pressures largely due to high levels of wage growth. Input prices rose at their fastest rate for six months after falling to a 33-month low in January.
Firms passed higher costs onto consumers with the survey pointing to a “sharp and accelerated” increase in prices charged. Inflation in London was the strongest recorded nationwide and was comfortably above the long-run average.
Sebastian Burnside, chief economist at Natwest, said: “Inflation indicators remain particularly high in London, but they have picked up again in most other areas, too.”
“Price pressures generally increased across the UK in February, with businesses reporting a combination of growing wage demands and costs increases related to the Red Sea shipping disruption,” he continued.
The UK entered a technical recession with the announcement of a contraction in Q4 of last year, however more up-to-date readouts of economic activity at the start of 2024 indicate it is likely to be a short-lived downturn.