Business activity in the Yorkshire and Humber region experienced a decline in May, according to a key economic survey.
Survey details
The NatWest Regional Growth Tracker, which measures changes in output across manufacturing and service sectors, dropped to 46.5 in May from 51.4 in April. A reading below 50 indicates economic contraction, and this marks the second decrease in output in the past three months. The pace of decline was the sharpest since September last year and exceeded the national average.
Companies participating in the survey reported lower new orders due to weaker customer demand and uncertainty among clients, which led to hesitation in committing to new projects.
Employment impact
Efforts by businesses to control costs resulted in job reductions in May, both through direct layoffs and not replacing departing staff. Workforce numbers fell sharply, marking the largest contraction since July of the previous year.
Cost pressures
Firms also faced growing inflationary pressures, with input costs rising substantially. Despite these challenges, confidence in the year ahead remained above the national average for Yorkshire and Humber businesses.
Expert comment
Malcolm Buchanan, chair of the NatWest North Regional Board, said: "After showing signs of positivity in April, the Yorkshire & Humber region suffered a setback in May as market uncertainty and steep price rises suppressed demand and led to a renewed fall in business activity. In particular, cost pressures intensified again and were substantial, with firms locally suffering one of the sharpest increases in input costs across the UK.
"Price pressures stemmed from a range of sources, including energy, transportation, raw materials and staff, providing little respite for companies. In turn, cost cutting efforts meant that staffing levels decreased sharply.
"There were some positive signs in terms of the year-ahead outlook, however, with a number of companies planning business investment in an effort to boost activity over the coming 12 months."
The survey comes ahead of key economic data releases this week on regional and national unemployment and the latest inflation figures.
