The latest NatWest PMI® survey data shows a substantial drop in South West private sector output in March.
This follows the Coronavirus Disease 2019 (COVID-19) outbreak.
Concerns over the length and severity of the pandemic greatly undermined business confidence, which fell to the lowest since this series began in mid-2012.
At the same time, lower new order intakes resulted in spare capacity, with backlogs of work falling sharply. Consequently, companies reduced their staffing levels at a solid pace.
The headline South West Business Activity Index – a seasonally adjusted index that measures the combined output of the region’s manufacturing and service sectors – fell sharply from 50.2 in February to 36.7 in March, to indicate a renewed fall in South West private sector output.
Furthermore, the rate of decline was the most severe since the survey began in January 1997. Business activity also fell at a record pace across the UK as a whole.
The marked drop in output was driven by a substantial reduction in new business across the South West during March. Moreover, the rate of contraction for new orders was the steepest seen since December 2008.
A lack of incoming new work also contributed to a reduction in employment across the region during March. Companies often mentioned the non-replacement of voluntary leavers and redundancies due to weaker demand conditions.
A marked drop in staff numbers was also recorded at the national level.
Furthermore, average cost burdens across the South West private sector rose at the slowest rate since June 2016 at the end of the first quarter.
Paul Edwards, Chair, NatWest South West Regional Board, comments: “The outbreak of the COVID-19 pandemic had a widespread impact on the UK economy in March, with NatWest PMI data signalling substantial drops in output across all 12 monitored regions.
“In the South West, business activity fell at the quickest rate in over two decades of data collection amid a marked drop in client demand. As a result, business confidence in the region fell to a fresh series low and firms cut back on staffing levels as they became increasingly concerned over the length and severity of the pandemic.
“Cost pressures eased however, as weaker demand for inputs limited supplier price hikes. That said, firms cut their selling prices for the first time in over four years in March, to suggest that margins could come under greater pressure as companies increase their efforts to boost sales.”