By Daniel Hunter

Business activity growth slowed across most of the English regions in December according to the latest Lloyds TSB Regional Purchasing Managers’ Index (PMI), although there were once again divergent trends in the other aspects of the survey across the nine areas monitored.

The latest reading of 50.1 in December is down from 51.0 in November, but remains just above the 50.0 no-change mark, indicating that there is still slow business activity growth across the country.

As this was lower than the average reading for the year as a whole (52.3), the continued loss of momentum in business activity seen towards the end of 2012 highlights the difficult trading conditions many businesses are facing.

Yorkshire & Humber was the strongest performing region in terms of output growth in December (at 52.5), and private sector activity rose at the most marked pace for three months. The West Midlands also outperformed the overall trend during the month, with a moderate rise in business activity contrasting with declines in the region over the previous two months.

Companies in the North West and East Midlands recorded the weakest output trends, at 47.9 and 48.6 respectively. For the East Midlands this was the fastest drop in business activity since April 2009.

The overall business activity slowdown seen across the English regions mainly reflected a lower level of new business orders in December. The latest data highlights only a marginal rise in new business volumes, led by the West Midlands and London. The fastest declines in new work were seen in the North West and East Midlands, with both regions seeing the most marked reductions in levels of incoming new business since early 2009.

In line with the trend seen throughout much of 2012, the latest survey suggests there was little pressure on operating capacity across the English regions. Of the eight regions that saw a decline in work-in-hand, the fastest falls were in the West Midlands and the South West. Only the North East bucked the overall trend, with companies across the region reporting broadly unchanged levels of unfinished business during December.

Lower backlogs of work and stagnating levels of business activity continued to weigh on staff recruitment amongst private sector firms across the English regions. Overall, employment numbers were broadly unchanged in December, continuing the trend seen during the previous month.

The North West was the worst performing region in terms of employment in December, with workforce numbers falling slightly for the tenth successive month.

The growing disparity between input and output price inflation led to average cost burdens increasing at an accelerated rate among private sector firms in the English regions. The East of England and the South West witnessed particularly marked rises in input prices, while the slowest rate of inflation was seen in London.

Higher input costs were generally the result of rising fuel and utility bills in December. Eight of the nine English regions did indicate a rise in output prices over the month, and Yorkshire & Humber was the only exception. However, price inflation was slower than that recorded for input costs, suggesting an ongoing squeeze on operating margins at the end of 2012.

“The generally subdued business picture seen throughout the final quarter of the year continued into December, with output expansion slowing among private sector businesses," David Oldfield, Managing Director, SME & Mid Markets Banking, Lloyds Banking Group, said.

"While this is a sign of a short-term loss of momentum, the overall picture is more encouraging for the year as a whole given that the survey highlights output growth in eight of the nine English regions.

“New order volumes continued to grow in December, providing hope that output will slowly move in the right direction in 2013. This also meant that local businesses were generally able to keep employment levels up at the end of the year. This is a sign that the majority of local businesses are looking to focus on long-term development plans and remain confident that they can seize new opportunities for growth despite the challenging economic backdrop.”

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