East firms putting up prices – and taking on workers, poll shows

Dhan Nepali machine working at Caribbean Blinds in Sudbury

Companies in the East of England are facing rising costs - but are upbeat, the latest NatWest PMI survey suggests - Credit: Jahed Quddus

Companies in the East of England are feeling upbeat – despite facing challenges, a new survey suggests.

The NatWest East of England Business Activity Index – which measures the month-on-month change in the combined output of the region’s manufacturing and service sector – found the region’s firms ending the first quarter of the year on a high in spite of rising costs. They responded to input inflation by putting up their own prices, the poll found.

Business activity expanded at its fastest rate in nine months, and workforce numbers grew markedly. Meanwhile, output inflation hit a new high for the Purchasing Managers Index (PMI) survey.

The 0 to 100 index surveys companies about changes in the volume of business activity month-on-month. It is seasonally adjusted with a reading above 50 indicating an overall increase compared to the previous month.

In March, the headline index figure rose from 59.8 in February to 60.1.

Among the reasons businesses found to be optimistic were investment opportunities, planned new product launches, the post-pandemic economic recovery and improvements in supply chain conditions.

NatWest said anecdotal evidence suggested the rise in the rate of output was down to strong customer demand, creating new business as the easing of pandemic restrictions boosted confidence.

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March saw new orders across the East of England’s private sector rising steeply. However, the rate of growth softened slightly from February’s nine-month high and the degree of business confidence dipped from a 10-month high recorded in February to the lowest since last November. It was also weaker than the UK-wide average, said NatWest.

Workforces expanded as companies responded to rising sales and bigger backlogs caused by a combination of delayed material deliveries and staff shortages.

But while service firms experienced higher work backlogs manufacturers saw a decline.

Costs rose as shortages of materials, price increases from suppliers and the impact of the Russian invasion of Ukraine on global commodity prices took their toll. As a result, companies put up prices.

John Maude of NatWest Midlands & East Regional Board said: “Ending the first quarter on a strong note, private sector firms in the East of England signalled a further improvement in output, as business activity increased at the quickest pace in nine months amid the lifting of Covid-19 restrictions. 

“Strong demand conditions and another steep rise in new business led firms to maintain a sharp rate of hiring activity.

“Less positively, ongoing supply disruptions and soaring commodity prices resulted in the second-quickest increase in input costs on record. In response, firms hiked their selling prices, with the rate of charge inflation accelerating to a survey high in March. Inflationary pressures and Russia’s invasion of Ukraine further fuelled uncertainty, as output expectations slipped to a four-month low.”