BUSINESS activity in the south west has fallen for a fourth successive month, research by NatWest has shown.

The headline NatWest South West PMI Business Activity Index fell to 45.3 in November.

Although the figure was a three-month high, and an improvement on the recent low of 42.3 in October, it still represented a sharp contraction that outpaced that seen nationally.

Anecdotal evidence linked lower output to a weak economic climate, intense cost pressures and subsequent cuts to client spending.

Paul Edwards, chair of NatWest south west regional board, said: “Business conditions across the South West private sector remained challenging in November, with the latest PMI survey pointing to a further marked drop in output. The deterioration in economic conditions and the cost of living crisis led to belt-tightening among both businesses and households, with overall new work falling for the fifth month in a row.

“Notably, cost pressures intensified in November, with input costs and output charges rising at sharper rates amid reports of higher staff wages, utility bills and raw material costs. Although employment increased again, the rate of job creation remained marginal as efforts to contain costs led to the non-replacement of voluntary leavers at some firms. Until there is a meaningful improvement in demand conditions and an easing of cost pressures, employment and output are likely to remain under pressure in the months ahead."

Total new business placed with South West private sector companies continued to fall sharply in November, despite the rate of contraction easing from October's 21-month record. Survey respondents said clients had cut spending because of uncertainty, rising costs and tighter financial conditions.

After dropping to a record low in September and October, business confidence regarding output over the next 12 months improved. The degree of positive sentiment was the highest seen in five months, but well below the historical series trend.

Staffing levels increased for the second month in a row but the rate of job creation remained marginal overall.

The seasonally adjusted Outstanding Business Index signalled a reduction in backlogs of work for the fifth successive month, although the rate of depletion was the slowest seen since July and only modest. According to panel members, lower intakes of new business had enabled them to work through unfinished orders.

Across the UK as a whole, backlogs of work were broadly unchanged.

The survey pointed to a renewed acceleration in the rate of input cost inflation, with the rate of increase at the steepest since July.

Prices charged by companies increased at the sharpest rate since August. However, the rate of increase remained the weakest seen of all 12 UK regions.