West Midlands output falls only modestly at year-end
December data showed a second successive monthly fall in business activity across the West Midlands, but the rate of contraction was only modest and firms foresee growth in 2025.
Companies that signalled a fall remarked on subdued client confidence and reduced intakes of new business.
Indeed, sales decreased for the second month in a row, which allowed companies to complete pending workloads but also prompted another round of job shedding.
Looking ahead, panel members were confident of a rise in output over the course of 2025. Optimism was underpinned by advertising, investment and hopes of a recovery in client demand.
The West Midlands Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – was down from 49.9 in November to 48.9 in December, indicating a modest rate of reduction.
December data showed that West Midlands firms had ample resources to work through outstanding business at the end of the year.
The latest decline in backlogs was sharp and the fastest since August 2023. A lack of existing and new work, alongside the upcoming increase in employer National Insurance Contributions and minimum wages, prompted West Midlands companies to reduce headcounts at the end of the year.
Moreover, the rate of job shedding was sharp and the quickest in over four years.
Lisa Phillips, Regional Managing Director, Midlands and East, Commercial Mid Markets, said: "As we closed out December, local firms faced a slight dip in demand, prompting them to make modest reductions in output volumes. This trend was accompanied by a more pronounced decline in employment, as businesses grappled with a fall in new orders and growing concerns over upcoming increases in employer National Insurance Contributions and the minimum wage.
“However, there is hope for a turnaround. If firms can boost sales in the coming months, we may see a reversal of this trend. Encouragingly, the local landscape shows signs of improved competitiveness, with the rate of charge inflation remaining the lowest in the country. Also, firms expressed optimism that their investment and marketing strategies will pave the way for growth in 2025."
