12 July 2021 Royal Bank of Scotland UK Regional PMI® Further strong rises in business activity seen throughout the UK in June UK Regional PMI Key findings Business Activity Index Regional output levels continue to recover, supported by rising demand sa, >50 = growth since previous month, Jun ‘21 North West Continued broad-based rebound in employment levels Wales Price pressures intensify, reaching new record highs in majority of areas Yorkshire & Humber West Midlands Latest Regional PMI® data from Royal Bank of Scotland showed an ongoing broad- East of England based recovery in business activity and employment across the UK in June. Rates London of growth in business activity generally remained strong, but eased since May in most cases. South East The rebound in demand for goods and services was accompanied by increasing South West inflationary pressures, with nine out of the 12 regions monitored by the survey North East posting record rises in prices charged as firms' costs continued to soar. The PMI Business Activity Index is the first fact-based indicator of regional economic East Midlands health published each month, tracking the monthly change in the output of goods Scotland and services across the private sector. A reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled. Northern Ireland The North West topped the regional growth rankings for a second straight month UK in June, its Business Activity Index coming in at 65.0. However, only Yorkshire & 45 50 55 60 65 70 Humber (64.5) and London (61.9), which were ranked third and sixth overall respectively, saw faster increases in business activity compared to May. Northern Ireland (58.2) and Scotland (58.4) were at the foot of the table, though even here rates of growth remained strong by historical standards. Business Activity Index Jan ‘21 - Jun ‘21 70 70 70 70 60 60 60 60 50 50 50 50 40 40 40 40 30 30 30 30 London East of England Yorkshire & Humber Scotland South East East Midlands North West Wales South West West Midlands North East Northern Ireland © 2021 IHS Markit Royal Bank of Scotland UK Regional PMI® Contents About the UK Regional PMI® report About the report The Royal Bank of Scotland UK Regional an overall increase compared to the PMI® data are compiled by IHS Markit previous month, and below 50 an Comment from responses to questionnaires sent overall decrease. The indices are then to companies that participate in IHS seasonally adjusted. Demand and outlook Markit's UK PMI surveys. IHS Markit The headline figure for each region is compiles data for nine English regions, the Business Activity Index. This is a Scotland, Wales and Northern Ireland Business capacity diffusion index calculated from a single (NUTS 1 definitions). question that asks for changes in the Survey responses are collected in the volume of business activity (at service Prices second half of each month and indicate providers) or output (at manufacturers) the direction of change compared to compared with one month previously. Index summary the previous month. A diffusion index The Business Activity Index is is calculated for each survey variable. comparable to the UK Composite Contact The index is the sum of the percentage Output Index. It is sometimes referred of ‘higher’ responses and half the to as the ‘PMI’, but is not comparable percentage of ‘unchanged’ responses. with the headline UK Manufacturing The indices vary between 0 and 100, PMI figure. with a reading above 50 indicating Index interpretation 50.0 = no change since previous month 60 Slower growth Faster growth 55 50 Slower decline 45 Faster decline 40 '06 '07 '08 '09 '10 '11 '12 Comment Sebastian Burnside, Royal Bank we head into the third quarter. of Scotland Chief Economist, “At the same time, however, we’re commented: seeing businesses in all corners of “June’s PMI results rounded off a the UK coming under increased strong second quarter of growth pressure from rising costs. This is for all UK regions and nations as underscored by three-quarters of UK business activity levels continued to regions registering record inflation bounce back following the gradual in prices charged for goods and loosening of restrictions. Rates of services. Notably, we continue to expansion eased in most areas see marked variations in regional from the highs seen in May, though inflation, with London recording well another broad-based rise in backlogs below average rates of increase in of work indicates that supply still has costs and output prices.” some way to catch up with demand, indicating plenty of scope for further increases in business activity and employment throughout the UK as © 2021 IHS Markit Royal Bank of Scotland UK Regional PMI® Demand and outlook New Business All areas see strong growth in Growth expectations Index Jan ‘21 - Jun ‘21 new orders moderate in most regions 80 Demand for goods and services continued Sentiment towards future activity was 70 to rise across all areas of the UK in June, generally positive in June. However, only 60 as highlighted by a further broad-based Wales (ranked third overall) and the South 50 increase in new business. Rates of growth West (fifth) saw growth expectations 40 were generally strong, though the North improve since May. Firms in Yorkshire & 30 West and Wales saw particularly steep Humber recorded the highest degree of increases in new work. The East of England, optimism, as has been the case in five of the North West which was one of eight regions where the past six months, while those in Northern East of England pace of expansion eased since May, was at Ireland were the least upbeat. the foot of the rankings for new business. New Business Index Future Activity Index sa, >50 = growth since previous month, Jun ‘21 >50 = growth expected over next 12 months, Jun ‘21 Future Activity Index North West Yorkshire & Humber Jan ‘21 - Jun ‘21 100 Wales South East 90 80 Yorkshire & Humber Wales 70 60 West Midlands London 50 40 London South West 30 20 South East North West Yorkshire & Humber North East West Midlands Northern Ireland East Midlands East Midlands Northern Ireland East of England South West Scotland Scotland North East East of England Northern Ireland UK UK 45 50 55 60 65 70 40 50 60 70 80 90 © 2021 IHS Markit Royal Bank of Scotland UK Regional PMI® Business capacity Employment Further broad-based rise in Firms in all regions struggle Index Jan ‘21 - Jun ‘21 employment to keep pace with demand 70 The West Midlands led a broad-based All 12 regions monitored by the survey 60 increase in regional employment in June. saw a rise in outstanding business in June, 50 Rates of job creation accelerated in five out in a sign of firms in every part of the UK of 12 cases and were unchanged in three struggling to keep pace with demand. The 40 others. Wales saw the greatest acceleration most marked increase was recorded in 30 in the pace of workforce growth, although Wales, which was one of six areas where still ranked only ninth overall, ahead of the rate of accumulation was at a series- West Midlands Scotland, Northern Ireland and the North record high, the others being the North North East East. West, Northern Ireland, East of England, South East and East Midlands. Employment Index Outstanding Business Index sa, >50 = growth since previous month, Jun ‘21 sa, >50 = growth since previous month, Jun ‘21 Outstanding Business Index West Midlands Wales Jan ‘21 - Jun ‘21 70 London North West East of England West Midlands 60 North West Northern Ireland 50 Yorkshire & Humber East of England 40 South West Yorkshire & Humber 30 South East London Wales North East East Midlands South East Wales South West Scotland East Midlands Northern Ireland Scotland North East North East UK UK 45 50 55 60 65 45 50 55 60 65 © 2021 IHS Markit Royal Bank of Scotland UK Regional PMI® Prices Input Prices Rates of input cost inflation Three-quarters of areas post Index Jan ‘21 - Jun ‘21 continue to accelerate record output price rises 90 Cost pressures continued to intensify Rates of output price inflation reached 80 across the board in June, with all regions record highs in nine of the 12 monitored 70 and nations of the UK seeing faster rates of regions in June. Northern Ireland continued 60 input price inflation. Northern Ireland once to see by far the quickest increase in 50 again reported the steepest overall rise in charges, with the North West and Yorkshire 40 costs (by some margin), and was one of & Humber ranked second and third seven areas where the rate of inflation was respectively. Price pressures remained Northern Ireland at a record high. London saw the slowest softest in London, where the rate of output London rise in input prices, but even here the rate of charge inflation was at a near six-year high inflation was among the fastest on record. but still well below its historical peak. Input Prices Index Prices Charged Index sa, >50 = inflation since previous month, Jun ‘21 sa, >50 = inflation since previous month, Jun ‘21 Prices Charged Index Northern Ireland Northern Ireland Jan ‘21 - Jun ‘21 80 West Midlands North West 70 Yorkshire & Humber Yorkshire & Humber 60 Wales North East 50 North East East Midlands 40 East of England Wales Northern Ireland East Midlands East of England London South West West Midlands South East South West North West Scotland Scotland South East London London UK UK 40 50 60 70 80 90 45 50 55 60 65 70 75 © 2021 IHS Markit Royal Bank of Scotland UK Regional PMI® Index summary UK regions sa, 50 = no change over previous month / *50 = no change over