BUSINESSES saw a “sharp and accelerated” expansion in activity as the effects of the pandemic eased and demand picked up.

However, concerns about sharply rising costs and continued disruption to supply chains weighed on business confidence last month, according to the NatWest South West Business Activity Index, which covers Southampton. 

The headline index, which measures the month-on-month change in output from manufacturing and service sectors, rose from 54 in January to 59.6 in February. It was the quickest rate of growth for seven months, descrivbed by the bank as "sharp and accelerated". 

New business expanded at the quickest rate for three months, with a number of panel members commenting on firmer client demand, according to the purchasing managers index (PMI).

However, optimism about the 12-month outlook had weakened since January, although it remained above the long-run survey average.

Private sector employment rose for the 12th month in a row. Companies which added to their payrolls often mentioned they were expanding capacity amid rising sales and filling of vacancies. A number commented on the challenges of finding suitable staff.

Paul Edwards, chair of NatWest South West Regional Board, said: “Latest NatWest PMI data showed that the South West private sector bounced back strongly in February as the Omicron wave receded. “The easing of restrictions and firmer customer demand helped to push activity growth to a seven-month high and drove a sharper rise in sales, suggesting the sector has regained momentum since the slowdown around the turn of the year.

“However, cost pressures intensified, and alongside ongoing supply disruption, this weighed on business confidence. These worries will likely be exacerbated by the Ukraine crisis, and could in turn hamper the recovery in the months ahead."