BUSINESS activity fell for the second month in a row in November, according to the South West Business Activity Index compiled by NatWest.

The index, which combines the output of the region’s manufacturing and service sectors, shows a drop from 49.7 in October to 47.1 in November.

The rate of reduction was solid overall, albeit much slower than those seen during the height of the pandemic.

Companies linked lower business activity to the renewed lockdown measures stemming from the coronavirus pandemic, and a subsequent drop in client demand.

That said, new business fell at a softer pace than seen in October.

But firms continued to cut their staff numbers sharply amid further signs of excess capacity and a stronger rise in costs.

There is hope, however, after optimism about the year ahead picked up to a record high amid hopes of a timely end to the pandemic.

A back-to-back fall in new business was also seen at the national level, though the rate of contraction was slower than that seen in the South West.

Business confidence towards the 12-month outlook for output improved markedly in November, despite sustained declines in output and sales.

According to panel members, business activity and new orders were expected to recover when the pandemic situation improves, restrictions are eased and market conditions normalise.

Sentiment regarding the year ahead also improved at the UK-level, rising to the highest since March 2015, but was not quite as robust as that seen in the South West.

As has been the case in each month since March, employment across the South West private sector fell during November.

Furthermore, the rate of job cuts quickened since October and was the sharpest recorded since August. Anecdotal evidence frequently linked lower staff numbers to redundancies stemming from the pandemic, as well as decisions to place staff on furlough.

Employment fell at a similarly sharp rate across the UK as a whole.

Paul Edwards, Chair, NatWest South West Regional Board, said: “The second national lockdown created challenging business conditions in November, with South West private sector firms reporting a quicker drop in activity amid temporary business closures and reduced customer numbers.

“However, business confidence improved sharply, and rose to its highest since this series began in mid-2012, on hopes that the pandemic situation will improve, restrictions will ease, and market conditions will normalise in the coming months.

“Attention now quickly turns to December’s results to see the immediate reaction among local businesses to the UK-EU future trading relationship.”