Business activity increased across the south west's private sector for the first time in six months during March.

NatWest's South West Business Activity Index measures the month-on-month change in the combined output of the region’s manufacturing and service sectors

It was slightly above the 50.0 no-change mark for the first time in half a year, which showed a renewed expansion of business activity.

However, the 50.8 rating indicated a rate of growth that was marginal and much softer than the UK-wide trend of 56.4.

The amount of new orders received by private sector firms in the south west increased during the month, ending a five-month period of decline.

The rate of growth was solid and stronger than the long-run series average, but not as marked as that seen across the UK as a whole.

Companies that reported higher sales often mentioned increased confidence around the outlook due to the roadmap out of lockdown and the commencement of previously delayed projects.

Although slipping from February’s record high, the level of positive sentiment towards the 12-month outlook for output was among the highest seen in the series' history in March.

Firms often hoped that the easing of Covid-19 containment measures and more normal business operations would lead to a release of pent-up customer demand and drive an upturn in activity.

Across the UK as a whole, confidence was slightly stronger than that seen in the south west.

Businesses in the region signalled a renewed increase in workforce numbers during March. It marked the first expansion for just over a year, with the rate of job creation the quickest seen since September 2017 and solid.

The upturn was stronger than that recorded at the national level. Anecdotal evidence indicated that firms added to their staffing levels due to increased workloads and employees returning from furlough.

After declining in each of the prior 28 months, the level of work-in-hand (but not yet completed) stabilised at south west private sector firms.

While some companies mentioned that outstanding orders had risen due to greater sales and material shortages, others indicated that the pandemic and subdued sales had enabled them to work through unfinished business.

Across the UK as a whole, backlogs of work rose for the first time in six months, albeit at a modest rate.

As has been the case since last June, average input costs faced by south west private sector companies increased in March.

The rate of inflation quickened to a four-year high and was rapid overall. Cost burdens increased at a near-identical pace across the UK as a whole.

When explaining the latest rise in costs, companies often cited greater prices for raw materials such as metals, oil and components and higher staff costs. There were also mentions of increased shipping charges having pushed up expenses.

In line with growing cost pressures, prices charged for goods and services by firms in the South West rose at a faster pace in March. T

he rate of inflation was in fact the sharpest seen since April 2017, and slightly quicker than the UK-wide trend.

Improved demand conditions, rising costs and expectations of higher expenses in the months ahead all drove the latest upturn in selling prices, according to panel members.

Chair of the NatWest South West Regional Board Paul Edwards said: “The latest PMI data showed that the south west is starting to recover as the roadmap out of the lockdown and vaccine progress boosted market confidence and drove the first increases in output and sales since last September.

"However, rates of growth were not as strong as those seen at the national level, to suggest the region still has some catching up to do.

"At the same time, cost pressures continued to build, with both input costs and output charges rising at the fastest rates since early-2017 amid reports of higher prices for raw materials, transport and staff.

“Nonetheless, optimism towards the outlook remained historically sharp, and supported a renewed and solid rise in employment as companies anticipate busier months as we head into summer and restrictions are loosened further.”