BUSINESS activity in the south west is rising fast according to new data.

NatWest's South West Business Activity Index showed the quickest increase in output from the area's manufacturing and service sectors since July last month, but growth remained slower than the UK average. After easing notably in September, the rate of new order growth in the region's private sector firms rebounded in October.

According to anecdotal evidence, stronger demand across new and existing customer bases lifted sales but some reports suggest supply chain issues and uncertainty related to the ongoing pandemic had restricted overall growth of new business.

Companies expect business activity to increase over the next year but the level of positive sentiment weakened for the second month in a row and optimism was, overall, the lowest since January.

Some businesses anticipate a recovery from the pandemic, stronger customer demand and planned company expansions to boost activity while others had concerns over labour shortages, supply chain delays and lingering Covid-19 uncertainty.

Employment in private sector firms increased for the eighth month in a row. Though solid, the rate of job creation was the softest recorded since March and not as strong as that seen for the UK private sector as a whole.

Higher payroll numbers were often attributed to greater amounts of new work and efforts to expand future capacity but some firms noted difficulties recruiting and retaining staff due to tight labour market conditions.

Panel members suggested that higher sales and supply constraints had contributed to the latest upturn in unfinished business.

Average input prices faced by south west private sector firms increased for the 17th successive month in October. The rate of inflation picked up for the first time since August, and was the sharpest seen since data collection began in January 1997.

The upturn in costs was slightly quicker than that seen at the national level. Companies often mentioned that higher costs for staff, energy, fuel and materials had driven up expenses.

The region's private sector firms increased their output charges during October. The rate of inflation accelerated to a three-month high and was rapid overall, albeit not quite as strong as the UK-wide average. Where higher selling prices were recorded, they were generally linked to efforts to pass on increased input costs to clients.

NatWest South West Regional Board chair Paul Edwards said: "Latest data showed a stronger increase in business activity across the south west, fuelled by a notable rebound in overall new work.

"Companies commented on higher sales across both new and existing client bases as business conditions continue to normalise. However, the recovery has been accompanied by a rapid upturn in input prices, with greater staff, energy and raw materials costs all driving the steepest increase in operating expenses since the series began nearly 25 years ago.

"Reports of difficulties recruiting and retaining staff amid tight labour market conditions weighed on employment growth. Labour shortages, supplier delays and lingering Covid-19 uncertainty all dampened optimism towards the year ahead, which slipped to a nine-month low, and are likely to limit firms' abilities to expand in the months ahead."