The headline NatWest London Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – indicated a resurgence in growth across the capital, rising from 57.3 in January to a three-month high of 63.0 in February. The strong upturn was widely attributed by survey respondents to a marked increase in new business, which was the strongest recorded in over eight years.

The latest data signalled a sharp and accelerated upturn in new work across the London private sector in February. The rate of growth picked up to the fastest since November 2013. Where new business increased, firms related this to greater optimism regarding the pandemic and expansion into new markets. Notably, London was the fastest-growing region of the UK for the fourth month in a row.

The degree of confidence among London firms remained historically elevated in February, as the Future Activity Index dropped only fractionally from January’s series record. Optimism was also stronger than the UK average. Hopes of output growth were often based on forecasts of higher demand as markets return to normal following the Omicron wave, with some panellists also mentioning investment in new products.

London private sector companies indicated another marked rise in employment in the second month of the year, driven by continued efforts to fill staff vacancies and fulfil higher work levels. The rate of job creation accelerated for the first time since August last year, and was among the quickest seen since data collection began in 1996. The UK as a whole also registered a pick up in employment growth over February.

The level of work-in-hand in the London private sector rose during February, extending the current run of accumulation to ten months. Moreover, the rate of growth accelerated from January’s recent low and was solid, albeit slightly softer than the national trend. Respondents highlighted that they unable to raise output quickly enough to complete new business.

February data signalled an unprecedented markup in input prices at London firms, as the seasonally adjusted index rose above the previous record high in November last year. Approximately 62% of companies reported an increase in costs over the month, attributing this to higher staff salaries and an uptick in fuel prices.

While remaining below the UK trend, the gap in input price inflation between the capital and nationwide was the smallest recorded since May 2020.

In line with cost trends, London-based companies continued to raise their selling charges at a considerable rate in February. The pace of inflation was broadly the same as those seen in January and last November’s record high. Some panellists noted that strong demand levels had supported their efforts to increase output prices.