PRIVATE sector firms in the South West saw the softest increase in output for five months, figures have shown.

Firms saw a notably softer, but still solid, increase in business activity midway through the third quarter.

Recovery momentum slowed following the record boosts to output and sales after the initial loosening of COVID-19 restrictions.

Despite this, business confidence hit a six-month high, which in turn supported a record increase in employment.

At 54.7 in August, the headline NatWest South West 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 – fell from 62.2 in July to signal a sustained upturn in output.

Firms operating in the South West recorded a sharp increase in inflows of new work in August, with businesses often attributing the upturn to the further release of pent-up demand since the loosening of Covid-19 restrictions and increased tourism in the region.

That said, the rate of new order growth softened to a five-month low, and was much slower than May's multi-year peak.

New business also expanded at a softer rate across the UK as a whole, though growth was stronger than that seen in the South West.

The rate of expansion eased notably from the previous month, however, and was the softest seen since March.

The rate of growth was broadly in line with that seen across the UK a as a whole, however, which also saw a marked slowdown in momentum.

August saw an improvement in business confidence towards activity over the coming year among South West private sector firms. The degree of optimism reached its highest since February and was above the UK average. Upbeat forecasts were often linked to expectations that sales and output will continue to increase over the coming months, and that economic conditions will normalise.

As has been the case since March, staffing levels at South West private sector firms increased during August. Furthermore, the rate of job creation quickened for the fifth month in a row to hit a fresh series record. The South West also recorded the second-fastest expansion of payroll numbers of all 12 UK regions.

Staff hiring was generally linked by panel members to rising sales and expectations of further increases in client demand in the months ahead.