London saw its fastest increase in employment for nearly seven years as the capital’s economy continued its bounceback from the pandemic, an influential survey has found.
The NatWest London Business Activity Index – which tracks the month-on-month change in the city’s manufacturing and service sectors – fell slightly from a 73-month high of 60.7 in April to 59.5 in May, signalling another increase in overall business activity.
Firms questioned in the PMI survey attributed the growth mostly to an easing of lockdown measures, which boosted sectors such as hospitality and led to a strong upturn in demand.
May survey data also pointed to a substantial increase in new orders at London firms, while business optimism remained high, with 63% of businesses expecting output to expand, while only 4% expected a decline.
Employment numbers rose for the third month and accelerated to the fastest rate seen since June 2014.
Stuart Johnstone, managing director for London and South East at NatWest Corporate & Commercial Banking, said: “May data signalled another strong performance in the London economy in the second quarter, despite slightly softer rises in output and new business compared to April.
“Rising demand increasingly turned into jobs growth, as employment rose at the fastest rate for nearly seven years. Backlog volumes grew for the first time since last September, indicating there could be additional efforts to expand workforce capacity over the summer.
“Input prices continued on an upwards course, with the rate of inflation accelerating to the fastest since September 2008. Despite a rise in output charges, cost pressures were largely absorbed as firms remained uncertain about clients’ willingness to spend.
“Whilst this benefits the immediate recovery, we could see a surge in consumer prices further down the line as businesses look to rebuild their profits.”
London firms reported a marked increase in input costs and a number also highlighted both a rise in salary costs and increased vendor prices as demand for inputs outweighed supply.
The concern on costs comes as the UK inflation rate has topped 2% for the first time in nearly two years.
Higher transport and motor fuel costs were a major contributor to the jump in inflation, as crude oil prices increased amid pressures on supply.
