KPMG Local Business Pulse Index

The index shows the following trends in across the UK economy at Q3 2024:

• The index continues to show an improvement in business expectations at the national level. It also shows a record number of localities being classified in the High Research and Investment cluster (114 localities), and in this quarter the number of localities being classified into the Business Creation Cluster has returned to the peak level seek in 2023 Q2 (92 localities).
• As of Q3, more than half of the localities covered in the geography of the index now fall into these two segmentations. The main movements into these segments are due to localities moving out of the Sales Growth Cluster, while the Employment Growth cluster remains robust, adding three localities in this quarterly update.
  
• New entrants to the Business Creation Cluster include a geographic concentration of localities across the Midlands, including Chesterfield, Derbyshire Dales, Hull, Rushcliffe, South Derbyshire and Stoke-on-Trent. A concentration of localities across the East of England also feature in this cluster for the first time, including East Suffolk, North Norfolk, Peterborough and South Norfolk.
  
• Over the past quarter, business expectations in localities classified into the Employment Growth cluster have proven to be particularly positive. This cluster exhibits the highest rates of online job advertisements, expected growth in employment and, and also strong growth in R&D expenditure and expected growth in sales. Localities entering this cluster in this quarter include Beford, Dartford, Harrogate, Havant, Swindon, Tamworth and York.

The index shows the following trends in across the UK economy at Q2 2024:

• The index shows a notable improvement in business expectations for future investment, potentially linked to expected reductions in interest rates. This is reflected in a record number of localities across the UK being classified in the High Research and Investment cluster (114 localities), while the index has seen a further reduction in the number of localities in the Sales Growth cluster and Consumer and Leisure cluster, reflecting ongoing challenges of high interest rates and a weak economy at the present time. 
• The growth in the High Research and Investment cluster is spread across the regions of the UK, with localities joining this cluster in Q2 2024 including Brighton and Hove, Great Yarmouth, East Riding of Yorkshire, Lancaster, Adur and Fylde. This reflects a growing improvement in business expectations across the UK.
• While the national outlook for retail sales has been muted over the past year, some localities stand out for their resilient sales growth. Localities which have shown strong sales growth over each of the past four quarters include Reading, Cambridge, Exeter, Chelmsford, Canterbury, Stockport, and Hounslow. While larger cities continue to experience a decline in city centre footfall and retail sales volumes, these large towns / smaller cities show stronger resilience in their retail sales.
• The index also sees areas entering the business creation cluster for the first time. These include Bradford, Middlesborough, Blackburn, Pendle and Knowsley. These areas stand out for their high rates of new business creation.  

The index shows the following trends in across the UK economy at Q1 2024:

• Despite the challenging national outlook, regions of the UK outside of London and the South are showing the strongest levels of new economic activity. The Business Creation cluster features 68 locations, with 57 of these outside of London and the South. New entrants to the cluster this quarter include Erewash, Kingston upon Hull, Northumberland and Glamorgan. Overall, the West Midlands has the highest share of localities in this cluster.
• Similarly, 68 of the 86 localities in the High Research and Investment cluster are now outside London and the South. This cluster includes Bradford, Swansea, West Lothian, and West Suffolk, which have all joined the cluster over the past quarter.
• Employment growth is proving most resilient in London, where 19 of the 33 localities which make up the Greater London area in the index are included in the Employment Growth cluster, together with 10 localities in the South East including Lewes, Tandridge, Waverley and Woking, which continue to show robust employment growth.
• Compared with Q1 2023, LBPI has seen a reduction in the number of localities in the Sales Growth Cluster (down 12%) and High Productivity Cluster (down 18%). Areas retaining strength in sales, however, include Cambridge, Luton, Oxford, Reading and Southampton.

The index shows the following trends in across the UK economy at Q4 2023:

• The anticipated slowdown in the UK economy caused by higher interest rates is reflected in lower reported levels of expected sales growth and investment growth by firms. This is reflected at the local level, with 10% fewer localities in the Sales Growth and High Research and Investment cluster compared with the Q3 update.
• Despite the national slowdown in activity, firms in some localities are reporting above-average expectations for employment growth over coming quarters. This sees a selection of localities entering the employment growth cluster including York, Bath and North-East Somerset, Cheshire East and Trafford.
• Localities across the UK are also proving more resilient to the slowdown in consumption growth at the national level. East Riding of Yorkshire, Bournemouth, Christchurch and Poole, North East Derbyshire, North Hertfordshire and South Staffordshire are among the localities entering the consumption growth cluster for the first time.
• Clusters of localities remain distinctive for their relatively high productivity and rates of new business creation. These two clusters together contain approximately one third of localities, such as Rutland, Wealdon, North Somerset, Stirling and Spelthorne which have featured in the high productivity cluster is all four releaeses of the index to date.

The following trends have been detected across the UK economy at Q3 2023:

• The leading growth centres for research and investment are spread across the regions with Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester showing highest rates of growth in research and investment, including development, R&D spend and venture capital investment.
• New business creation is strongest across the devolved nations and regions with Wales, Northern England and Scotland, East Anglia and the North East experiencing the fastest rates of new business creation.
• Investment in digital and remote working technologies is benefiting the midlands and northern cities, with firms in these areas reporting high rates of investment in new technology, and faster adaption to working form home.
• New job openings and employment growth is strongest in London and the south east, with firms in these localities showing the highest expected growth rates in employment over coming quarters.

• Places outside of London are leading the recovery in business research and investment and productivity. While investment has historically been skewed towards London and the South East, highest expected investment is now seen across the South West, Wales, Northern and Eastern England.
• Areas outside of large cities are benefiting most from the work-from-home revolution. Employers and employees report the greatest benefits of work from home are found outside of bit cities, allowing workers to avoid long commutes and wasted productive hours.
• The coastal tourist economy bucks the work-from-home trend. The tourism-heavy coastal economy with a high share of hospitality and leisure services has seen strong growth in face-to-face service delivery, as consumer seek holiday experiences to balance their work-from-home lifestyles.
• London retains its strength in attracting venture capital, which contributes to it being an area characterised by high research and investment. Venture capital growth remains highly concentrated in London, with a large share of R&D expenditure also concentrated in the City, which continues to experience the benefits of the agglomeration economy.