BUSINESS faces a “prolonged” path to recovery after new data showed output and orders were falling before the latest lockdown.

But despite the Covid crisis hitting customer demand, business confidence was near a record high last month at the prospect of a vaccine.

The NatWest South West Business Activity – which measures output in the manufacturing and service sectors – fell to 46.9 in December from 47.1 the previous month. It was the steepest rate of contraction since last June.

Seasonally adjusted, the bank’s New Business Index signalled a third successive monthly decline in new orders for South West firms.

Panel members often said customer demand was weak due to the pandemic and restrictions on trade and travel. But the contraction in new business was the slowest seen during the pandemic.

Optimism for the year ahead remained historically sharp, despite easing from November’s record high.

Paul Edwards, chair of the NatWest South West Regional Board, said: “Businesses across the South West had a tough end to 2020, and saw further declines in both new orders and activity.

“The pandemic continued to heavily weigh on performance, with clients often cancelling or delaying orders due to uncertainty over the trajectory of the virus and restrictions to contain it.

“On a more positive note, the roll-out of vaccines and the prospect of an end to the public health crisis meant that business confidence held close to November’s record high. However, the path to recovery is likely to be prolonged, as rising virus cases and a renewed national lockdown will cause further disruption to business operations and weaken spending.”

In December, England had just emerged from a lockdown and went into a system of tiered restrictions.

Companies surveyed frequently cited expectations that customer demand would rebound once the pandemic was under control.

At the UK level, sentiment regarding the 12-month outlook for output was little-changed from November, and not quite as strong as that seen in the South West.

South West firms reported a further fall in staffing levels during December. Though solid, the rate of job shedding eased notably from November and was the softest recorded in the current 10-month sequence of decline.