The latest Purchasing Managers' Index has revealed that while business activity has grown in the region, employment has fallen.

Despite manufacturing and service sector companies operating in Yorkshire and Humberside reporting further growth of activity and new business in September, the improved business conditions have again failed to stimulate any employment growth.

Efforts to trim capacity to reduce costs have also resulted in a further marked decline in staffing levels.

The PMI report, which is produced for The Royal Bank of Scotland by NTC Research, also found that while September saw expansion of business activity for the tenth consecutive month, the rate of growth of activity eased to the slowest since last December. It was again slightly weaker than that seen for the UK as a whole.

Lucy O'Carroll, head of UK macroeconomics at The Royal Bank of Scotland, said: "Activity in the region continued to grow in September, though more slowly than in the previous month.

"New orders - a good leading indicator of future business activity - rose at the fastest rate for four months.

"With backlogs of work also rising for the first time in almost two years, the latest survey suggests that capacity is now more closely aligned to workloads - and in turn points to a more positive outlook for the region's employment in the coming months."

The report also revealed that volumes of incoming new orders, which tend to act as a leading indicator for business activity, continued to rise in September.

And the rate of growth of demand hit a four-month high, as improved business conditions enabled a greater proportion of companies to secure new contracts.