The North East has topped the UK rankings for business activity growth in a key survey, despite facing increased price pressures. The latest NatWest Growth Tracker for the region showed a seasonally adjusted index reading of 53.8 in May, down from 55.0 in April but still indicating a marked rise in activity.
Fifth consecutive month of expansion
This marks the fifth consecutive month of expansion for the region, with the North East recording the strongest growth among the 12 monitored UK regions and nations for the first time since December 2024. Only three areas reported a rise in output overall.
Private sector firms saw a softer increase in new business intakes in May, with regional companies citing the impact of higher prices on both sales and output. Cost pressures remained historically elevated, yet business confidence regarding the year-ahead outlook strengthened for the first time since the start of the year.
New business growth slows but remains strong
May marked the sixth successive expansion in new business for the region, though the pace slowed from April’s 17-month high. Firms attributed sales growth to strong underlying demand and clients placing additional orders to guard against future supply shortages and price increases. The rise in sales in the North East was second only to London in the regional rankings, contrasting with a decline at the UK level.
However, the degree of optimism in the North East remained below the long-run series trend and was among the weakest of all monitored UK areas. Anecdotal evidence suggested confidence was supported by new product launches and capacity expansion plans.
Employment falls as cost-cutting measures take hold
Employment in the North East fell for the second successive month, driven by the non-replacement of voluntary leavers and business restructuring. The rate of increase in local output charges eased slightly on the month but stayed historically elevated, with firms passing on higher cost burdens to clients. Only Northern Ireland and the West Midlands saw a faster rise in selling prices than the North East in May.
Malcolm Buchanan, chair of the NatWest North Regional Board, said: “North East-based companies were buoyed by stronger optimism during May, and saw growth of both activity and new order inflows enter a fifth and sixth successive month respectively. Firms often noted that the region had strong underlying demand for private sector goods and services. That said, anecdotal evidence also suggested that some customers placed additional orders in order to protect against future price hikes and supply disruption, partly in response to the ongoing impact of the conflict in the Middle East.
“Cost pressures remained notably acute in the latest survey month, easing only slightly from the 41-month high seen during April, and were still well above the historical average. Companies often looked to pass on higher input costs to clients through a sustained and marked increase in selling prices.
“Employment also fell for the second successive month, with some firms attributing this to efforts to cut costs. Despite the reduction in headcounts and rising order inflows, the volume of outstanding business – a bellwether for near-term activity – fell for the second month running, albeit only marginally.
“Looking ahead, however, the overall degree of confidence improved for the first time since January, though local firms were among the least optimistic of the 12 monitored UK areas.”
