North East Business Growth Slows Amid Global Tensions and Rising Costs
Business activity in the North East of England remained in growth territory last month, but the pace of expansion slowed significantly as global events weighed heavily on confidence, according to a new report. The latest NatWest Growth Tracker data indicates a notable deceleration in activity growth within the region's private sector during March 2026, marking the slowest rate recorded so far this year.
Survey Highlights Softer Sales and Higher Prices
Companies participating in the survey reported experiencing higher prices and lower demand, with many attributing these challenges partly to the ongoing war in the Middle East. Cost pressures surged to their highest level since the beginning of 2023, the survey suggests, leading to a decline in overall business confidence. The headline North East Growth Tracker Business Activity Index, which measures changes in the region's manufacturing and service sectors, fell from 53.8 in February to 50.4 in March. This indicates only a slight increase in business activity, with the expansion broadly aligning with trends observed across the United Kingdom as a whole.
Regional Economy on Uneven Footing
Malcolm Buchanan, chair of the NatWest North Regional Board, commented on the findings, stating, "The North East private sector economy closed the first quarter of 2026 on uneven footing. The region registered only a fractional increase in business activity, following the trend seen at the UK level." He noted that panel members often linked the moderation in growth to a steep jump in cost pressures, largely related to energy price rises following the outbreak of war in the Middle East.
In fact, the rate of input cost inflation surged to the highest since January 2023, which pushed firms to raise selling prices to the greatest extent in just under three years as businesses looked to protect profit margins. At the same time, the pace of growth in new business slowed to a crawl during March, with some companies stating that fading client confidence had weighed on sales.
Employment Levels Show Resilience
Despite these challenges, evidence of demand resilience encouraged firms to raise employment levels. The North East saw a slight improvement in staffing levels, standing out as one of only three regions or nations out of the twelve monitored across the UK to experience job creation, alongside Northern Ireland and Scotland.
Business Optimism Softens
Concurrently, business optimism regarding the year-ahead outlook softened from February's recent high and was the least pronounced since August 2025. While growth was expected to be boosted by new product launches, private sector businesses in the North East cited concerns regarding the health of the domestic economy and the wider impact of the war in the Middle East.
The release of the growth tracker comes ahead of a week of key economic data being published, including monthly unemployment and inflation figures scheduled for next week.
