Businesses across the North East are witnessing a significant rebound in demand as the year drew to a close, according to a major new economic survey of the region.
Survey Points to Stabilising Activity
The latest NatWest Growth Tracker index for the North East revealed that December brought a slower decline in overall activity levels. The seasonally adjusted tracker rose from 48.7 in November to 49.5, moving closer to the neutral 50.0 mark that separates contraction from expansion. Both manufacturing and service sector firms reported a rise in output.
This renewed confidence among regional business leaders is linked to hopes of increased investment, plans for staff recruitment, and expectations of higher customer numbers. Optimism for the year ahead was registered at its second strongest level since July 2024, broadly aligning with the national mood.
Mixed Employment Picture and Rising Costs
Despite the positive indicators, workforce levels across the private sector fell slightly at the end of the fourth quarter. Some companies attributed this to a slower-than-expected recovery in demand, while others spoke of taking on additional staff due to an improved outlook. Notably, the rate at which North East firms reduced jobs was the joint softest of all 12 UK nations and regions, equal to Scotland.
The survey also highlighted growing cost pressures. The seasonally adjusted Input Prices Index came in well above the 50.0 neutral mark in December, driven by higher raw material and staff costs. Local inflation reached a seven-month high, though it remained softer than the UK average.
In response, North East firms raised their selling prices, having offered discounts in November. This charge inflation was at its strongest since April, with increases in the region outstripping the national average.
Backlogs and Future Outlook
According to the December data, backlogs of work rose marginally for the second time in three months. This occurred despite depleted levels nationally, with the research suggesting improved demand, labour shortages, and delivery delays were impacting capacity.
Malcolm Buchanan, chair of the NatWest North Regional Board, commented on the findings. He said: "Firms across the private sector in the North East reported a strong improvement in demand conditions at the end of 2025, with a renewed increase in new business intakes."
"Higher intakes of new orders also bode well for the near-term outlook, as local companies recorded a renewed accumulation of outstanding business, which they’ll likely seek to clear in the coming months," he added.
Mr Buchanan also noted that firms closed the year with stronger confidence for 2026, with positive sentiment among those surveyed gathering momentum from November and ranking among the highest recorded in the past four-and-a-half years.
