A key business survey of the region pointed to more stable activity levels in December
The Newcastle skyline, viewed looking across from Gateshead towards the Tyne Bridge and the Glasshouse(Image: Newcastle Chronicle)
Businesses across the North East are seeing signs of a rebound in demand, a new temperature test of the region shows.
The latest NatWest Growth Tracker index for the North East showed December brought a slower decline in the activity levels as business leaders indicated more confidence in the year ahead. Firms in the manufacturing and service sectors reported a rise in output, with the seasonally adjusted tracker rising from 48.7 in November to 49.5.
Regional businesses’ renewed confidence was said to stem from hopes of increased business investment, staff recruitment and higher customer numbers. Optimism was registered at its second strongest since July 2024 and broadly followed national levels.
Despite the indicators, workforce levels across the private sector fell slightly at the end of the fourth quarter. Some firms linked the downturn to slower than expected recovery in demand, while others talked of taking on additional staff thanks to improved outlook. The rate at which North East firms shed jobs was joint softest of all 12 nations and regions of the UK, equal to Scotland.
Backlogs rose marginally according to the December data – the second time in three months and despite depleted levels nationally. The research suggested improved demand, labour shortages and delivery delays had impact capacity.
Meanwhile the seasonally adjusted Input Prices Index came well above the neutral 50.0 mark in December, suggesting continued cost pressures for North East businesses. That came from higher raw material and staff costs. The local rate of inflation was marked and reached a seven-month high, but was softer than the national average.
In response to those pressures, North East firms raised their selling prices having offered discounts in November. Charge inflation was at its strongest since April with the rises in the North East outstripping the UK average.
Malcolm Buchanan, chair of the NatWest North Regional Board, 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. Meanwhile, a rise in sales gradually fed through to activity levels, pointing towards stabilisation. 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.
“Firms closed the year with stronger confidence in the outlook for 2026. The degree of positive sentiment amongst those surveyed gathered momentum from November and was among the highest recorded over the past four-and-a-half years. The stronger outlook was also supportive of a broad stabilisation in employment levels, with some companies citing hiring activity at their units.
“Cost pressures accelerated in the latest survey period, with the rate of inflation intensifying to the most pronounced since last May. In turn, firms looked to mitigate rising costs by lifting average prices charged. In fact, the rate of charge inflation was the strongest in eight months.”
