The region registered the strongest expansion for the first time since December 2024
Malcolm Buchanan, Chair of the NatWest North Regional Board(Image: Nicola Gotts Photography)
North East businesses top the UK rankings for activity growth in a key survey, with figures showing a marked rise in activity despite increased price pressures. The latest findings from the NatWest Growth Tracker for the North East – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – dipped from 55.0 in April to 53.8 in May.
The numbers point to a softer but still marked increase in business activity, while also representing the fifth upturn in consecutive months. Only three of the 12 monitored UK regions and nations recorded a rise in output, with the North East registering the strongest expansion for the first time since December 2024.
Private sector firms also recorded a softer increase in new business intakes in May. Regional firms noted the impact of higher prices on both sales and output, as cost pressures remained historically elevated. That said, business confidence regarding the year-ahead outlook strengthened for the first time since the start of the year.
Last month saw regional businesses mark a sixth successive expansion in new business. However, the pace of growth slowed from April’s 17-month high. Where sales rose, firms linked this to strength in underlying demand, as well as clients placing additional orders to protect against future supply shortages and price increases.
The rise in sales in the North East compared with a decline at the UK level and was second only to London in the regional rankings. The degree of optimism in the North East was below the long-run series trend and among the weakest of the 12 monitored UK areas, however.
Anecdotal evidence suggested confidence was underpinned by new product launches and capacity expansion plans – and the non-replacement of voluntary leavers and business restructuring pushed firms to lower staffing numbers in the North East. Concurrently, the rate of increase in local output charges eased slightly on the month but remained historically elevated.
Anecdotal evidence suggested that higher cost burdens were partially passed through 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.”
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