Growth has picked up in the North East and firms are feeling more optimistic, a new business survey suggests.
The latest Growth Tracker data from NatWest shows increasing growth in the region’s private sector output, though lingering nervousness on the state of the economy meant hiring activity fell for the eighth month running.
The Tracker, which measures the combined output of the region’s manufacturing and service sectors, came in at 51.4 in July, up from 51.0 in June and above the 50 level that denotes growth in the economy. Confidence levels rose to their highest for four months, though were the lowest in England.
July saw a sustained increase in input prices across the North East, extending a sequence that began in 2020, but firms passed higher operating expenses to customers, the survey found.
Malcolm Buchanan, chair of the NatWest North regional board, said: “The North East private sector economy entered the second half of 2025 on a seemingly positive note, as overall business activity rose at a modest pace that was the strongest in four months. Growth was dampened by a muted demand environment, with sales falling for the fourth time in the past five months albeit only marginally. According to the data, firms often cited that higher output was due to the completion of existing orders.
“Market conditions remained challenging, as companies continued to signal elevated cost burdens in July, which discouraged hiring and investment decisions. In fact, employment levels have now fallen consistently for eight months running.
“Firms were confident that the current cloud of uncertainty would lift however, as optimism regarding the coming 12 months strengthened sharply to the highest since March. Confidence was underpinned by planned new product launches and hopes of an easing of domestic and international economic uncertainty.”
A separate report has also pointed to a fall in hiring activity in July as the Ƶ jobs market was weighed down by concerns over the economic outlook and increased labour costs. The monthly KPMG and REC report on jobs showed a “further steep decline” in permanent staff appointment in July, while growth in starting salaries also slowed to its lowest level for more than four years as firms tightened their recruitment budgets.
Jon Holt, group chief executive and Ƶ senior partner at KPMG, said: “The labour market cooled in July as chief execs held back from increasing their recruitment budgets. Economic uncertainty, the complexities of AI adoption and global headwinds are all weighing on business planning.”
