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Confidence is growing amongst North East firms despite subdued demand, a new business survey has shown.

The latest NatWest Growth Tracker data for the region - which measures the output of the region’s manufacturing and service sectors - showed the index dipped to 49.3 in September, after a solid expansion in August (54.5). The figure points to a moderation in business activity for the first time since May.

But business confidence strengthened for the third consecutive month during September and survey managers said the degree of optimism in the North East reached the highest since July 2024.

Confidence was said to be underpinned by planned new product launches and business expansion plans, including staffing levels. However, rising costs and workers opting to change jobs meant companies in the North East registered lower employment levels again in September, meaning employment has now fallen for ten months in a row. Of the 10 monitored º£½ÇÊÓƵ areas which saw falling staffing levels, the North East signalled the softest rate of job shedding.

The seasonally adjusted index showed that eight of the 12 monitored º£½ÇÊÓƵ regions and nations recorded a fall in output, with the slowest decline in the North East and the quickest in Northern Ireland.

Companies in the North East registered a stagnation in demand in September and where sales fell, firms linked this to muted client confidence and domestic economic uncertainty. This was offset by improving economic activity being sustained from the previous month.

While new orders remained subdued, backlogs of work were depleted during September. The rate of increase in output charges also eased for the fourth time in five months to reach the lowest in nearly five years.

According to survey respondents, some raw material prices fell and some charges were being lowered amid fierce competition for new work.

Malcolm Buchanan, chair of the NatWest North Regional Board, commented: “North East-based companies were increasingly confident regarding the outlook for activity over the coming year at the end of the third quarter of 2025. Businesses noted that confidence stemmed from optimism for new product launches, alongside planned expansions in business operations and workforces.

“This was despite renewed challenges on the business activity front in the past month. Subdued demand meant that firms were reluctant to take on new staff, with the rate of job shedding accelerating slightly from that seen in August.

“September also brought softening price pressures in the North East. Input cost inflation remained above the long-run series average, but eased to a ten-month low. In response, firms were able to raise output charges at a slower rate. In fact, prices charged rose at the slowest rate since November 2020, with some companies mentioning they had lowered prices to stimulate sales.”

The headline figure of the Business Activity Index is calculated from a single question that asks for changes in the volume of business activity compared with one month previously. It varies between 0 and 100, with a reading above 50 indicating an overall increase in compared to the previous month, and below 50 an overall decrease.