An improvement in operating conditions for North East and North West firms
The latest Growth Tracker for the North West shows a welcome upturn in business activity in August, with the headline index back in expansion territory for first time for nearly a year.
Local firms saw increased inflows of new business in a sign of stronger underlying demand. And there's hope among businesses that they can build on the progress of the past month, with activity expected to rise over the coming year.
In another encouraging development, the downward pressure on employment levels has started to ease, with workforce numbers showing their slowest decline for seven months.
Meanwhile, North East firms are looking to the future with optimism, with positive sentiment the most pronounced since March.
Firms across the North East private sector reported a stronger improvement in operating conditions, with a rise in activity coupled with a renewed expansion in new business intakes. Growth in the region also exceeded the national average. This stronger outlook supports a softer reduction in employment levels.
Cost pressures remain historically elevated in the North East, but the rate of cost inflation retreated to the lowest in nine months. That said, firms continued to look at mitigating rising costs by lifting average prices.
Yorkshire & Humber businesses optimistic about returning to growth
In contrast, the Yorkshire & Humber region posted a further reduction in private-sector business activity during August; however, the pace of contraction showed signs of stabilising. Firms cited challenges in securing new orders amid softer customer demand, with this impacting on employment levels and contributing to inflationary pressures.
Nevertheless, companies in Yorkshire & Humber remain optimistic about the future.
Businesses are hopeful that output will return to growth in the coming months, signalling potential for positive momentum in the region. Although stronger price pressures and recent increases in employer National Insurance contributions present headwinds, the outlook holds promise as firms adapt.
Momentum continues to build in export markets of North businesses
Growth was recorded in four of the five largest export markets for the North East, with the US posting the steepest rise. Activity in the Netherlands and Italy saw stronger expansion, along with a broadly unchanged expansion in Germany. France saw a sustained, albeit only fractional, reduction.
Similarly, business activity also increased in four of the largest five export markets for Yorkshire & Humber firms, led by the US where output rose markedly. Similar to the North East, the only destination to see a drop in activity was France, but here the rate of decline was only marginal and the slowest for a year.
In terms of overall export momentum, the North West rose for the second month running in August, taking it to its highest level since June 2024. The rise was supported by stronger growth in both European markets and mainland China. Of the region's top export markets, the US remained the fastest growing.
