Market Update: Surveys point towards growing positivity in North East economy – Full Analysis

The separate reports from NatWest and KPMG have the North East among the best performing UK regions

Two well-regarded surveys have pointed to a more positive picture in the North East economy.

The latest NatWest Growth Tracker data showed a renewed expansion in output amongst firms in the North East, with the rate of growth among the fastest in the UK.

The tracker – which measures change in the region’s manufacturing and service sectors – rose from 49.5 in December to 54.4 in January, pointing to an increase in business activity for the first time in three months. Nine of the 12 monitored UK regions and nations recorded a rise in output, with the second-fastest expansion seen jointly in the North East and West Midlands, behind London.

Private sector firms in the North East also registered a steeper increase in new business intakes, while business confidence reached its highest level in more than four years. Employment levels were unchanged, NatWest said, but some companies in the region are looking to increase headcount to keep pace with rising demand.

Malcolm Buchanan, chair of the NatWest North Regional Board, said: “North East-based companies were buoyed by stronger optimism and higher new order inflows to raise activity levels for the first time in three months at the start of 2026. Output rose at the fastest pace since last August, and was behind only London in terms of growth leaders across the 12 monitored UK regions and nations.

“The near and medium-term pipeline is also positive for the North East region, with growth in new business intakes reaching a three-month high, while outstanding business continued to accumulate – signalling pressure on capacity amid growing demand. Looking further ahead, companies were confident that positive trends would continue over the coming 12 months. The overall degree of confidence surged from the end of last year to reach the highest since May 2021.

“Moreover, local firms were among the most optimistic of the monitored UK areas, with only London-based companies recording a stronger degree of optimism.”

Meanwhile, a report for Big Four accountancy group KPMG has suggested that 92% private business owners in the North East are confident about growth in 2026, the highest level of confidence of any Northern region. KPMG’s annual Private Enterprise Barometer puts business confidence in the North East five percentage points above the national average.

Rising demand for products was identified as the main reason for the increasing positiveity, while some businesses also highlighted plans to expand into new markets and launch new products.

Michael Downes, senior partner for KPMG at its Newcastle office, said: “Leading the Northern regions in confidence reflects not only resilience, but a determination from the businesses in the North East to invest in the future.

“It’s particularly encouraging to see businesses across the region increasingly looking beyond domestic markets, with appetite for international expansion well above the national average. That confidence is being reinforced by continued investment in technology and AI at home, supported by major developments such as the North East’s AI Growth Zone, which is helping to drive innovation, skills development and job creation across the region.

“With technology, diversification and a growing openness to alternative funding all shaping growth strategies, the North East’s private businesses are showing the ambition and forward-thinking needed to compete on the international stage.”