NatWest Regional Growth Tracker reveals slowdown in North West business activity

Firms in the North West recorded a slight slowdown in business activity at the end of the opening quarter, following growth in the first two months of the year, the latest NatWest Growth Tracker showed.

The bank’s headline North West Business Activity Index – which measures changes in the region’s output of goods and services – registered 48.7 in March, dropping below the 50.0 threshold that separates growth from contraction for the first time this year. February’s figure was 50.6.

Businesses surveyed by NatWest reported a spike in inflationary pressures, their highest since 2023, which was weighing on demand. Energy, fuel, transportation, raw materials and wages all contributed to the steep rise in operating expenses, according to respondents.

Firms’ growth expectations for the next 12 months meanwhile slipped to their lowest in almost a year in March. There were mentions from surveyed firms of a more challenging economic outlook and concerns over rising energy prices amid the geopolitical backdrop.

Malcolm Buchanan, Chair of the NatWest North Regional Board, said:

“March’s Growth Tracker shows a marked jump in inflationary pressures across the local economy linked to a rise in the cost of fuel, transportation and raw materials largely related to energy price rises following the outbreak of war in the Middle East.

“Business activity has slowed after what was a reasonably positive start to the year, and understandably the increase in costs and more uncertain outlook have together impacted business confidence, which has slipped to an 11-month low. With inflationary pressures reaching the strongest since early 2023, many businesses are feeling the strain.

“What is particularly challenging for the region is that these pressures are now feeding through into employment and new business inflows, as firms take steps to manage overheads and navigate a more cautious outlook. Despite this, many businesses continue to show resilience, and supporting them through this period will be critical as they adapt to a more complex and uncertain economic environment.

“We’re still waiting for a turnaround in the labour market, and we may have to wait longer now due to the slowdown in activity and spike in costs.”

Alongside the drop in activity, firms in the North West also recorded a decrease in staffing levels in March, continuing a downward trend that began in October 2024. The North West registered a steeper decline in workforce numbers than any of the other UK nations and regions monitored by the survey. Three areas saw employment rise, namely Northern Ireland, Scotland and the North East.