North West firms express increased optimism about outlook, finds NatWest survey

Despite revealing a drop in activity in the start of Q3 of 2025, the latest NatWest Growth Tracker saw firms in the North West express increased optimism for trading conditions over the next 12 months.

The region’s Business Activity Index – which measures changes in the region’s output of goods and services – dropped slightly into contraction territory to 49.4. Firms surveyed for the high street bank reported a general lack of demand and rising cost pressures, with the manufacturing sector especially affected.

Input prices rose sharply across the North West private sector in July, with the rate of cost inflation ticking up for the first time since April and moving further above its long-run average.

However, latest data showed a rebound in expectations towards growth for the forthcoming year. Business optimism in the North West was the joint-highest in the past nine months, with businesses expressing hopes of a recovery in market conditions, plans for increased marketing activity and new products, and a brighter outlook for export sales.

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

“The North West economy looks to be treading water at present, with a slight dip in business activity in July following on from the steady levels of activity we saw in June.

“We continue to see headwinds to demand, but the fact that business confidence about future growth prospects has perked up suggests firms do see things improving in the coming months.

“Businesses continue to face sharply rising costs, with the rate of increase even ticking up slightly for the first time since April. With firms not able to fully pass on cost increases to customers due to a highly competitive environment, savings are having to be found elsewhere. We’re seeing this impacting the labour market, but there’s hope that the renewed optimism will eventually bring with it a turnaround in hiring activity.”

Although business activity rose across the UK as a whole, the rate of growth eased. Trends varied widely across the North, with an expansion in the North East contrasting with a deepening downturn in Yorkshire & Humber.

Firms in the North West continued to report a lack of new business as the second half of the year got underway. Surveyed firms commented on factors such as customers being deterred by high prices, competition from abroad, and a general reluctance amid concerns for the economy. Inflows of new work fell at a faster rate than in June, and also one that was slightly quicker than that recorded for the UK as a whole.

The degree of business optimism in the North West region was the second-highest across the UK, behind only the South East.