Restoring confidence for the economic road ahead

After several difficult quarters, the North East’s latest economic data finally offers some breathing space.

Cost pressures are easing, domestic demand is showing early signs of recovery, and, on paper at least, the outlook appears more stable than it has been for some time.

But beneath the headline figures, the picture is more nuanced.

Our latest Quarterly Economic Survey suggests the region’s business community is not yet shifting into growth mode.

Instead, firms are consolidating, steadying themselves after years of disruption and preparing cautiously for what comes next.

The most immediate change is around costs.

Prices are falling across several key areas, including labour, energy and finance.

For businesses that have spent much of the past two years absorbing relentless increases, this is a significant and welcome shift.

At the same time, domestic sales and orders are beginning to pick up, hinting that demand may finally be stabilising.

However, these improvements have not yet translated into a widespread appetite for expansion.

Rather than pushing ahead aggressively, many businesses are choosing to shore up their position.

Investment intentions have improved, particularly in training and plant, but this feels less about growth in the short term and more about future-proofing.

Nowhere is this caution clearer than in the labour market.

While employment levels edged up in the final quarter of 2025, recruitment activity weakened further, especially for permanent and part-time roles.

Instead of expanding headcount, firms are focusing on retaining and developing existing teams.

This is a rational response to prolonged uncertainty.

But it also carries risks.

A continued reluctance to recruit could begin to constrain capacity and productivity if demand strengthens faster than anticipated.

Export data tells a similar story.

Although export activity improved compared to previous quarters, it remains below year-on-year levels.

Global uncertainty and ongoing trade barriers continue to weigh heavily, particularly on manufacturers and internationally-facing firms.

Taken together, the data points to a region that has become highly resilient, but also understandably cautious.

Through 2025, businesses adapted impressively to sustained pressures.

Yet confidence remains fragile.

As we move into 2026, the priority for many firms is not rapid growth, but stability.

Turning resilience into momentum will require more than easing costs alone.

It will depend on restoring confidence that the economic road ahead is finally stable enough for businesses to invest, recruit and grow with conviction.

Erika Armanino is a knowledge and research executive at the North East Chamber of Commerce

Looking to promote your product/service to SME businesses in your region? Find out how Bdaily can help →