As January 2025 commenced, four out of the twelve UK regions reported growth in business activity, based on the latest findings from the NatWest Regional Growth Tracker.
The Business Activity Index, a monthly measure of regional economic health, indicated that London and the North East were the main drivers of growth, echoing December’s trend. Wales and the South West also recorded growth, highlighting regional variances in economic performance.
Despite pockets of growth, businesses across the UK faced steep increases in prices for goods and services. The South West and East of England reported the highest rates of output price inflation, with the West Midlands seeing the most significant acceleration. The North East was a notable exception, with only a marginal increase in prices from the previous month.
Sebastian Burnside, NatWest Chief Economist, commented: “London started 2025 as it ended 2024 – as the regional driver for growth for the UK.
“The North East, Wales and South West also enjoyed a positive start to the new year, but in other areas, elevated price pressures are having an effect. Firms in every region of the UK reported rising cost pressures in January, as well as indicating steep increases in prices charged for goods and services too.”
Demand
Similar to December, London and the North East saw a rise in new business in January. Other regions experienced a decrease in demand, with Northern Ireland facing the sharpest decline since December 2022.
Outlook
While growth expectations remained positive, optimism weakened in several regions. Northern Ireland’s business confidence reached its lowest in over two years. In contrast, firms in London and the West Midlands showed increased positivity about the future.
Employment
Employment figures reflected a decline in January for all regions except Northern Ireland, which saw minimal growth. The West Midlands and East of England experienced the largest drops in workforce numbers.
Capacity
Backlogs of work decreased across most regions, with Northern Ireland and the North West seeing the most substantial reductions. Only the North East recorded increased capacity pressures.
Inflation
Cost pressures intensified for businesses nationwide. The North East saw the fastest rate of input price inflation since March 2023, while Wales experienced the slowest increases, though still above the long-run average.
For detailed insights, download the January 2025 NatWest Regional Growth Tracker here.
