North East leads UK economic growth in February

The North East of England has solidified its position as a key driver of UK economic growth, according to the latest NatWest UK Regional Growth Tracker for February 2025. The region’s private sector firms reported an eleventh consecutive monthly increase in new business, with the combined output for manufacturing and service sectors rising from 53.1 in January to 53.7 in February.

London maintained its resilience, marking 27 consecutive months of growth. Additionally, Wales and the South West experienced improved business activity, reflecting a growing optimism for the year ahead.

However, the report also highlighted challenges, as all 12 UK nations and regions streamlined their employment in February due to rising costs and the anticipation of increased National Insurance Contributions. This trend was most pronounced in Northern Ireland, which had previously enjoyed nearly four years of continuous employment growth.

Sebastian Burnside, NatWest Chief Economist, commented: “The North East continues to play a critical role in driving business activity for the UK in 2025. For almost a year, the region has experienced continued growth, with February proving to be one of its most successful periods.

“London is showing great resilience, extending its growth streak to 27 consecutive months. Whilst February saw Wales and the South West moving in the right direction.

“But these latest figures also show the impact of higher costs and prices, with firms across the country scrutinising their staffing levels. Nonetheless, all regions report expectations that conditions will improve in future.”

In terms of demand, only the North East and London saw growth in new business inflows during February. Other regions faced pressure as customers curtailed spending amid rising costs, with Northern Ireland registering the steepest drop in new work inflows for the second consecutive month, followed by the North West.

Employment figures showed a universal streamlining across all regions, a phenomenon not observed for over four years. The North East and Scotland experienced only slight declines, while the East of England and West Midlands saw more significant decreases.

Capacity pressures, as indicated by outstanding business, decreased across the UK, with the North East being the exception, recording a fifth consecutive monthly rise in backlogs of work. Conversely, the North West and East Midlands experienced particularly low capacity pressures.

Inflationary pressures remained a concern, with all regions facing rising costs. Northern Ireland experienced the highest input price inflation since March 2023, while Wales reported the lowest. Output price inflation rates were similar across regions, with the South West experiencing the highest and the North East the lowest.