Business sector seeing “a gradual recovery in demand”
The chamber’s latest Quarterly Economic Survey for the fourth quarter of 2025 highlights improvements in key economic indicators, with falling price pressures and rising UK sales contributing to a more stable environment for businesses.
Rhiannon Bearne, deputy chief executive of the North East Chamber of Commerce, said: “This quarterβs results show a more encouraging picture for North East businesses.
“Cost pressures are easing across key areas, helping to stabilise operating conditions, while stronger UK sales, orders and improving investment intentions point to a gradual recovery in demand.
“However, confidence remains cautious.
“Workforce indicators are mixed, recruitment activity has softened, and export levels, while improving, still lag behind last year.
“Businesses need certainty on costs, regulation and investment support if this emerging stability is to be sustained.”
The report reveals a broad decline in business concerns, with the sharpest falls in inflation (-15.3 per cent), staff costs (-12.9 per cent), and energy prices (-11.9 per cent).
Labour costs dropped by 13.3 per cent, utilities by 8.7 per cent, and fuel by 9.2 per cent.
Domestic demand showed positive movement, with UK sales up by 4.2 per cent compared to the previous quarter and up by 9.5 per cent year-on-year.
UK orders increased by 12.7 per cent.
Workforce levels saw a 6.5 per cent rise this quarter, but remain 7.1 per cent below last year.
Recruitment activity continued to soften, with fewer businesses looking to hire part-time (-10.8 per cent), temporary (-4.7 per cent), or permanent staff (-4.3 per cent).
Investment intentions improved, with plant investment rising by 17.7 per cent this quarter and training investment up by 3.3 per cent.
Business sentiment was generally more positive, as concern levels declined across most areas.
Manufacturers remained most worried about taxation and inflation, with both cited by 68.4 per cent of respondents, while 61.7 per cent of service businesses identified inflation as their top concern.
The report also showed that manufacturers continued to feel the most pressure from raw material costs (63.2 per cent), while labour costs were a dominant concern for service businesses (61.7 per cent).
Overheads remained a key issue for 54.3 per cent of service sector respondents.
Business activity showed mixed results.
The proportion of businesses operating at full capacity fell by 1.3 per cent this quarter and by 1.8 per cent year-on-year.
Exporting businesses increased to 28 per cent, a 2.3 per cent rise on the quarter, but still 4.5 per cent below the same period last year.
Deb Walton, Chamber president, said: “These findings reflect a growing sense of relief among businesses after a prolonged period of pressure.
“Falling concerns around inflation, staff costs and energy prices are easing day-to-day pressures, allowing firms to plan with greater confidence, supported by rising sales and renewed investment.
“Yet recovery remains fragile.
“Many businesses are still hesitant to expand their workforce, capacity constraints persist in key sectors, and export activity has not fully recovered.
“Targeted, practical support will be essential to turn this cautious optimism into long-term resilience for the North East economy.”
Energy prices remain a concern for 41 per cent of businesses, including 31.6 per cent of manufacturers and 43.2 per cent of service firms.
Only 13 per cent of respondents reported taking steps to reduce energy expenditure.
Operational changes increased among those taking action, including switching off equipment (+7 per cent) and altering work patterns (+37 per cent).
The fourth quarter of 2025 signals improving conditions for the North East business community, but the Chamber warns that sustained growth will require continued stability and targeted support.
The Chamber said it plans to use these findings to inform discussions with policymakers and advocate for measures that will support long-term growth, investment, and job creation in the region.