Report indicates ‘cautious’ optimism as costs ease

North East businesses are beginning to see light at the end of the tunnel as cost pressures ease and domestic demand shows signs of recovery, according to a regional business survey.

The latest Quarterly Economic Survey (QES) from the North East Chamber of Commerce, covering Q4 2025, points to a more stable operating environment for many firms, with falling price pressures and strengthening domestic demand providing some relief after a prolonged period of volatility.

Concerns around inflation, staffing costs and energy bills have fallen noticeably, helping to stabilise confidence across the region.

Domestic demand strengthened during the quarter, with UK sales rising by more than four per cent and orders increasing by almost 13 per cent, offering welcome relief for companies that have faced prolonged pressure on margins.

Despite this, confidence remains measured.

Workforce levels increased by around 6.5 per cent during the quarter, yet recruitment activity continued to soften, particularly for permanent and part-time roles, suggesting many firms are prioritising stability over expansion. 

Export performance also remains mixed, with just under 30 per cent of businesses currently selling overseas.

There are, however, positive signs around investment.

Intentions to invest in plant and machinery increased by nearly 18 per cent, while spending on training also edged up, indicating that businesses are preparing for future growth, even if immediate plans remain cautious.

Rhiannon Bearne, deputy chief executive at the Chamber, said: “This quarter’s 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.” 

Overall, the survey paints a picture of improving conditions rather than full recovery.

While easing costs and stronger domestic demand are welcome, many firms remain focused on resilience and efficiency, waiting for greater certainty before committing to significant expansion.

Deb Walton, Chamber president, added: “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.”

You can download a copy of the survey here.

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