Four of the 12 UK nations and regions recorded business activity growth in January, according to the NatWest Growth Tracker.
The NatWest Regional Growth Tracker Business Activity Index is described as the “fact-based indicator of regional economic health, tracking the monthly change in the output of goods and services across the private sector.”
As in December, London and the North East were “the key drivers of activity growth throughout January, followed by Wales and South West with businesses there declaring increases in output during the first four weeks of 2025.”
However, like the rest of the UK, most businesses “reported steep increases in prices charged for goods and services.”
The South West and East of England recorded “the highest rates of output price inflation, respectively, while the greatest acceleration was registered in the West Midlands.”
The North East was the one exception, posting “a fractionally slower increase in prices charged than the month before.”
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.”
They added:
“The Bank of England appears to agree; last week it raised its inflation forecast to 3.7%. And whilst the Monetary Policy Committee hopes this rise is temporary, they are mindful of risks from increasing wages, national insurance contributions and energy costs. Against this backdrop demand has held up strongest in London and the North East, whilst Northern Ireland has the most resilient labour market, with job creation continuing for 25 consecutive months.”
As was the case in December, London and the North East were “the only areas to record a rise in new business during the opening month of the year.”
Demand decreased elsewhere, and rates of decline “accelerated in most cases. This included Northern Ireland, which registered the steepest overall drop in inflows of new work, and one that was the sharpest since December 2022.”
Expectations towards growth in the coming year “remained positive across the board in January, but optimism weakened in many cases.”
This included Northern Ireland, which “recorded its lowest business confidence for just over two years.”
Firms in London were the most positive about “the outlook ahead of those in the West Midlands, with both regions going against the general trend and seeing sentiment improve.”