In the closing month of 2025, the UK’s business landscape revealed a patchwork of progress, with robust expansion in select areas counterbalancing slowdowns in others, according to the latest NatWest Regional Growth Tracker. This report, which analyzes private sector performance across nations and regions, highlights a concentration of output gains in southern and central England, while northern areas faced steeper challenges.
London emerged as the standout performer in December, posting a Business Activity Index of 54.9, signaling strong expansion.
This not only topped the regional rankings for the month but also cemented the capital’s position as the UK‘s fastest-growing area throughout the entire year.
Businesses in London benefited from surging demand, with new orders climbing at the quickest pace among all regions.
This momentum contributed to a buildup of unfinished work, pointing to emerging capacity strains that could fuel further hiring if sustained.
Close behind was the West Midlands, where activity rebounded sharply to an index of 52.9.
The region experienced a late-year surge, particularly in the fourth quarter, shaking off earlier setbacks such as temporary industrial disruptions.
Similarly, the South West and South East recorded solid advances, with indices of 52.2 and 51.9, respectively.
These southern hubs drove much of the national uptick, supported by healthier order books and improved market conditions.
However, the picture was far from uniform.
The North West suffered the most pronounced contraction, with its index dipping to 46.6, reflecting weakened demand and operational hurdles.
Other areas, including Scotland and the East Midlands, also grappled with declines, though less severe.
Overall, new business inflows rose in eight out of twelve monitored regions—a notable improvement from just five in November and the highest count since October 2024.
This broader demand recovery offers a glimmer of optimism heading into 2026.
On the employment front, the report paints a sobering view. Job numbers decreased across every region, driven by persistent cost pressures that prompted firms to trim payrolls.
The reductions were relatively mild in Scotland and the North East, but more aggressive in the East Midlands and West Midlands, where economic headwinds hit hardest.
Despite these cuts, backlogs of work increased in four regions—London, the South West, West Midlands, and North East—marking the widest spread since April 2023.
This suggests that while staffing levels are lean, underlying demand might soon necessitate expansions.
Inflationary trends added another layer of complexity.
Input costs accelerated nationwide, exceeding long-term averages in most areas, with only Northern Ireland seeing a slight moderation from the previous month.
In response, companies raised selling prices universally in December, reversing sporadic declines observed in November—the first such broad increase in over five years.
Northern Ireland led with the sharpest price hikes, while Yorkshire & Humber saw the mildest.
Business sentiment brightened considerably.
Confidence in future activity strengthened in more than half of the regions, surpassing levels from a year prior in most cases.
London displayed the most buoyant outlook, while Northern Ireland hit a 14-month peak in optimism.
This improved mood could herald a more balanced recovery in 2026, provided inflationary pressures ease and demand holds firm.
The NatWest findings underscore the UK’s regional disparities, with southern engines powering ahead amid northern vulnerabilities. Policymakers may need targeted interventions to bridge these gaps, fostering inclusive growth as the economy navigates post-pandemic challenges.