Chamber survey shows cautious start to 2026 for North East businesses
Date published:
Economic survey results released today (22 April) by the Chamber show North East businesses remained cautious ahead of rising geopolitical tensions.
The results of our latest Quarterly Economic Survey (QES) for Q1 2026 pointed to easing cost pressures, but a more uncertain outlook, with weaker demand and labour market challenges, continued to weigh on business confidence.
Headline findings
- Labour costs remained the most significant pressure for businesses, despite falling 6.2% in Q1 and 24.9% year-on-year.
- Employment levels and future hiring plans declined, alongside rising recruitment difficulties in several areas.
- The proportion of businesses operating at full capacity dropped by 4.7%, while exporting activity also edged down.
- Plant investment increased by 12.2%, and profitability expectations improved slightly, suggesting some underlying resilience.
- Over half of firms have taken steps to reduce energy costs, with increased focus on efficiency measures.
Rhiannon Bearne, executive director of policy and representation and deputy CEO at the Chamber, said: “Although these results were gathered before geopolitical tensions escalated in March, it is likely that an increasingly uncertain global environment was already having an impact on confidence and activity.
“Ongoing geopolitical tensions, supply chain disruptions and wider economic volatility continue to influence business confidence and trading conditions. For many businesses, these external pressures add a further layer of unpredictability, reinforcing a more measured approach to growth and investment.”
Price pressures and concerns
Price pressures saw a general decrease across most indicators in Q1, with only fuel seeing a small increase (+2.3%). Similarly, over the course of the last 12 months, price pressures decreased across all indicators, with the most significant decreases in labour costs (-24.9%) and raw materials (-23.1%).
In terms of business concerns, the Q1 results showed a mixed picture. The highest areas of decreased concerns were inflation (-16.8%) and staff costs (-10.8%), on the other hand, the highest areas of increased concerns were competition (+4.6%) and staff shortages (+2.1%).
Workforce and recruitment
Workforce indicators weakened in Q1, with both current employment (-6.5%) and future hiring plans (-6.6%) declining. Recruitment activity softened overall, although permanent hiring saw a slight increase.
Despite falling concerns around staff costs, recruitment difficulties increased, particularly for clerical and semi-skilled roles. Manufacturers continue to face challenges recruiting skilled technical staff, while service providers struggled more with professional roles.
Business activity and investment
Domestic demand slowed, with both UK sales and orders declining. Exporting activity also fell slightly, with manufacturers still far more likely to trade internationally than service providers.
Encouragingly, investment intentions improved, particularly for plant investment (+12.2%), while profitability expectations also rose slightly, suggesting some resilience among businesses.
Deborah Walton, Chamber president, said: “Despite these pressures, the QES shows that businesses are responding pragmatically, focusing on efficiency, targeted investment and maintaining stability in the short term. These strengths will be important as employers weather some of the storms ahead.”
Energy
Energy concerns remained relatively stable, with 41.9% of businesses citing it as an issue. Over half of firms have taken steps to reduce energy costs, with increased focus on efficiency measures such as reducing usage and investing in energy-saving equipment.
Outlook and advocacy
Taken together, Q1’s findings highlight relief from cost pressures but a more challenging demand and labour market environment. Declining sales, reduced capacity utilisation and rising recruitment difficulties point to growing pressures on business performance, even as firms show resilience through increased investment and energy efficiency measures.
Deborah added: “Our findings underline the importance of consistent, practical support that enables businesses to build confidence, invest sustainably and access the skills they need. The Chamber will continue to work closely with organisations and policymakers to support businesses across the North East.”
The QES is carried out by the Chamber, in partnership with the British Chambers of Commerce. Q1 2026 was conducted between 9th February and 9th March 2026.
Download a copy of the Quarterly Economic Survey Q1 2026 report here.
British Chambers of Commerce Survey
As economic conditions evolve, it is vital that policy provides clarity and stability to support business confidence in real time.
To help firms now, the British Chambers of Commerce (BCC) has launched a new Diplomatic Advisory Hub in partnership with the Foreign, Commonwealth and Development Office.
As part of this work, the BCC, in partnership with local Chambers, is conducting a survey to explore how businesses are finding conditions day-to-day.
We want to know about the impact of the conflict in Iran on your business, whether changes to employment rights and labour costs are affecting you, and how the UK’s future alignment with the European Union looks from your perspective.
This survey will feed directly into regional and national decision-making and ensure the voice of your business is heard where it matters most. Take the short, 5-minute BCC survey here.