Gilson Gray is delighted to once again sponsor the North East Quarterly Economic Survey (QES) issued by Aberdeen & Grampian Chamber of Commerce.
Unfortunately, the Q2 2025 QES report paints a challenging picture for the North-east businesses, with many reporting more strain than their UK counterparts. With 142 regional responses, the report gives a cross-sectoral view and reveals a worrying mix of falling demand, investment cutbacks, and deteriorating business confidence that collectively point to a fragile and uncertain local economy.
The clearest warning sign is the sharp drop in both domestic sales and forward orders - now at their lowest levels since Q1 2021. A huge 38% of firms reported declining sales and 45% saw falling advance orders. This contrasts starkly with national trends, where sales and orders are largely stable, if flat.
There is some good news in international markets. Whilst overseas sales and orders were significantly down last quarter, perhaps resulting from global tariff uncertainty, they have ticked upward again with the proportion of businesses seeing growth in overseas orders doubling to 25%. Regionally, firms have regularly outperformed the UK average in international demand and it is encouraging to see this side of the economy showing resilience.
Labour market conditions remain tight and largely stagnant. While 56% of firms attempted to recruit, only 19% managed to grow their workforce. The biggest challenges were with skilled and professional workers, with 80% of recruiters reporting hiring challenges. Looking ahead, fewer businesses expect to expand their teams, and more anticipate downsizing - pointing to continued headwinds in the employment landscape.
On the investment side, both training and capital expenditure have fallen more sharply in the north east than in the wider UK market. The north east still records the highest proportion of actively investing businesses compared to other UK regions. However, 44% of respondents are scaling back or postponing local investments, highlighting a cautious mood across the region which risks eroding its future productivity base.
We have regularly highlighted that the UK government tax and policy approach to the domestic oil & gas industry will hit Aberdeen and the north east hard – particularly without rapid action on a robust and progressive energy transition plan and incentives mechanism. And it seems clear we are seeing first-hand the consequences of government policies impacting cascading across businesses in our region. Only 27% of businesses are operating at full capacity, the lowest since early 2021 and well below the UK average of 39%. At the same time, 35% of businesses cite competitive pressures as a major concern - up from 25% last quarter.
There is a strong perception of declining government support, and many firms are either delaying investment or considering exit strategies. Recently there have been increasing headlines of firms pointing to government policies as the reason for reducing workforce and moving operations overseas.
While some UK-wide indicators suggest a stabilising economy, the Q2 2025 QES report reveals a region under significant strain, caught between systemic pressures and a lack of confidence in the policy environment. UK & Scottish governments must act quickly to arrest the decline and incentivise investment and growth. Strategic intervention - particularly around infrastructure, skills, and sector-specific support - will be critical in reversing the negative trends we are seeing in the region.