Over the last six quarters, the dominant narrative emerging from the North-east Quarterly Economic Survey has been one of increasing crisis: collapsing confidence, policy-induced stagnation, and a region falling further behind the UK average. That narrative remains strong in the pages of this quarter’s report. One would be forgiven for being somewhat downtrodden when faced with the rather banal consistency of the quarter-on-quarter statistical creep downward in the North-east figures. Particularly when, as Russell Borthwick rightly points out in the closing remarks of his executive summary, “the frustration is that it simply doesn’t need to be this way”.
However, I believe the data also speaks to something even more consequential. Whilst it is abundantly clear that the North-east economy continues to be directly impacted by external forces, it appears that it is undergoing a painful structural reckoning that will determine whether it truly adapts for the medium to long term, or entrenches long-term fragility.
The North-east headlines are bleak. Sales growth lags badly behind the UK, forward orders are weak, and nearly 40% of firms expect turnover to fall in 2026, with half forecasting declining profits. Yet the striking feature is not just the depth of pessimism, but its concentration. Unlike the national picture, where weakness is diffuse and tentative, North-east sentiment is decisive and directional.
Businesses are not confused about the outlook; they are acting as if a lower-growth environment is now the base case.
This matters because it explains several other trends that we see in the report. Workforce contraction, reduced training spend, and subdued capital investment are often framed as evidence of economic malaise. However, they are also rational responses to an ongoing environment in which firms expect volatility, policy risk, and constrained margins to persist. In effect, many businesses are choosing balance-sheet resilience over expansion. Whilst that is not optimism, neither is it outright crisis - it is direction that is becoming embedded.
The same is true of pricing behaviour. While almost half of North-east firms expect to raise prices, this proportion is now lower than the UK average. That is not a sign of easing cost pressure — labour and utilities remain acute — but rather of competitive constraint. Firms appear acutely aware that pricing power is limited in their markets, particularly for those exposed to national or international competition. In that sense, the region appears to be adjusting faster to post-inflation realities than some of its UK peers.
Perhaps the most striking signal in the report is the contrast between domestic weakness and relative export strength. North-east firms continue to outperform nationally on overseas sales and forward export expectations. This export orientation reflects a region that has long operated in globally competitive sectors and is therefore structurally better equipped to seek demand elsewhere beyond a stagnating domestic economy. Whilst there is a clear risk here of an increasing offshoring of the supply-chain, the real systemic risk is perhaps that the domestic ecosystem becomes too thin to support them.
The widespread adoption of digital tools, AI, and automation reinforces this point. Over half of regional firms are using innovation extensively or moderately, primarily to drive productivity and efficiency. Together these are not the behaviours of an economy in retreat, but of firms attempting to decouple performance from local demand constraints. Innovation, in this context, is not about growth narratives; it is about survival and optionality.
That framing also sheds light on the stark statistic that almost a third of businesses cite “survival” as their top priority. This is often read as terminal pessimism. But survival is also a strategy. It implies prioritisation, cost discipline, and selectivity - traits that, if combined with the region’s export capability and technical skill base, could form the foundations of a leaner but more durable economy.
Government policy, taxation, regulatory uncertainty, and the uneven impact of national decisions continue to impact more heavily on the North-east than elsewhere. But the more uncomfortable issue raised by the data is that it suggests many firms no longer expect policy reversal to restore confidence any time soon – and are reorganising accordingly.
The real risk, then, is not just one of short-term decline which we have witnessed over these past six quarters, but a slow normalisation of lower expectation. Whether the North-east emerges weaker or more resilient will depend on whether today’s defensive adaptations become a ceiling for future growth – or create tomorrow’s platform for renewal.