Regional insights

North East

Economic activity and growth

The North East accounts for almost 4% of the UK’s population but a smaller share of output (ie goods and services produced). The GDP per capita is just under 72% of the national average.

It has a relatively large manufacturing sector, meaning that developments in industry, energy, engineering and trade-exposed sectors (ie industries that compete in international markets) have a strong effect on regional economic conditions.

Agency network contacts say demand remains weak or uneven. Businesses that rely on consumer spending, housing, chemicals and some parts of manufacturing are finding conditions particularly challenging. Consumer spending has weakened gradually. People are cutting back on non-essential purchases, and businesses are finding it harder to raise prices, squeezing profit margins.

Some sectors are proving more resilient. Businesses involved in infrastructure projects, defence, digital technology and AI – as well as some exporters – continue to see stronger demand. Investment in areas such as energy, water and transport is supporting this. Some firms are also becoming more productive by using automation and AI.

Many businesses are reluctant to invest despite healthy order books, citing uncertainty about the economic outlook, high borrowing costs and a lack of clarity about future demand.

Evidence from the Bank’s Citizens' Panels points to continued pressure on household finances. Food, energy and childcare costs are still high compared to how much money people have coming in. 

Labour market and pay

The North East has higher unemployment and higher inactivity than the UK average.

Employers are hiring less than they were a year ago. Recruitment difficulties have eased but there are still shortages of people for specialist and higher-skilled jobs, such as engineering, construction, digital and professional services roles.

Citizens' Panel participants in Durham (August 2026) said there is increasing uncertainty around job security and incomes, with some taking on extra or part-time work. Firms are increasingly using automation, outsourcing and productivity improvements to meet demand without employing more people.

Pay growth has slowed to low single digits as weaker demand and squeezed profit margins make businesses more cautious about pay rises.

But staff costs are rising, with National Living Wage increases having a particularly pronounced impact given the region's concentration of lower-paid jobs. Employers increasingly rely on one-off bonuses and selective pay rises rather than increasing wages for all.

Recent conditions suggest a labour market that has become less tight, with employment generally holding up but labour demand softening and inactivity remaining high.  

Housing market

House prices remain significantly below the UK average, although recent growth has been stronger. Affordability may be helping support demand.

But agency intelligence also suggests that housing market activity is weaker than price trends alone would imply. The number of sales has gone down, processes have slowed and house builders report higher cancellation rates and a greater need to offer incentives to secure sales.

Demand remains a lot stronger in rental and social housing, indicating that people cannot afford to buy and there is limited availability of rental accommodation.

New housing supply remains limited. Developers face similar construction costs to elsewhere in the UK, but lower sale prices make it harder for projects to be profitable. Planning and regulatory hurdles are also delaying or reducing developments, limiting the number of new homes being built even though demand remains strong.

Yorkshire and Humber

Economic growth and activity

Yorkshire and the Humber accounts for just over 8% of the UK’s population but a smaller share of output, with GDP per capita at about 82% of the national average.

Agency intelligence shows there is growth but it is difficult to say where the momentum is. Contacts frequently report cautious customers, delayed decisions and an uncertain outlook.

Professional services, logistics, utilities, infrastructure-related activities and parts of food manufacturing report strong conditions. Demand is being supported by digital and AI investment, international business, public sector programmes and regulated investment pipelines. Some specialist engineering businesses linked to energy, transport and data centre investment also report strong order books.

Elsewhere, conditions are more mixed. Consumer-facing sectors, including hospitality, leisure and parts of retail report weaker spending on non-essentials. Construction and housebuilding remain constrained by higher costs and viability concerns. Manufacturing varies a lot, with some firms benefiting from investment and export opportunities while others face competitive pressures and low demand.

Investment intentions remain cautious, reflecting uncertainty, regulatory burdens, Brexit-related frictions and ongoing geopolitical risks. Although many firms continue to invest in technology, automation and AI, expansion plans are often selective and closely focused on productivity enhancement.

Citizens' Panels suggest households are prioritising essential spending. 

Labour market and pay

Yorkshire and the Humber has lower employment rates and higher inactivity than the national average.

Recruitment has become easier over the past year, with fewer vacancies and lower staff turnover. Businesses remain cautious about hiring, and while it is easier to fill many lower-skilled and routine roles, shortages persist in areas such as engineering, construction and technology.

Employment appears stable. Rather than making large numbers of redundancies, many firms are limiting hiring and allowing staff numbers to fall gradually as people leave. Overall, the labour market has become less active as demand has weakened.

Evidence from Citizens' Panels suggests that many people struggle to find jobs that match their skills, while others face barriers to retraining or moving into new types of work. Employers raise similar concerns.

Pay growth has slowed to low single digits and is similar to elsewhere in northern England. Higher National Living Wage rates and National Insurance costs are increasing staff costs, prompting businesses to focus on efficiency gains, automation and targeted hiring rather than widespread pay rises. 

Housing market

House prices are almost 25% lower than the national average.

Agency contacts report that there is strong demand from first-time buyers. More people are buying at the lower end of the market because of relatively high mortgage costs.

Housing market conditions vary by price range. Lower-priced homes continue to sell relatively well, while the middle of the market remains subdued. Demand for more expensive homes is weaker, putting pressure on sellers to drop their prices.

Demand for rented homes is strong, but there are not enough available. Demand for student accommodation is also helping to keep the market busy. At the same time, some landlords are leaving the market and regulatory changes have reduced investment in buy-to-let properties in some areas. This has made rental housing harder to find and is pushing rents up.

Agency contacts say new housing development is being held back by lower sale prices, planning delays and other obstacles. These are making some projects less financially attractive and limiting housebuilding, even though demand remains relatively strong.