UK business activity accelerates in June as regional growth broadens

The UK economy rounded off the second quarter on a positive note, as business activity increased across most regions in June, according to the latest NatWest UK Regional Growth Tracker.

The report, which monitors business activity in both the manufacturing and services sectors across 12 UK nations and regions, revealed that eight regions posted growth in June – up from six the previous month and marking the broadest expansion since September 2024.

The East of England emerged as the frontrunner, recording the fastest rate of expansion in over three years. It was closely followed by the South West and London, reinforcing their status as the key growth engines at the end of Q2. Meanwhile, business activity was flat in the North West, and nearly stabilised in the East Midlands and Yorkshire & Humber.

Despite a slight retreat in Northern Ireland following growth in May, most other parts of the UK showed signs of economic momentum.

“Even where business activity dipped in June, with the rates of decline being only modest and the performances better than seen on average over the first half of the year, those areas are still in what we dub ‘recovery’ territory.”

Burnside added that underlying demand also showed improvement, with new business rising or stabilising in several areas.

Despite growing output, the labour market remained subdued. Employment fell in nearly all regions, with the exception of Northern Ireland, which posted its first uptick in workforce numbers in five months. However, the increase was only marginal. The steepest job losses were recorded in Yorkshire & Humber.

Burnside noted: “The combination of wage pressures and underutilised capacity encourages firms to look for productivity gains where possible.”

Demand conditions strengthened in Wales, with renewed upturns also seen in the East of England, North East, South West, and London. The East of England again led the pack with the fastest growth in new business in over two years. However, Northern Ireland saw a modest decline in new orders.

June data pointed to a reduction in business backlogs across nearly all regions – a sign that capacity pressures are easing. The North West and Yorkshire & Humber recorded the steepest declines in outstanding work, while the North East was the only region to see a marginal increase.

Businesses across all English regions and Wales reported slower input cost inflation, with the North West seeing the weakest cost pressures. However, Northern Ireland and Scotland experienced a slight uptick in operating expenses, with Northern Ireland posting the steepest rise overall.

Despite continued price rises for goods and services nationwide, output price inflation eased across the board, offering relief to customers and indicating a more stable pricing environment. The West Midlands saw the sharpest slowdown in inflation, while the lowest price rise was in Yorkshire & Humber.

Outlook

Outlooks for the next 12 months remained positive in all regions. The West Midlands reported the highest business confidence, even though sentiment dipped slightly in most areas compared to May, especially in the North East.

The June NatWest Tracker signals growing economic resilience across the UK, as most regions returned to expansion and price pressures softened. While the labour market still shows signs of fragility, particularly with staffing cuts in several areas, easing inflation and improving demand could pave the way for more stable growth in the second half of 2025.