Q3: North West business confidence rises but remains negative amid weak sales and persistent cost pressures.
- Business confidence in the North West rose to -2.1 from -14.3 in Q2, slightly below the UK average (-0.5).
- Annual domestic sales and exports growth lagged the national rates, though businesses are optimistic that both will improve next year.
- Labour costs were the most widely cited rising challenge, closely followed by energy costs and geopolitical risk, while late payment concerns rose further above the historical norm.
- Employment growth slowed sharply, but salary growth remained above the historical norm and businesses plan a strong pick-up in hiring.
- Input price inflation eased and is expected to slow further, while companies anticipate a marked improvement in profits growth.
- Capital investment and R&D growth was robust, but businesses plan to moderate both next year.
Business confidence in North West
Business sentiment in the North West improved markedly, with the Business Confidence Index rising from -14.3 in Q2 2026 to -2.1 in Q3 2026. The score was slightly below the UK average (-0.5) and remained in negative territory for the second consecutive quarter, sitting well below the regional historical average (+5.5).
As in most parts of the UK, the recovery in confidence reflected the resilience of the economy to the ongoing US-Iran conflict and the disruption in the Strait of Hormuz, although renewed hostilities towards the end of the survey period pushed oil and gas prices higher again. Businesses in the region remain upbeat about the outlook, expecting stronger domestic sales, exports and profits growth over the coming year, though subdued annual sales growth and rising late payments concerns likely held back confidence.
Domestic sales and exports growth
Annual domestic sales growth eased from the previous quarter to 2.9% in Q3 2026, lagging both the 3.6% rate recorded nationally and the region's historical norm (3.2%). However, companies in the North West anticipate a notable uplift over the next 12 months to 4.9%, above the 4.3% projected UK increase.
Annual exports growth edged up to 2.2% in Q3 2026 but remained below both the region's historical norm (2.6%) and the UK average (2.8%), as geopolitical uncertainty and higher transport costs continued to weigh on external demand. Businesses expect conditions to improve over the next 12 months, with an anticipated increase of 3.3%, though this lags the 4.1% rise forecast nationally.
Business challenges
Elevated costs are the principal concerns for North West businesses. Labour costs were the main growing challenge, reported by 49% of businesses, although this eased from the previous quarter and was below the national average (53%). Energy costs were the second greatest challenge, cited by 47% of businesses and slightly above the UK average (45%).
Geopolitical risk remained a significant concern, noted by 46% of businesses in the region. While this was down from the previous quarter and less widespread than the UK (58%), continued US-Iran tensions kept it among the main pressures facing companies. Concerns about the tax burden also eased but were cited by 43% of businesses, more than twice the historical norm (18%) and slightly above the UK average (41%).
Reports of regulatory requirements as a rising challenge eased to 43% in Q3 2026 but remained above the regional historical norm (40%), as companies continue to adjust to the Employment Rights Act and the Renters' Reform Bill. Meanwhile, reports of late payments rose further to 26%, their highest since Q4 2025, above both the historical norm (22%) and the UK average (19%) and among the most widely cited in the UK. Transport problems (22%) and competition (37%) were also more widely reported than their historical norms of 17% and 35% respectively.
Labour market
Annual employment growth in the North West slowed to 0.6% in Q3 2026, the weakest rate since Q2 2021 and below both the 0.7% rise recorded nationally and the region's historical norm (1.3%). Businesses anticipate a strong pickup to 2.7% over the next 12 months, well ahead of the national average of 1.5%.
Despite softer jobs growth over the past year, companies in the region reported that annual salary growth picked up slightly to 3.0% in Q3 2026, above both the UK average rate (2.8%) and the historical norm (2.2%). Businesses predict wage growth will remain elevated at 2.9% over the coming year, above the 2.6% rise forecast nationally.
Cooler labour demand was reflected in fewer companies reporting skills-related concerns. Reports of the availability of management skills (7%) and non-management skills (16%) as growing challenges both sat below their historical norms, of 13% and 18% respectively.
Input and selling prices, and profits growth
Annual input price inflation in the North West eased to 3.7% in Q3 2026, below the 3.9% rate recorded nationally but still well above the region's historical norm (2.7%). Companies expect these cost pressures to moderate further to 3.0% over the next 12 months, broadly in line with the 2.9% rise forecast nationally, although rising oil and gas prices at the end of the survey period pose upside risks to this outlook.
Companies in the region continue to pass on some of their higher costs to their customers. Businesses lifted their selling prices by 2.7% in the year to Q3 2026, running ahead of both the 2.2% rate recorded nationally and the region's historical norm (1.4%). Firms intend to raise prices by 2.4% over the next 12 months, above the 2.1% increase expected UK-wide.
Despite raising selling prices at a faster rate, weaker sales weighed on profitability, with businesses reporting annual profits growth eased slightly to 2.1% in Q3 2026, which is lower than both the 3.3% rate recorded nationally and the region's historical norm (2.9%). Companies in the region anticipate a marked acceleration, projecting profits to rise by 4.9% over the next 12 months, exceeding the national average rise of 4.5%.
Capital investment and R&D
Businesses reported robust annual capital investment growth of 3.3% in Q3 2026, easing from the previous quarter but exceeding both the 2.3% rate recorded nationally and the region's historical norm (2.2%). However, businesses see growth moderating to 1.7% over the coming year, below the UK forecast (2.0%).
Annual R&D growth picked up to 2.4% in Q3 2026, broadly in line with the 2.3% rise recorded across the UK and above the region's historical norm (1.9%). This is consistent with the national picture of businesses focusing on productivity and efficiency improvements to mitigate rising costs. However, companies expect R&D growth to slow to 1.5% over the next 12 months, below the national projection of 1.9%.
UK results
The UK Business Confidence Index rebounded to -0.5, from -14.6 in Q2, but remained negative for a seventh consecutive quarter. Current sales and profits proved resilient, but firms downgraded their expectations for both over the next 12 months. Geopolitical risk remained the leading challenge, while elevated input and labour costs continued to put pressure on margins. Energy costs, regulations and the tax burden remain significant challenges. The rebound was broad but uneven: confidence rose in every sector, IT & Communications was the most positive, while Property and Construction remained deeply negative.
The latest quarterly findings are based on the period 13 July to 21 September 2026.