Q3: Sentiment eases slightly into negative territory but is among the most confident regions in the UK.
The latest national Business Confidence Monitor (BCM) shows that business sentiment deteriorated further into negative territory in Q3 2025. This increased pessimism is underpinned by elevated concern over the tax burden, as well as above-average inflation and weak domestic and export sales growth eroding businesses’ profit margins.
The survey results are based on 1,000 telephone interviews among ICAEW Chartered Accountants covering a range of UK sectors, regions and company sizes, ensuring a representative picture of the UK economy. The latest quarterly findings are based on the period 14 July to 24 September 2025.
- Business confidence in the North West edged back into negative territory in Q3 2025, but sentiment remains higher than the UK average and most other regions.
- Strong annual domestic sales supported sentiment and companies forecast both domestic sales and exports to improve in the year ahead.
- Companies are also relatively optimistic about employment growth prospects but expect salary inflation to remain above the historical norm.
- Annual input price inflation continued to ease and is relatively low compared to other regions, with further moderation anticipated.
- Profits growth was stronger than in almost all other regions and companies expect growth will accelerate further.
- Concern about the tax burden rose to another survey high and was the most widespread rising challenge for businesses, followed by regulations.
- The outlook for capital investment and R&D budgets remains robust, with companies anticipating above average growth over the next 12 months.
Business confidence in North West
After improving in the previous quarter, business confidence in the North West slipped back into negative territory in Q3 2025, dropping slightly from +0.2 to -0.4. However, while this is significantly below the region’s historical average (+5.7) the North West is still among the least pessimistic regions in the UK, only behind Wales which had a positive score (+0.9), and notably above the UK average (-7.3).
Businesses in the North West recorded comparatively strong domestic sales growth in the year to Q3 2025, supporting comparatively solid profits growth. With the uncertainty in the global trading environment dissipating, companies in the region anticipate a strong uplift in exports over the year ahead, bolstering the profits outlook. However, the tax burden continues to be a prominent concern, reaching another survey record high in Q3 2025, and businesses will be concerned about the forthcoming tax announcements in the November Budget.
Domestic sales and exports growth
After easing in the two previous quarters, annual domestic sales growth picked up to 3.9% in the year to Q3 2025, rising above the regional historical average (3.2%) and outpacing all other UK regions. Businesses in the North West expect this strong performance will continue over the year ahead, with a marked uplift in growth to 4.9%, again outpacing the 4.0% rise projected nationally. Optimism in the locally important Transport & Storage and Business services sectors likely underpin this outlook.
Exports growth was more subdued in the year to Q3 2025, at just 2.0%, lagging both the region’s historical norm (2.6%) and the national average (2.4%). However, in the year ahead, companies in the North West are expecting a sharp uplift in exports growth to 6.1%, the most optimistic exports outlook of any region in the UK. This view is probably supported by above average growth anticipated in the Energy, Water & Mining sector.
Business challenges
April’s rise in employers’ National Insurance Contributions continues to be the primary challenge reported by businesses within the North West, with 60% of the companies surveyed citing the tax burden as a growing challenge in Q3 2025. This proportion is over three times the region’s historical norm (17%) and equals the national average. It likely also reflects business anxiety about further potential rises in the forthcoming November Budget.
Regulatory requirements were the next most prominent concern for businesses in the North West, cited by 41% of companies, marginally ahead of the region’s historical rate (39%) but lower than reported across the UK (47%). The rise in regulatory concern is most notable in sectors that have historically been less likely to report the issue, including Retail & Wholesale and Transport & Storage, with rates in these sectors at their highest levels for seven years. Both sectors have a significant presence in the North West region.
With relatively strong domestic sales performance and exports growth expected to improve significantly, concern about customer demand and competition in the marketplace both eased notably from the previous quarter, with responses on both measures below the region’s historical norm.
Labour market
Companies in the North West raised employment levels by 1.6% in the year to Q3 2025, exceeding both the historical average (1.3%) and the national average (0.9%). Over the coming year, businesses anticipate employment growth to improve slightly to 1.8%, with the North West set to remain one of the fastest growing regions in the UK, outpacing the national average projected increase of 1.2%.
Annual wage growth in the region ticked up to 3.2% in the year to Q3 2025, widening the gap to the region’s historical norm (2.1%) and marginally above the national average (3.1%). Businesses predict some moderation in the growth rate over the coming year to 3.0%, among the stronger rates forecast nationally and ahead of the UK-wide projection (2.7%).
With demand for labour remaining relatively strong in the North West, businesses in the region are still encountering labour market related challenges. Of the businesses surveyed in the North West, 21% of companies cited the availability of non-management skills as a growing challenge, while 17% reported the availability of management skills, both higher than their respective historical averages.
Input prices, selling prices and profits growth
Companies in the North West reported a marked slowdown in annual input price inflation in Q3 2025. Growth of 3.3% was significantly below the national average increase of 3.8% and the joint-lowest in the UK. Businesses in the North West expect input price growth will soften further over the coming year, to 2.2%, falling below the region’s historical average (2.6%) and is the slowest anticipated rise of any UK region over the next 12 months.
Businesses reported annual selling price inflation eased slightly in Q3 2025, slowing to 2.5%, and marginally exceeding the national rate of 2.2%. Selling price growth is projected to moderate further to 1.9% over the coming year, matching the rate forecast across the UK but still higher than the region’s historical average (1.4%).
The combination of weaker input price inflation and strong domestic sales growth supported comparatively robust annual profits growth of 3.2% in the North West in the year to Q3 2025. This rise climbed above the region’s historical norm (2.9%) and exceeded the UK average expansion of 2.3%. With businesses in the region anticipating inflation to ease further and their sales growth to accelerate, they predict a substantial uplift in expected profits growth to 5.1%. This projection is notably higher than the 4.1% rise anticipated nationally and only weaker than the increase expected in Wales.
Investment
Despite recording relatively strong profits growth, companies in the North West slowed capital expenditure growth to 1.7% in the year to Q3 2025, lagging marginally behind the UK average expansion (1.8%). With a relatively optimistic growth outlook, businesses in the North West plan one of the highest increases in capital investment of any UK region over the next year, with a projected uplift of 2.1% and close to the region’s historical norm (2.2%).
The R&D budget growth outlook for the region is also resilient. While businesses also slowed the rate at which they raised R&D budgets to 2.3% over the year to Q3 2025, this outpaced the national average of 1.8% and was again among the largest increases in the UK. Companies plan to moderate R&D budget growth over the coming year to 2.0%, above the expected national average (1.6%) and broadly in line with the region’s historical average (1.9%).