Q3: Confidence dips back into negative territory amid weak sales and heightened tax concerns.
The latest national Business Confidence Monitor (BCM) shows that business sentiment deteriorated 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.
- Sentiment in Yorkshire & Humberside declined in Q3 2025, falling back into negative territory, but is still more confident than the UK average.
- The tax burden remained the main rising challenge for companies in the region. Regulatory issues and competition in the marketplace were also prevalent concerns.
- Domestic sales growth slowed but companies remain optimistic about the coming year, while exports are predicted to continue to underperform.
- Input price inflation slowed sharply but weak sales underpinned disappointing profits growth in the quarter, though businesses foresee a strong recovery.
- Employment prospects are expected to deteriorate sharply in the year ahead, with businesses planning negligible growth.
- Capital investment and R&D budget growth both improved on last quarter, but the below par performance is expected to continue next year.
Business confidence in Yorkshire & Humberside
After briefly returning to positive territory last quarter, the Yorkshire & Humberside Business Confidence Index slipped back into negative territory in Q3 2025, with a score of -2.8. Sentiment in the region remains above the UK average (-7.3) but is below the region’s historical average (+4.9).
The decline in confidence in the region is likely linked to weak domestic sales amid ongoing uncertainty following April’s rise in employers’ National Insurance Contributions and ahead of the November Budget. Speculation about how the Chancellor may address any fiscal shortfalls were widely reported during the survey period, likely weighing on business sentiment and influencing short-term decision making. Concerns about the tax burden were the most widely cited growing challenge in the region and, despite easing global uncertainty, the region experienced muted exports growth.
Domestic sales and exports growth
Domestic sales growth slowed to 1.9% in the year to Q3 2025, underperforming compared to the national average (3.0%) and the region’s historical average (2.9%). It is likely that relatively weak domestic sales reported in Retail & Wholesale and Manufacturing & Engineering weighed on growth in the quarter. However, looking ahead, businesses in Yorkshire & Humberside remain optimistic about the coming year, forecasting that domestic sales growth will rise to 4.1%, just ahead of the UK projection (4.0%).
Despite improving on the previous quarter, annual exports growth of 1.3% is among the weakest reported across all UK regions in Q3 2025. The expansion was notably below the UK average (2.4%) and the regional historical norm (2.7%). With global uncertainty easing over the survey period, companies expect exports growth to improve to 2.1% over the next 12 months, however this is the weakest forecast of all regions and markedly lower than the UK-wide forecast (3.6%).
Labour market
Despite businesses reporting above-average employment growth in Q3 2025, there are further signs that Yorkshire & Humberside’s labour market is cooling. Annual employment growth of 1.4% was higher than the national average (0.9%) but was marginally weaker than recorded in Q2 2025 (1.5%). Furthermore, businesses plan to grow their workforces by just 0.1% in the coming year, the lowest rate projected across all UK regions and significantly below the region’s historical norm (1.0%).
Concerns about staff turnover and the availability of skills provides further evidence that the labour market in the region is cooling, with all three issues reported by an increasingly smaller proportion of businesses in recent quarters, and below their respective historical averages.
Salary inflation also edged down, with wages rising by an average of 2.7% in the year to Q3 2025, the joint-lowest rate recorded in the UK. While it remained high compared to the historical average (2.2%), companies in the region anticipate that the gap will close, predicting wage inflation will ease to 2.3% in the year ahead.
Input prices, selling prices and profits growth
After the rate rising in the previous quarter, annual input price inflation returned to its downward trajectory in the region in Q3 2025. Companies reported input price growth of 3.3%, below the UK average (3.8%) and the lowest rate reported in the UK. Businesses expect inflation to moderate further over the coming year, predicting input prices will rise by 2.6%, finally dipping below the regional historical average (2.7%).
Selling price inflation eased sharply to 1.5% in the year to Q3 2025, also the lowest rate reported across the UK and matching the regional historical average. Companies in the region project that selling prices will rise by 1.4% in the coming 12 months, a slower rise than expected in all other regions.
With domestic sales and exports growth both underperforming, Yorkshire & Humberside businesses recorded the smallest rise in annual profits in the year to Q3 2025. The reported expansion of just 0.2% was the lowest figure reported since Q3 2024. Businesses remain positive about future prospects as inflationary pressures continue to recede and domestic and global sales improve, predicting profits growth will rise to 4.7% over the next 12 months, ahead of the regional historical average (2.8%) and national projection (4.1%).
Business challenges
Ahead of the November Budget, the tax burden remains the primary growing challenge for Yorkshire & Humberside businesses, reported by 60% in Q3 2025, matching the UK average and close to the region’s historical high (62%). Concern about regulatory requirements remains prominent, though the proportion of businesses citing the issue dropped to 39%, equaling the historical average and less widely reported than the UK average (47%).
However, competition in the marketplace was a more prominent issue in the region than reported UK-wide, cited by 39% of companies in Yorkshire & Humberside compared with 33% in the UK and above the region’s historical average of 35%. Meanwhile, concerns about customer demand edged down and were reported by a smaller proportion of businesses in Q3 2025 than the historical average.
Investment
Capital investment growth recovered somewhat from the low point reported last quarter, rising by 1.6% in the year to Q3 2025. However, the expansion continued to lag the national average (1.8%) and the regional historical norm (2.0%). Businesses intend to maintain growth at a similar rate next year, predicting that capital investment will rise by 1.5% over the coming 12 months, marginally below the UK-wide projection (1.7%).
Businesses in the region also reported a recovery in the growth of R&D budgets, recording expansion of 1.3% in the year to Q3 2025. However, much like capital investment, this rate was lower than both the national average (1.8%) and the region’s historical average (1.7%). Companies plan to slow the growth in R&D budgets to just 1.0% in the year ahead, one of the lowest rates forecast across UK regions.