Businesses across the North East are continuing to invest for growth and resilience, despite ongoing cost pressures and workforce challenges, according to Barclays’ Q1 2026 Business Prosperity Index.

The Index, which combines anonymised Barclays client data with business leader research, highlights a region that remains focused on long-term capability and expansion, even as firms navigate a more complex operating environment.

Barclays research shows that business confidence remains strong, with 79 per cent of firms confident in their prospects over the next 12 months. However, workforce challenges are becoming more pronounced, with 65 per cent reporting that difficulties hiring skilled labour are constraining their ability to grow.

Barclays’ anonymised client data, from over 28,000 business shows:

Despite workforce challenges, larger corporates and SMEs outperformed the national average for cash entering Barclays accounts. SME cash inflows rose +0.7 per cent, compared to a 0.2% national average rise. Larger corporates within Barclays UK Corporate Bank saw cash flows decline 3.5%, half the UK average (-7.0%).
Meanwhile North East SMEs, increased savings (+1.8 per cent) and reduced borrowing, broadly mirroring a cautious national picture for smaller firms.
At the same time, larger corporates in Barclays Corporate Bank continued to increase longer-term borrowing (+4.3 per cent) suggesting investment intentions may remain intact.

Barclays Business Prosperity research indicates that, in response, investment appetite across the region remains strong. Nearly half (46 per cent) of North East businesses say they are planning to expand or upgrade facilities, underlining a clear focus on boosting productivity and building long-term resilience.

While firms are confident in their own outlook, sentiment towards the wider economy is more measured. Around 58 per cent of businesses say they are confident in the UK economy, which is comparatively positive relative to other regions.

Supply chains also remain a source of stability, with 90 per cent of firms describing them as reliable.

Taken together, the findings point to a regional business community that is adapting
pragmatically, balancing caution with continued investment to support future growth.

Businesses across the North East are continuing to invest in their future, even as cost pressures and labour challenges persist.

What stands out is the region’s focus on growth. Firms are allocating capital towards
equipment, facilities and innovation, which will help strengthen productivity and long-term competitiveness.

While there is still uncertainty in the wider environment, the continued commitment to investment reflects both resilience and confidence across North East businesses.

Key findings from the Q1 Index at a national level show:

Geopolitical tensions have hit confidence and investment, with one in five (20 per cent) pausing investment in light of geopolitical uncertainty
Meanwhile 68 per cent expect to increase cybersecurity investment over the next 12 months, but almost half (46 per cent) believe the adoption of new technologies is
increasing their exposure to cybersecurity risks
Six in 10 (61 per cent) now proactively use agentic AI, with cloud, cyber and AI together accounting for 44 per cent of planned technology budgets over the next year

Geopolitical shock impacts business activity with firms split on how to handle rising costs

In a quarter that included the intensifying of the Middle East conflict, Barclays anonymised client data from around 900,000 UK businesses comparing Q1 2026 to Q1 2025, showed the diverging ways smaller and larger firms are responding.

SMEs within Barclays Business Bank saw a modest uptick in inflows (+0.2 per cent) while continuing to build savings buffers (+1.5 per cent) and cut borrowing (-13.1 per cent).
Larger corporates within Barclays Corporate Bank saw a significant drop in cash entering (-7.0 per cent) and leaving businesses (-6.1 per cent) as they reduced savings (-5.2 per cent)
Larger firms have simultaneously increased longer term borrowing (+6.9 per cent) and reduced shorter-term overdraft borrowing (-11.8 per cent), suggesting future investment plans remain intact

Businesses of all sizes are split on their pricing strategy in response to rising costs, with 37 per cent passing them on to customers and 32 per cent absorbing the impact within margins.

Meanwhile over four in five (81 per cent) expect revenues to increase next quarter as 83 per cent are confident in their prospects over the next year. Looking ahead, more than half (54 per cent) are planning to increase investment in the next 12 months.