According to RSM UK’s latest Economic Outlook for Q3 2025, the UK was the best performing G7 economy in the first half of 2025, despite low consumer confidence and stagnant business investment.

However, growth looks more challenging moving forward, with inflation set to hit 4% and wage growth slowing. There’s also the added risk that speculation around Autumn Budget tax rises could depress confidence further.

Mike Thornton, Regional Managing Partner for Yorkshire and the North East at leading audit, tax and consulting firm RSM UK, looks at:

• Why there’s reason for cautious optimism among Yorkshire and the North East businesses despite a squeezed UK labour market;

• The importance of the government delivering its Industrial Strategy to boost regional growth;

• The urgent need for infrastructure investment in the North amid a budget storm brewing.

  
  

Mike Thornton comments:

“A weakening labour market is affecting availability of jobs and pay growth across the UK, with some regions and industries hit harder than others. However, in Yorkshire and the North East, emerging industries are popping up around us and are set to become drivers of future growth and productivity."

"In addition, commitments outlined in the Industrial Strategy to benefit key industries for the region, including advanced manufacturing, clean energy and digital technologies, are conducive to unlock long-term economic growth and skilled jobs."

“Hull and the Humber is already recognised as a national leader in world-class renewable energy generation and is home to sites such as Siemens Gamesa and Saltend Chemicals Park. These businesses employ over 2,400 people and are expected to bring in more than £2bn in private investment, with the area also experiencing above-average productivity growth (2.6%), outpacing other northern regions. In the North East, plans are underway to develop Blyth and Cobalt Park into an AI growth zone to boost economic growth and create thousands of jobs. Similarly, Google is in talks to develop a giant datacentre at Teesworks in Teesside, with the site also lined up as an AI growth zone."

“However, public finances are in an unsustainable position and therefore tax rises plus spending cuts are inevitable in the upcoming Autumn Budget. During periods of economic uncertainty, businesses need stability to underpin long-term decisions, especially in Yorkshire and the North East, where further funding in key sectors and local investment zones is expected. The Industrial Strategy is hugely welcome and rightly focused on unlocking opportunities in sectors like clean energy, advanced manufacturing, and digital infrastructure, but we can't afford another budget full of surprises and a dampening business confidence.”

He added: “If the government is serious about its commitment to unlocking growth in the North, it must finally get to grips with infrastructure and improving connectivity. Currently, our rail networks hinder productivity and prevent skilled workers from reaching industry hubs, due to delays, disruption and complex routes. Additionally, the upgrades to the network have felt underwhelming, with many arguing they fall short of what’s needed, or even bypass areas like Hull, which still lacks electrification. The government did commit to improving rail and road connectivity in the North of England in the Industrial Strategy over the next five years, but, despite funding, progress has felt steady rather than stellar. It is therefore key that the Autumn Budget tackles concerns around infrastructure, ensuring it acts as a catalyst for industrial and regional growth, rather than a barrier.”