North East Forecast to See Consistent Economic Growth Over Next Three Years As Newcastle’s Job Growth Outpaces National Rate

The North East’s economy is expected to achieve annual average GVA growth of 1.3% between 2025 and 2028, a slower rate than the UK average of 1.6% over the same period, according to the latest EY Regional Economic Forecast.

However, Newcastle’s growth is expected to align more closely with the national pace, with the city projected to average an annual GVA growth rate of 1.5% over the next three years. Newcastle is also expected to see average annual employment growth of 0.8% from 2025 to 2028, outpacing the national rate (0.7%).

The North East’s growth in the immediate future is predicted to be subdued, with 0.5% GVA growth forecast for the region over the next 12 months. However, this is set to be followed by more buoyant levels of growth as the North East economy accelerates in 2026 and 2027, according to the forecast.

The forecast also projects that, by 2028, Newcastle’s local economy is expected to be more than half a billion pounds larger than in 2024 when measured by GVA.

The North East’s growth is expected to be concentrated in urban areas, in line with previous trends, with Sunderland expected to see the region’s joint-fastest-growing economy from 2025 to 2028, matching Newcastle’s average annual growth rate (1.5%). However, Sunderland’s annual average employment growth (0.3%) is expected to be slower than that expected of Newcastle (0.8%), the North East (0.5%) and the wider UK (0.7%).

Michael Scoular, EY’s Newcastle Office Managing Partner, said: “The North East’s return to steady economic growth in the coming years is an encouraging signal, particularly given the persistent challenges and headwinds that continue to face the region and the UK as a whole.

“However, the North East is expected to be the UK’s slowest-growing regional economy over the next few years, highlighting room for improvement. The region’s strong manufacturing prowess should continue to be a key focus going forward, particularly given the challenges the sector is expected to face across the UK in the coming years, with employment forecast to decline significantly. Indeed, businesses and policymakers should prioritise finding ways to leverage the North East’s proud manufacturing heritage and expertise going forward, especially as the sector is expected to remain the region’s biggest contributor towards GVA over the next three years. Navigating the challenges associated with the shift towards advanced manufacturing will be critical for the North East, and collaboration between the public and private sectors will undoubtedly be pivotal in supporting businesses through this transition.

“Going forward, creating an optimal environment for companies to thrive throughout the region, not just in Newcastle, across a wide variety of sectors, should be a top priority. A significant focus should be placed upon how growth opportunities linked to evolving technology and the energy transition can be capitalised upon right across the North East in pursuit of unlocking more of the region’s untapped economic potential.”

Energy and tech among North East’s leading growth sectors 

The electricity, gas and steam sector, which includes electric generation, transmission, trading and distribution, and fuel mains, is expected to be the North East’s fastest-growing sector, with 2.6% average annual GVA growth between 2025 and 2028. This partly reflects the increased investments in networks and renewable energy generation in the region.

Information and communication (which involves technology-led activity), is forecast to be the region’s second-fastest-growing sector with average annual GVA growth of 2.5% over the next three years. This is followed by arts, entertainment and recreation (2.1%).

The construction and professional, scientific and technical sectors are expected to see the joint-fastest average annual employment growth rates in the North East over the next three years (1.4%). In comparison, the manufacturing sector is expected to see employment in the North East contract by an annual average of 1.7% over the next three years, reflecting elevated energy and labour costs.

Despite the fact that manufacturing is still expected to be the North East’s biggest contributor of GVA over the next three years, the sector’s GVA is expected to decline by 1.4% over the next 12 months. However, it is then forecast to bounce back, averaging annual growth of 1.2% across the 2025 to 2028 period.

Meanwhile, North East manufacturing employment growth is expected to see an average annual reduction of 1.7%, in line with the UK rate amid challenges for the sector.

Behind manufacturing, the North East’s real estate and human health and social work sectors are expected to be the next-largest contributors to the region’s overall GVA over the next three years.

Knowledge-intensive industries are expected to be among Newcastle’s fastest-growing sectors over the next three years. The city’s information and communication sector is forecast to see average annual GVA growth of 2.5%, while its professional, scientific and technical sector (which includes R&D as well as business-to-business services) is expected to see average annual growth of 2.3%.

This growth is expected to translate into job opportunities, with professional services (1.6%) forecast to be Newcastle’s fastest-growing sector for average annual employment growth over the 2025-2028 period.

Growth rates expected to vary across North East towns and cities

Behind Newcastle and Sunderland, the next-best-performing locations in the North East between 2025 and 2028 are expected to be Hartlepool and Middlesbrough, with both forecast to see an annual average of 1.3% GVA growth, in line with the region’s average. Middlesbrough’s average annual employment growth over the period is expected to be 0.4%, while Hartlepool’s (0.3%) is forecast to be slightly slower.

Stockton-on-Tees and Darlington are both expected to see an annual average of 1.2% GVA growth between 2025 and 2028, as well as 0.3% average annual employment growth.

Durham is forecast to see the region’s slowest GVA growth rate over the period with an annual average of 1.1%, along with annual average employment growth of 0.3%.

The national outlook

While the national economy currently remains subdued, the growth outlook for the country and for most regions is expected to improve through 2025, thanks to a combination of falling inflation, rising real wages, and steady reductions to interest rates. This is expected to drive average annual GVA growth of 1.6% for the UK between 2025 and 2028.

London and the East of England are expected be the UK’s leading regional economies over the next three years, each averaging annual GVA growth of 1.7%. The slowest rates of average annual GVA growth in the UK over the next three years are expected in Scotland (1.4%) and the North East (1.3%).

The UK is forecast to see relatively flat annual average employment growth of 0.7% over the next three years as businesses continue to face elevated costs due to energy prices and the upcoming rise in employers’ National Insurance Contributions (NICs).

Information and communication, and professional, scientific and technical activities are expected to be among the UK’s fastest-growing sectors over the next three years and are set to achieve average annual GVA growth of 2.6% and 2.2% respectively. The construction sector is forecast to see annual GVA growth of 2.1%.

Electricity, gas and steam – which includes everything from electricity generation, transmission, trading and distribution to fuel mains – is also expected to perform well and is set to average 2.6% GVA growth over the next three years, reflecting increased investments in networks and renewable energy generation. In contrast, persistent challenges in the mining and quarrying sector – projected to see an average annual GVA contraction of 1.8% at the UK level over the next three years – largely reflect the long-term decline in North Sea oil production.