Understanding business confidence in the North — insights from the Bank of England

Unlocking the North's true potential requires honest, collaborative conversations between business leaders and policymakers. It was in this spirit that we recently hosted a digital roundtable with a small group of business owners from the True North network to speak directly with Ken Clark, the Bank of England’s Agent for the North West.

With the context of the Bank’s August Monetary Policy Report, we sought to gain an ‘on-the-ground’ view of the sentiment and challenges business leaders face that data alone can sometimes miss.

Here, Robert White shares some key insights from the roundtable, including:

• Planning to be agile — economic uncertainty has fundamentally changed long-term planning. Businesses must build adaptability and agility into their core strategy rather than planning for simple linear growth.
• Knowing your market — there’s a clear paradox in consumer behaviour. Premium brands are holding up but much of the market is "intensely value-conscious”. Ultimately, businesses must serve their community, so understanding that market is vital.

• Embracing AI — investing in artificial intelligence (AI) isn't for the future, it's a present-day economic calculation. With labour costs rising, AI should not replace staff but enhance productivity, allowing firms to increase their top line while holding headcount constant.

   

Consumers are saving, leaving businesses uncertain

Despite facing the highest inflation in the G7 both this year and next, the UK is amid a "disinflationary” process. That process is proving slower than hoped, driven by stubbornly high services inflation (remaining above 4%) and a backdrop of slow GDP growth.

This is reflected in an elevated household savings ratio. Ken explained that in "normal times", the ratio is usually around 5%, whereas it’s recently been over 10%. The critical question — and one the Bank is still exploring — is 'why?'. Are people rebuilding reserves after a cost-of-living crisis, or is it a "forward-looking precautionary measure" in the face of rising unemployment?

This consumer caution is the engine behind the uncertainty we heard from business leaders, with a practical manifestation of this seen in commercial property. As one leader noted, businesses "rarely have the confidence" to sign a traditional 10-year lease built for growth. The demand is now for short, three-year, ‘plug and play’ suites.

This isn't only about office space but a powerful signal that long-term strategic planning has become a casualty of economic instability. The key skill for businesses is no longer just planning for growth, but now also includes building a capability to adapt.

Business confidence — a mixed picture

Business confidence isn't a single, unified metric. Our conversation reflected a sharp divergence by sector. On the one hand, we heard real optimism from a leader in the plant hire sector whose confidence is buoyed by long-term investment in the nation's energy infrastructure. This was echoed by a financial advisor seeing confidence in services.

However, this optimism isn’t shared in hospitality where food inflation has crushed margins that were already "paper thin”. These costs often can’t be passed on to a squeezed consumer, with pressure amplified by rising labour costs — which sectors like manufacturing are particularly feeling.

These insights were validated by Ken, who noted a paradox in consumer behaviour. Premium brands are holding up, supported by households with disposable income. Meanwhile, much of the market is "intensely value-conscious", forcing businesses into heavy discounting. 

This creates a challenging landscape for any business but the clear sentiment is that it’s more important than ever as a business to understand the community you serve in order to make key decisions on costs.

AI investment — a strategic imperative

With the “macro triggers” of geopolitical and domestic political uncertainty out of businesses’ hands, leaders are doing what they do best — carrying on, focusing on what they can control.

An area that they should be addressing is AI. This isn’t about innovation for its own sake but an economic calculation. As labour costs rise, AI is becoming an increasingly accessible tool for enhancing productivity.

Ken was clear that the Bank isn’t seeing a story of "massive layoffs” as a result of AI adoption. Instead, firms are "extremely quick" to use AI to "increase top line while holding headcount constant". This is a fundamental shift. The practical challenge for leaders isn’t about replacing people but about investing in the new skills that their teams will need to leverage these tools effectively.

The path forward with devolution

While the national picture remains uncertain, the group expressed excitement about the path forward being offered by devolution.

This isn't an abstract political point. Leaders noted that increased devolution offers a path to create "regional and local stability, removed from the short-term political cycles of Westminster". This is the holy grail for businesses — a stable policy environment where they can confidently plan, invest and collaborate over the long term.

Our conversation was a powerful reminder that while businesses remain resilient and ambitious, growth and confidence require a stable framework.

Our task as a network is to connect the voice of purpose-led businesses with decision-makers and with one another to ensure that that voice is heard and to promote collaboration so businesses can work together to unlock our true potential, while also addressing our shared challenges together.

Shape what’s next for the North

The conversations that leaders across True North have had show that while uncertainty remains, there’s real ambition to build something better — together.

Collaboration is the key to ensuring that the voice of purpose-led businesses is heard and that we can collectively shape a more resilient future for our region.

If you’re committed to unlocking the North’s potential, join us.