NatWest Reports Some Economic Growth in London

Despite Andy Burnham establishing a Number 10 North in Manchester at vast expense, there was also growth in London, according to NatWest;

Firms in London saw a faster expansion of business activity during July, helped by sustained sales growth, weaker inflation and higher confidence. 

The headline London Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – rose from 54.1 in June to 55.3 in July, marking an acceleration of output growth for the second month running. Firms seeing output increase remarked on greater levels of new work and a rebound in European markets.

London businesses welcomed additional relief on inflationary pressures at the start of the third quarter. Although input costs increased sharply, the rate of inflation slowed for the third straight month from April’s multi-year high.

Predictions for output levels in 12 months’ time improved in July, but they remained less upbeat compared to those observed at the start of the year. Anecdotal evidence suggested that geopolitical uncertainty and high business costs continued to weigh on confidence. That said, many firms assessed the outlook with optimism due to strong demand forecasts and business investments.

Catherine van Weenen, NatWest’s Regional Managing Director, Commercial Mid-Market, London & South East, said:

“London businesses benefitted from solid sales growth and a tempering of price pressures in July, which led to the fastest rate of output growth in three months. This spurred an uptick in future expectations, with many firms prioritising investment as they expect sales revenues to grow.

“After a surge in price pressures related to the Middle East conflict, July saw a further softening of this trend for local firms, driving a slower increase in charges. An encouraging sign was also seen for employment which recorded its softest reduction in 2026 so far.” 

Performance in relation to UK

Sustained growth across the capital contributed to a renewed expansion in UK-wide output. In fact, most of the monitored regions saw an uplift, although London’s was the strongest.

London-based companies reported solid growth of new orders and an uptick in confidence as the second half of 2026 got underway. The month-on-month increase in new order volumes was the twelfth seen in a row, while the pace of expansion was the strongest registered nationwide. Some firms reported a demand boost from European markets.

London’s employment narrative remained negative in July. Businesses reported a solid drop in headcounts, which they largely attained through natural attrition. Nevertheless, the rate of decline softened in July and was the least marked for seven months, with some firms noting selective hiring efforts as part of strategic investments.

Meanwhile, outstanding business at local companies was unchanged during July. This stability in backlogs ended a three-month sequence of decline and contrasted with a moderate fall at UK companies overall.

London firms seeing an uplift in costs pointed to higher prices for IT components, fuel and transport, plus elevated pay.

Slowing cost inflation translated into a softer rise in output charges. July’s increase was the least pronounced since February and one of the weakest recorded in the UK, behind Scotland and the East of England. That said, the inflation rate remained strong in the context of the series history.