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Businesses in Northern England continue to fight back, with the region emerging as the most buoyant in the UK for the first quarter of 2012, though significant risks still remain for the region’s economic prospects.
According to the latest ICAEW/Grant Thornton UK Business Confidence Monitor (BCM) survey, the Confidence Index in the region has recorded a score of 4.1 for Quarter 1 2012. Confidence has been broadly at this level for much of the past two years, after falling from a high of 28.6 at the end of 2009.
ICAEW Regional Director Keith Proudfoot says: “Northern businesses seem determined to fight back and are continuing to show great resilience and determination in the face of adversity. The financial performance of local firms is actually holding up relatively well. This optimism may have been boosted by the fact that more capital investment is likely to follow in the region, as both Teesside and Tyneside have been named as Centres for Offshore Renewable Energy (CORE). This will allow the region to receive additional government support for obtaining investment linked to offshore wind farms. Tata Steel is investing an additional £2m in its Hartlepool mills to enable them to accommodate the growing European offshore wind turbine market.”
All is not rosy however. With more than two in five firms in the region (43%) finding levels of customer demand a greater challenge now than a year ago, and export growth having fallen sharply this quarter, risks remain for the region.
Keith Proudfoot continues: “Hiring intentions among Northern England’s private sector businesses remain relatively buoyant this quarter. Over the coming 12 months, firms in the region expect to increase their employee numbers by 2.0% on average. Roughly 1,500 private sector jobs will be created or safeguarded in the region by the European Regional Development Fund Competitiveness Program, which aims to help businesses increase turnover.
“However, tough employment conditions will prevail for jobless workers in the region. Northern England has the highest unemployment rate of all UK regions, at 11.2% reported for the three months to December 2011. This is an increase of 1.1 percentage points over the past year.
“The region’s heavy dependence on the public sector for employment will continue to bear down on job prospects. One in four employees (25.0%) in the region is a public sector worker, so as government cutbacks take effect, the unemployment rate will rise further.”
The Business Confidence Index has been a close predictor of GDP growth in the eight years of its existence. Recent GDP figures show a contraction of -0.2% for Q4 2011 and, using the Index, another contraction of -0.2% is predicted for Q1 2012, suggesting that the UK economy is again in recession. The levelling out of confidence seen at the national level in this quarter does however indicate that this second recession will not be as deep.