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What are the regional prospects for business development and employment?


England’s north-south divide has become less apparent as businesses across the region show signs of recovery. Lloyds TSB recorded the slowest rates of expansion in England for the south-east and north-west towards the end of last year, but a reinvigorated manufacturing industry contributed to 19 successive months of sustained output growth in Yorkshire and the Humber, with the West Midlands topping the bank’s business activity index in December 2010. The south-west and London also saw a rise in business activity.

“The growth of both output and new orders accelerated in all English regions at the start of 2011, which provides encouragement that the underlying private sector recovery remains intact,” says John Maltby, managing director at Lloyds TSB Commercial.

According to the Bank of England, demand for credit by small and medium-sized enterprises remained broadly unchanged in the fourth quarter of 2010. Some banks report that borrowers are reluctant to draw on working capital. NatWest and RBS, for example, say UK businesses continue to have £40bn ($65bn) of undrawn facilities available. – MP


Scotland is the big exception to the UK’s north-south economic divide. Output per head, at almost 99 per cent of the UK average, is third among the country’s 12 regions, behind London and south-east England. It has shifted more effectively than most from shipbuilding, coal and steel into a diversified economy.

As Scotland entered the recession later than the rest of the UK, there are fears that it is coming out of it more slowly. “The pick-up in pace is slightly lagging the rest of the UK, but we do see growth ahead, albeit in a very gradual pick-up during the course of this year and next,” says Ally Scott, managing director of Scotland at Barclays Corporate.

The oil and gas sector based around Aberdeen is performing strongly, as are other parts of manufacturing, including Scotch whisky. But construction is in the doldrums and public sector employment accounts for 25 per cent of the workforce, the fourth highest after Northern Ireland, Wales and north-east England. The Scottish government’s budget is being cut by £1bn ($1.6bn) to £34bn for 2011-12. – BG


Welsh businesses have come through the recession in good shape, but are cautious. “Talking to our customers, confidence levels are higher but I don’t think they are expecting any major capital expenditure decisions in 2011,” says John Union, head of Wales at Barclays Corporate.

Global electronics businesses based around Newport and Cardiff may expand their staff as demand increases, but hiring by most companies is likely to be limited. The property and leisure sectors were badly affected by the recession, but manufacturing is recovering and retailers have adapted well. Unemployment, at 8.4 per cent, is above the UK average of 7.9 per cent.

With public sector employment accounting for more than 27 per cent of the total, compared with the national average of 21 per cent, Wales is vulnerable to austerity measures. Over the long term, it needs to create more large businesses and spread the success of the southern and northern coastal strips into the valleys and west Wales. – BG

Northern Ireland

This is a nervous time for Northern Ireland, exposed both to the turmoil in the Republic of Ireland and its own reliance on public spending.

Jobs in the state sector account for 30 per cent of the total, the UK’s highest. The region depends on public spending for 70 per cent of its economic activity, and the power-sharing executive’s budget is being slashed by £1.6bn ($2.6bn) over four years.

The economy has shifted from manufacturing towards service-led, knowledge-based activities, with more than 700 foreign investors including Citi, Caterpillar and NYSE Euronext, but output per head remains stuck at 79 per cent of the national average.

Northern Bank forecasts 1.9 per cent growth this year, while Ulster Bank expects just 1 per cent. A potential cut in corporation tax to match the republic’s 12.5 per cent is being discussed with the UK coalition government, along with plans to market the region as an enterprise zone, but any change is likely to be long term. – BG

What businesses say

John McCann, group chief executive, UTV Media, Belfast

“The economy is currently being squeezed by the twin pressures of excessive borrowing levels and inflation. The decision to address the level of borrowing has put pressure on consumer confidence and therefore consumer spending. Northern Ireland in particular will feel the impact of government spending cuts because of its overreliance on the public sector. The details of these cuts are still uncertain, but we are seeing some early signs of consumer reluctance to commit to major spending.”

Stewart Milne, chairman and chief executive, Stewart Milne Group (construction), Aberdeen

“The construction sector plays a significant part in the stability and growth of the UK economy but is also facing great challenges. The emphasis must be on supporting and growing commercial enterprise across the UK. The private sector, which has always been strong, has the ability to lead the economy out of recession, but we need direct government action in a partnership approach to make a difference in the short to medium term.”

David Stevens, co-founder and chief operating officer, Admiral Group (insurance), Cardiff

“The big unknown for 2011 is whether growth from the private sector can compensate for the depressing effects of shrinking government spending. The surprisingly high levels of inflation in the economy, even before the impact of the value added tax rise and the prospect of more to come as commodity inflation feeds through into retail prices, have tipped the scales in the wrong direction. For those parts of the UK, such as Wales, that are particularly reliant on government spending, the prognosis is not so good.”

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