IT'S not only in the DNA of the region's business leaders to be relatively upbeat - there's also a degree of recession fatigue.

So it’s no wonder there is talk of optimism for 2011.

However, much as I hope it will prove to be a better year, there are few economic indicators to give encouragement.

A key challenge in 2011 will be the need to refinance the high level of debt that has been secured in recent years. But the pool of liquidity is limited, so management teams must be prepared to take their refinancing plans seriously, focusing on what their credit story is, demonstrating to funders that their business is credible with forecasts that correlate to recent trading and with a team capable of delivering the budgeted results.

I also see a continuation of a 2010 trend of management teams proactively seeking advice if their business is underperforming, rather than simply hoping for the best.

This will allow businesses to get a robust plan in place before unsettled stakeholders decide to get engaged.

Retailers face a difficult year ahead. Post-Christmas sales are crucial. But with few panic price reductions and little more than the expected amount of discounting, the sales season will quickly run out of steam.

As well as contending with the VAT rise, retailers face customers tightening their belts because they’re worried about prospects for their own jobs and personal finances.

Retailers with a Northern footprint can expect to be impacted more by public sector job cuts due to the higher regional reliance on the public sector economy.

The construction sector is already facing knock-on impacts from the insolvencies of major companies such as Connaught. Given their scale, bad debts are being absorbed by a significant supply chain. Public sector spending has underpinned the sector in recent years, but this pipeline is shrinking and is unlikely to be sufficiently replaced by private sector contracts.

The region’s manufacturers are rather hamstrung by uncertainty, as it is difficult for them to invest in future growth without knowing what their prospects are.

With banks facing regulatory encouragement to improve their own liquidity, they may be more likely to liquidate distressed assets to improve their cash position in 2011.

:: Mark Firmin, KPMG’s Northern head of restructuring