Region is leading UK on rate of recovery

Dec 15 2009 by Chris Knox, The Journal

HOPES for economic recovery in the region have been boosted after a new report revealed that overall business activity has returned to pre-recession levels.

The Markit North East PMI (purchasing managers index) report reveals that November saw a further rebound in the region’s private sector business activity, with the North East now showing the fastest rate of recovery in the UK over the last three months.

The figures, which are based on combined percentages of respondents reporting an improvement, no change or a decline, showed a small increase in business activity to more than 60%.

Activity has now returned to levels last seen in summer 2006, with the figures representing the fifth successive month of growth in the region after a dramatic fall last year, says the survey.

Although the announcement of the closure of the Corus plant on Teesside earlier this month will have undoubtedly dented confidence, manufacturers will be encouraged by figures revealing increased demand during November, with respondents reporting greater willingness among clients to commit to new expenditure.

Levels of unfinished work also dropped during the month, despite the increase in new business, with spare capacity resulting from previous job cuts allowing firms to reduce their backlogs.

Respondents also reported marked increases in pricing, although this was offset by higher fuel and raw materials costs.

Allan Little, economic adviser at One North East, said: “November’s survey shows that the North East is taking further steps towards recovery.

“Business activity has now been improving for five successive months, and currently at the fastest rate of all UK regions.”

However, the figures weren’t all good news, with the number of bosses forced to make redundancies increasing during November, with 20.8% saying that employment levels were lower, compared to 13.3% in October, while 10.4% said levels were higher, compared to 11.1% during the previous month.

The survey, which quizzed 1,300 manufacturing and service companies in the UK, also revealed that employment in the region has fallen continuously since April 2008.

Alan Hall, region director at manufacturers organisation EEF, said: “It’s certainly encouraging that some areas of the regional economy are continuing to improve.

“However, it will be interesting to see how the closure of the Corus plant affects these figures in the new year.

“Although I don’t expect to see the level of job cuts next year as we have seen this year, we have to be realistic and face up to the fact that there will be many more before we reach the end of this recession.”