North East showing signs of climbing out of recession
Feb 9 2010 by Chris Knox, The Journal
BUSINESS leaders believe the North East economy has entered a period of recovery after new figures revealed that the region was the only one to record an acceleration in private sector output in January.
The latest Purchasing Managers’ Index (PMI) report shows that the North East has started 2010 on a firmer footing, with business activity expanding for the seventh month in a row, beating the UK average.
An increase in new work also saw one in three North East firms record an increase in activity since December, with anecdotal evidence indicating that improved economic conditions were the main factor behind the expansion in new orders.
The findings put the North East second behind London in terms of output and orders, while Yorkshire props up the table among English regions with its figures the worst for six months.
However, the report also found signs that the effects of the economic downturn are still being felt as job losses accelerated further over the month, with narrowing margins forcing employers to make redundancies as a way of managing costs.
Cost pressures within the North East private sector also reached a sixteen-month high, which indicated a marked rate of inflation, with survey respondents highlighting greater raw material and fuel costs, as well as unfavourable exchange rates and a return of VAT to 17.5% at the beginning of the year.
Alan Hall, region director of manufacturers’ group EEF, said: “The report supports our belief that the North East is beginning to enter a period of recovery.
“The North East is in a strong position to lead the fight back due to its strong transport infrastructure and network of business support.
“We are starting to see more investment within the region’s private sector as companies prepare themselves for the upturn.”
The national picture shows that heavy snow led to slower growth, with seven of the nine English regions citing the cold snap as a reason for the setback in recovery momentum.
Workforce numbers dropped in eight of the nine English regions, continuing the trend seen in the previous month, with the North West proving the only exception.
Andrew Sugden, director of membership and policy at the North East Chamber of Commerce, said: “The PMI confirms what we have found in our own research, that the region is moving into a position where it can begin to recover from the recession.
“Although output is a long way off the levels seen in 2007 and early 2008, it is encouraging that the North East is continuing along a positive pathway.
“I think we have now hit the bottom and are showing signs that we are pulling ourselves out of the downturn as a region.”
Allan Little, economic adviser at One North East, said: “There are some encouraging figures to take from this report, however, we continue to face extremely challenging times and will continue our work with partners to support North East companies and workers through 2010.”
