EXPORTERS and manufacturers are the driving force behind the North-East economy but sluggish demand in the UK market has hit local firms.
That was the main thrust of the latest survey from the North East Chamber of Commerce.
The study showed that exports from the region continued to increase in the last three months of 2011, despite the slowdown in the world economy.
But the growth in overseas markets has been tempered by weak UK sales and the knock-on effect of public spending cuts.
James Ramsbotham, NECC chief executive, said: “With a huge amount of uncertainty surrounding the global economy at the turn of the year, it is no surprise to see this reflected in most businesses in the final quarter of 2011.
“The continued excellent performance of the region’s manufacturers and exporters perhaps demonstrates why the North-east is growing more strongly than much of the rest of the country, according to regional GVA [gross value added) estimates published in December.
“The importance of a healthy manufacturing sector cannot be underestimated, but in general manufacturers have been carrying the North-east recovery for too long and this imbalance is unhealthy.
“The region needs to see UK sales and workforce growth in the service sector if we are to maintain a robust business base.”
A poor performance from the region’s service industry was a major factor behind the year-on-year decline in UK sales and orders, which were down 10.7% and 18.2% respectively.
Although firms had hired extra staff, levels of investment in plant and employee training were lower than in 2010.
High street bank Barclays, which contributed to the report, said “huge uncertainty” in the global economy had undermined business confidence.
Brian Thorpe, head of Barclays Corporate in the North-east, said: “Large numbers of businesses are not investing and while we try to encourage them to do so, many businesses are preferring to sit on cash which is understandable.
“Similarly, until individuals become more confident in employment prospects, they won’t spend.
“Restoring this confidence must be our goal for 2012 in order to protect and strengthen what remains a fragile recovery.”
Fears over the health of the economy have prompted the British Chambers of Commerce to call for an extension of the Bank of England’s asset purchase programme, more commonly known as quantitative easing.
Under the programme, the Bank buys assets such as Government bonds in the hope that banks lend more money to homeowners and businesses.
