Financial slowdown to narrow North-South divide

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The Independent Online

The traditional divide between the wealthy South and the poorer North of Great Britain will end 2002 at its narrowest for seven years, analysts said today.

The traditional divide between the wealthy South and the poorer North of Great Britain will end 2002 at its narrowest for seven years, analysts said today.

London in particular was likely to see a sharp decline in growth as tough conditions in the tourist and financial sectors take hold.

An economic slowdown in London and southern England will coincide with a pick-up in growth in counties north of the line between the Severn and the Wash, Business Strategies said. It said the North would grow by 1.4 per cent while its richer neighbour would grow at 2.1 per cent, leaving a gap of 0.7 percentage points.

This compares with the yawning divides of 2.7 and 1.9 percentage points seen in 2001 and 2000 respectively, it said. The gap will narrow further, to 0.4 percentage points in 2003 and an average of 0.5 over the following four years.

Business Strategies said the trend was driven by a slowdown in household spending, which was likely to affect activity in the South disproportionately. But it said: "Any improvement in the North-South gap is only relative to the stark divide of the last half-decade or more. But there will be no return to the yawning North-South performance differentials of the 1990s."

The North will enjoy the most of a forecast recovery for the recession-hit manufacturing sector and benefit more from the planning increases in public sector spending.

However, manufacturing only represents a fifth of the economy while services, which the South will still dominate, represents about two-thirds.

"These shifts bring only relative improvement for the northern regions," it said. "They are not enough to reverse a continued decline in their output share."

Overall, Business Strategies was bullish for the future of the UK economy. It forecast a "vigorous" recovery with GDP growing by 2.1 per cent in 2002 and 3.1 per cent in 2003.

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