The Government's programme of spending cuts will "exacerbate" the North/South divide, a leading credit ratings agency warns in a report published today.
Standard & Poor's says Northern households will suffer higher rates of mortgage arrears and, prospectively, homelessness, as unemployment and interest rates rise in coming years, even though property prices are relatively low. Already, some 6 per cent of Northern mortgages are in negative equity, and more than 4 per cent of households are in arrears in the North-west and East Midlands.
S&P's researchers claim that the £81bn in annual cuts scheduled by 2015 will hit Northern regions harder than the South in a report that will add to concerns about the fairness of Coalition Government policy.
S&P's concludes: "There is already a North-South divide in unemployment, house prices, and consequently mortgage credit risk. Given the North's public-sector jobs bias, looming cuts in government spending could widen the gap, in terms of mortgage arrears and borrowers' equity positions". The mortgage default rate over the last 12 months, says S&P's, was more than 50 per cent higher in the North than in the South.
The North's relative dependence on state and local government has a number of causes. Regions such as the Midlands now have relatively shrunken private sectors as traditional manufacturing industries have declined. The regions are thus more reliant on the NHS, university and other public spending. Areas such as the North-east and South Wales saw thousands of government jobs transferred from London over the decades, but will now be affected as everything from the Royal Mint in Llantrisant to the Department for Work and Pensions in Newcastle is asked for savings.
House prices are also diverging, with prices in the South recovering about 10 per cent this year, while those in the North are about 18 per cent below their peak.Reuse content