North-South divide 'to widen in the long-term'

THE NORTH-SOUTH divide will narrow next year, temporarily, thanks to a recovery in manufacturing and higher public spending. However, the trend towards an ever-wider gap between regions of the British economy will resume longer-term, according to a report published today.

THE NORTH-SOUTH divide will narrow next year, temporarily, thanks to a recovery in manufacturing and higher public spending. However, the trend towards an ever-wider gap between regions of the British economy will resume longer-term, according to a report published today.

The slowest-growing regions in 1999 have been the North-east and West Midlands, Business Strategies, a regional consultancy, says in its latest report. The fastest growth has been in London, the South-east, the East and the South-west. Growth rates this year will range from just 0.1 per cent in the North-east to 2.3 per cent in the South-east, averaging out at 1.5 per cent.

The re-emerging gap, widened by the difficulties suffered by manufacturing, has turned into a politically sensitive issue. Northern manufacturers and unions have protested about the level of interest rates.

Just two northern regions - Yorkshire and Scotland - have bucked the trend due to an expansion in call centre jobs, a spillover from rapid growth in financial services.

A separate survey yesterday confirmed that London and the South-east remain the most optimistic region, but said optimism had also improved in the East Midlands and the North-east and "surged ahead" in Wales. But dips in confidence in the North-west and Scotland did not prevent the national level of confidence rising last month despite the rise in interest rates, according to Dun & Bradstreet. Most notable, export confidence had improved, the survey said.

Business Strategies said the manufacturing recession in the West Midlands has been particularly severe because of the area's over-exposure to metals and mechanical engineering, which have been hit by the strong pound. The North-east's problem has been slightly different, in that it has had far worse than average growth in its service sector, linked to concerns over manufacturing but also a falling population.

An expected recovery in manufacturing in 2000, combined with a slowdown in consumer demand affecting the South the most heavily, will help narrow the North-South gap.

So too will the pick-up in public spending on health and education under the Government's Comprehensive Spending Review. Employment and growth in the northern regions and Scotland depend most heavily on the public sector. In Scotland, 27 per cent of all jobs are public sector, and 28 per cent in the North-east, compared with 20 per cent in London and 23 per cent in the rest of the South-east.

Business Strategies predicts the North-west and Scotland will see the biggest gains in the number of jobs next year, following declines in employment in 1999. Output and employment will continue to grow in the southern regions because growth for the UK as a whole is expected to pick-up in 2000.

Over a longer horizon, the South is expected to pull further ahead. The fastest-growing sectors of the economy will remain business services and communications, clustered in the South of England. Other service industries depend on the strength of local demand, so the south's advantage will be self-reinforcing.