Signs of divide between north and south grow

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The Independent Online
THE NORTH-SOUTH divide has re-emerged and will grow even wider, according to a stark warning today. The combination of stagnation in manufacturing and the clampdown on public spending have harmed job and output prospects in the North, while the South-east is enjoying a boom thanks to flourishing private sector services.

The gap in employment growth between the north and south last year - 1 per cent versus 2.3 per cent - was the biggest since 1984, according to regional consultancy Business Strategies.

It forecasts slower jobs growth in both this year, but a widening gap. And next year could bring a shake-out of 6-7 per cent of manufacturing jobs, with dismal results for industrial regions.

"There are lots of signs of the north-south divide opening up again," said Neil Blake, research director. "If there is a risk of overheating, the place we have to look for it is in the South-east of England."

But he said the Bank of England's Monetary Policy Committee would have to react to what was happening in the booming capital, with the slowdown taking place in Wales, Scotland and the northern region. He predicted an increase in interest rates within the next few months, saying that a continuing boom in the South-east would only mean a bigger recession everywhere later.

A further risk to some regions stems from the danger of reductions in investment by Asian companies. Although a small proportion of total investment, inward investment from Asia has created a large share of the jobs.

Between 1985 and 1997, big Japanese and Asian projects accounted for 43,560 jobs out of a total of 105,160. These were heavily skewed towards Scotland, Wales, the North-east and Northern Ireland. "Wales has the most to lose," warned Mr Blake.

The underlying regional gap stems from the greater dependence of areas such as the Midlands and the North of England on manufacturing. Industrial output is forecast to slow to virtually zero this year, with a one- in- four danger of outright recession.

Within manufacturing, only engineering is likely to enjoy decent growth. This will be driven mainly by a boom in aerospace orders and new investment in rail rolling stock by the privatised operators.

The Government's tough control of public spending will exacerbate the divide. Mr Blake said: "The less prosperous the area, the more dependent it is on the public sector."