Trade gap disguises widening regional disparities

Exports by West Midlands firms fell last year, according to ground-breaking research that shows a sharp North-South divide among exporters. The region's exports fell by £26m, or 1 per cent, between the first and third quarters of the year.

Exports by West Midlands firms fell last year, according to ground-breaking research that shows a sharp North-South divide among exporters. The region's exports fell by £26m, or 1 per cent, between the first and third quarters of the year.

Six other regions - East Midlands, North-west, South-west, Yorkshire and Humberside, Wales and Scotland - saw rises of less than 6 per cent, say Customs & Excise. The South rose by more than 20 per cent.

Other data showed that the UK's trade deficit with non-EU countries ballooned to a record £2.3bn last month. Exports excluding erratics slumped by 4 per cent.

Analysts, who had expected the deficit to narrow, said this demolished claims that industry had learned to live with a strong pound. The global trade figure for November also widened, to £2.5bn from £2.3bn, against forecasts of £2.2bn.

London led the UK with exports of £5.6bn in the third quarter, 21.5 per cent up on the first quarter. East Anglia rose 14.6 per cent, while the South-east rose by 11 per cent. North-east exports rose by 16.5 per cent, due to the local car industry.

John Lamb, spokesman for Birmingham's chamber of commerce, said the survey rang true for a region that had just suffered 1,400 redundancies. "Interest rates are rising and the pound is getting stronger, which is working against our exporting manufacturers," he said.

A MORI poll yesterday showed a massive fall in optimism in the Midlands, where sentiment moved from positive to negative, although optimism rose in the South.

Neil Parker of Royal Bank of Scotland said: "The UK isn't coping as well with the strong pound as we have been led to believe. The Bank of England should be cautious in making further rate hikes."

However, a survey from the Confederation of British Industry suggested the opposite; its industrial trends survey showed that demand rose for the first time in almost two years at the end of 1999. Nick Reilly, chair of economic affairs, said: "Exports are stabilising, but this is being driven by a rise in world demand. The strength of sterling is still holding back firms."

The pound hit a 14-year high last week and is now worth 3.2 Deutschmarks, much higher than the DM2.95 at which sterling crashed out of the ERM in 1992. Economist John O'Sullivan of Greenwich NatWest said: "Having adjusted to DM3, it is doubtful UK manufacturers can adjust again to DM3.2."

The National Institute said manufacturing would grow at its fastest for six years in 2000. In its economic review published today it said the economy would grow by 3.2 per cent this year.