The traditional ‘north/south’ divide was turned upside down last year, with northern firms enjoying far greater employment and economic growth than their southern counterparts, new research has found.
The HSBC Regional Focus Report said that London, normally one of the fastest-growing areas, performed badly in 2003, suffering a “mild recession”.
Conversely, the North East, the worst performing UK region in the late 1990s, did better than any other area last year, with employment growing significantly.
HSBC put last year’s role reversal down to increased public spending by the government in northern regions and the after-effects of the September 11 attacks.
However, the report predicted a return to the more traditional north/south divide this year, although the differences in economic growth are set to be far narrower than in previous years.
Businesses outside the south east are predicted to face additional challenges in 2004, such as a fall in inward investment, uncompetitive manufacturing and an over-dependence on publicly-funded services.
Dennis Turner, head of business economics at HSBC, said that as the long consumer boom finally runs out of steam, the pressure to rein back on spending and borrowing will be most keenly felt in the south.
“This will help the economy to achieve a better balance, and will also ensure that the growth differential between the regions remain more muted.
“Yet the regions in the north will face new challenges in their quest to keep pace with the rest of the country.
“The UK has performed with remarkable resilience throughout the recent global downturn, but it’s not clear that other sources of activity will fill the gap created by declining consumer boom.
“While the global environment has become more benign, there is little scope for growth to accelerate in the UK.
“Inflation and interest rates will remain low and the economy will achieve a more sustainable balance,” he said.
