Local economy ‘lagging behind rest of the UK’

YORKSHIRE’s economy is set to underperform the rest of the UK in 2013, a leading economist has warned.

Tom Vosa, chief economist at Yorkshire Bank, blamed higher unemployment and lower house prices for the downbeat forecast.

In a lecture at Leeds Metropolitan University, he said Yorkshire’s exports are lagging and described signs of a recent recovery in international trade as “a dead cat bounce”.

Hide Ad
Hide Ad

Mr Vosa said: “Activity was at such a low level that of course we are going to get a year-on-year improvement, but it doesn’t mean that we are going to see a march into sunny uplands of great export growth.”

He said the housing market is likely to struggle during the year with lower regional wages making it harder for would-be buyers to generate deposits. Buyer enquiries in Yorkshire drifted off at the end of last year, he added.

Mr Vosa advised against comparisons against the London housing market, which has “delinked” from the UK.

He said: “It’s a bit like watching Bullseye – look at what you could have won if you owned a London property.”

Hide Ad
Hide Ad

But employment growth is beginning to strengthen with private sector jobs and the economic activity rate “absolutely soared”, he added.

Mr Vosa said Yorkshire’s labour market is showing few signs of austerity with an increase in public sector jobs.

Latest statistics show Yorkshire’s economy was worth £91bn in 2011 and the region has consistently underperformed the UK average.

Last month, the Office for National Statistics said Yorkshire showed the greatest downward movement away from the UK average of gross valued added per head – a key economic measure – between 1997 and 2010.

Hide Ad
Hide Ad

Mr Vosa also raised concerns that new banking regulations could trigger a wave of business insolvencies.

“My fear for this year is if we do get regulatory intrusion into the financial sector it will essentially be that we need to write down more of our debt than we had thought about. Banks will be blocked from kicking the can down the road when it comes to insolvencies and restructuring.”

Yorkshire and Clydesdale banks are seen to be ahead of the curve after they transferred £5.6bn worth of troublesome commercial property loans to their parent National Australia Bank last year.

Mr Vosa said the Funding for Lending scheme will make credit cheaper for customers who already have access to credit; “indeed, if you don’t want to borrow money, it has never been so cheap”.

Hide Ad
Hide Ad

He also said that Government spending cuts “are yet to really come through” and that public spending has contributed to growth over the last year. “But this will change next year.”

He forecast the UK economy – worth £1.5 trillion in 2011 – will be “broadly flat, at best” this year.

Mr Vosa, who is head of markets economics, Europe, at National Australia Bank, offered a slightly more upbeat view on the outlook for the $70 trillion global economy.

Instead of banking and sovereign debt crises in Europe, he said the world faces “multi-stream, multi-dimensional” challenges.

Hide Ad
Hide Ad

“We are now concerned about the United States and their fiscal policy. We now assume that Europe will be a family that stays together, if only for the sake of the children.

“In the UK we are about to see a vast amount of political risk coming through into an economy which until now has been seen as a relative safe haven.”

On top of these are geopolitical risks from Iran’s nuclear ambitions in the Middle East and how China’s new leadership responds to the increasing push for liberalism, he said.

But most fiscal consolidation has already been carried out in Europe and the European Central Bank has solved the currency bloc’s “existential crisis”.

Hide Ad
Hide Ad

He added: “The economics really haven’t changed from last year. Probably the global economy is a bit stronger and a little bit happier. But overall I think the challenges for this year are more political than economic.”

He said emerging and developing economies continue to grow very strongly.

“They have 75 per cent of the world population, their banks are well capitalised and profitable.

“The advanced world’s banks are barely becoming profitable, they have a much smaller population and much more debt.

Hide Ad
Hide Ad

“There is plenty of growth out there, which causes problems for commodities. That’s why oil and food prices are high. If you want to know how to grow, it’s quite simple. Be big, have a big population or have resources.”

Related topics: