A period of uncertainty faces UK

A Yorkshire Post debate, which focused on the region's prospects for 2011, also highlighted threats to the financial system and a double dip in the construction industry but found that manufacturing appeared to be leading the recovery.

These were the headlines from the top-level discussion by business men and women from sectors including financial, manufacturing, building and food retailing.

Iain Cornish, chief executive of Yorkshire Building Society, said: "It seems to me, business and other parts of the economy have been far more negative and consumer confidence is one of the things that has pulled us through. So you do sense that consumers want to be confident but that we are in a period of uncertainty."

He added: "We're certainly seeing a lessening in demand for borrowing. We've got funds to lend but in the last quarter of last year people were quite nervous and they're not going to do a major thing like buy a house while there is that level of uncertainty around. And if they don't buy houses they don't buy fridges, cookers, no-one is needed to build houses, the knock-on effects are really quite significant."

Martyn Jones, group corporate services director at Morrisons, said a North-South divide was emerging. "People with bigger mortgages tend to be in the South, so I think there is a more positive sentiment coming out in the South, which is benefiting from low interest rates, than there is in the North, which is more dependent on public sector jobs. I think this year we're going to see more of a distinction as the year goes on."

Industry experts believe that the construction sector is on the brink of a "double dip", with figures revealing that growth in the sector hit an eight-month low in October.

Cal Bailey, sustainability director of Ilkley-based construction services firm, NG Bailey, said: "There are some buoyant sectors but overall demand is distinctly declining and in construction we have been through a dip, as the economy has as a whole, and we think we'll go through a second dip in construction."

He added: "There is certainly a difficulty for people to raise finance but I think the greater problem is that people don't want to raise it because they don't want to put something on the market they can't fill."

The affordability of mortgages continues to be an issue, particularly for first-time buyers and housebuilders have lobbied the Government for a scheme to replace the shared equity initiative HomeBuy Direct, which finished last September.

Jeff Fairburn, northern chief executive of housebuilder Persimmon, said: "We hear about the issues of affordability in terms of house prices, but that isn't the problem, it's the affordability of mortgages, particularly for first-time buyers.

"We'd like to see some type of scheme to enable the first-time buyer to be able to access the more affordable product (mortgage)."

But Mr Cornish said there were still a number of funding constraints for financial institutions.

"All the money that the Bank of England and the Treasury pumped into financial institutions – special liquidity schemes, various Treasury guarantee schemes – it now wants back,

"Unless global capital markets are going to replace that, people will have to shrink their balance sheets. Global capital markets are very focused on Portugal and Ireland. While that level of uncertainty is out there, there are going to be very few institutions that are flush with cash to go out and lend."

He added: "If we saw a controlled rise in interest rates back to more long-term levels, it would help most financial institutions and it would increase the supply of funding and I suspect you'd find most of us looking to contain the impact on mortgage rates because of the desire not to tip people over

the edge."

The Government has emphasised an export-led recovery but one of the obstacles to smaller businesses is "bully boy tactics" adopted by large companies who are taking longer to pay their suppliers, according to Pam Liversidge, engineer and senior warden of the Cutlers' Company in Sheffield.

"That pulls a lot of working capital out of smaller companies," she said. "These people are saying 'sue us, it won't get you anywhere'. It's real bully boy tactics."

She added: "But what we want is growth and for growth you actually need funds. I think some banks have got too risk averse and we've also lost some of the grey hairs in the banking sector who used to know their customers really well.

"We also have to import a lot of our raw materials. People like Sheffield Forgemasters have high energy bills. That is getting tougher to manage."

Jamie Bentley, chief executive of Leeds soap base manufacturer Stephenson Group, added: "The increase in raw material prices and inflation combined with enforced prudency of consumers doesn't stack up. I see margin being the biggest problem for the next year for us unless commodity prices fall."

Increasing competition from the likes of China and India are also putting pressure on companies.

Mark Ridgway, managing director of Wakefield engineering firm Group Rhodes, said: "There are obviously issues regarding China and India becoming much more international players of technology but equally it is incumbent upon ourselves as manufacturers that we place emphasis upon research and development."

Training and education continue to be challenging when it comes to developing companies.

Mr Jones said: "It (the education system) seems to be polarising at the two ends. You've got a lot of people who are highly-educated with high aspirations who are finding it difficult to satisfy their aspiration in the workplace in general. At the other end people we're training for Morrisons are saying 'this is great, it's the first qualification we've ever had'. The fact that they can get such as sense of satisfaction from an NVQ programme does say something about the education system at the bottom end. Despite all the rhetoric, despite all the expenditure, there's still clearly room for improvement."

Those sitting at the top table

THE business leaders taking part in the Yorkshire Post debate on the challenges to the region's economy in 2011 were:

Cal Bailey, sustainability director of construction services firm NG Bailey.

Jamie Bentley, chief executive of soap base manufacturer Stephenson Group.

Iain Cornish, chief executive of Yorkshire Building Society.

Jeff Fairburn, northern chief executive of housebuilder Persimmon.

Martyn Jones, group corporate services director at supermarket giant Morrisons.

Pam Liversidge, engineer and senior warden of the Cutlers' Company in Sheffield.

Mark Ridgway, managing director of engineering firm Group Rhodes.