Region to lead the way out of recession

The end of the 18-month slump, which has seen output shrink by six per cent and public borrowing soar to an estimated 178bn, will be confirmed today if official statistics show the economy expanded in the final three months of last year.

Tom Vosa, chief economist at Yorkshire Bank, said the UK was likely to have grown by only 0.2 or 0.3 per cent because of a rise in inflation. The diversity of this region's businesses, however, meant it could be "first in and first out" of the recession with a modest return to prosperity.

"Surveys showed our economy regaining a lot of momentum. That should not surprise us because it was first into it (the slump]."

Yorkshire's service sector has been boosted by exports, he said, while manufacturers here had been driven by domestic demand, although there were still some concerns over output.

The region's tourism industry had also done well, he said, as the recession and the weak pound persuaded more Britons to holiday at home. Leeds would still attract 1.5 million visitors a year, he added.

Manufacturers are also likely to have seen tentative growth, helped by the Government's cash-for-bangers scrappage scheme, despite disappointing retail sales figures for December last week.

The data, from the Office for National Statistics (ONS), is expected to reflect a slow recovery among services firms, which account for more than two-thirds of the economy, but is subject to revision.

Alan Hall, regional director of manufacturing body the Engineering Employers' Federation (EEF), said: "What we have seen is a very fragile start to the recovery. It is going to be a slow haul. It will be largely led by exports due to a weaker pound."

Mechanical equipment, metals and metal products are among those doing well in Yorkshire, he added.

"They look set to lead us out of recession because they are exposed to exports. Those with a longer lead time, like aerospace – because they are tied to defence budgets – remain weak."

The UK manufacturing sector will grow by 1.2 per cent this year and 3.4 per cent next year, according to the EEF.

Nick Pontone, policy director at Yorkshire and Humber Chambers of Commerce, said the end of a technical recession was just a part of the recovery.

"Cashflow remains very tight and investment is only picking up slowly, both of which point to a fragile recovery. Getting bank lending moving again is key to sustaining growth."

Last week the Centre for Cities warned that parts of Yorkshire face a continued recession which could leave them struggling for years to come. While Leeds is well placed to prosper other urban centres, including Doncaster and Barnsley, are facing a "second wave recession", as public sector jobs are cut after the election.

Barbara Noack, Yorkshire and Humber policy chairman of the Federation of Small Businesses, said the recovery could face a "fall back" early this year as the VAT rise kicked in.

Andy Caton, corporate development director of Yorkshire Building Society, said: "Output should have gone up on the back of recently improved industrial production and retail sales figures plus a reduction in the level of de-stocking. We can see scope for a similar improvement in the housing and mortgage market in 2010."

CBI chief warns of damage to UK

Richard Lambert, director-general of the CBI, said the UK faced serious damage to its level of employment and standard of living unless it achieved "as much economic growth as we possibly can" and warned that it could also suffer internationally.

Even if the UK comes out of recession today, it will be the last of the major G7 economies to do so.

Growth is needed to boost employment, improve the life chances of young people and help restore the public finances alongside cuts, Mr Lambert said.

"Without growth, businesses will look elsewhere in the world to invest, and the huge investment that is needed in our country's infrastructure –in power generation, transportation and the like – will be in jeopardy."