Growth projected for Yorkshire and the Humber in 2014

Non-financial services sectors will remain the main engine of growth in both output and employment, as has been the case for the last four years. The report shows these services sectors are playing an increasingly important role in driving UK export growth. 

House prices in the region have also risen this year by 1.1%, which is lower than the national average of 2.9%, but is in line with the rest of the UK regions outside of London. 

Nationally the report projects UK GDP growth to pick up gradually to around 1.4% in 2013, rising to around 2.4% in 2014. Meanwhile inflation has remained stubbornly above target at an average of around 2.7% in 2013 which is expected to subside only slightly to 2.4% in 2014. However, there still could be upside risks to this inflation outlook if stronger global growth in 2014 pushes up commodity prices again.

Arif Ahmad, PwC’s Leeds senior partner, said:  “After a couple of sluggish years in 2011 and 2012, the Yorkshire economy is showing clear signs of recovery this year and is now gathering real momentum, with predicted growth in line with the UK average. The services sector has been leading the growth but latest data sources indicate that manufacturing and construction are also now starting to recover.

“Given persistent above target inflation, we do not expect any significant further easing of monetary policy and attention could eventually turn to higher interest rates, although possibly not until late 2015, which is when we project the unemployment rate to fall to below 7% in our main scenario.”

The report also notes that spending on housing and utility bills has seen a strong increase and now account for around a quarter of total household spending, up from just 20% before the financial crisis. And this could rise to around 30% by 2030 as a result of rising utility prices and the housing market picking up. 

In the longer term, the PwC report projects average real consumer spending growth of around 2% per annum to 2030, significantly lower than the average growth rate of 2.7% in the 20 years to 2012. 

Ahmad added: “The report shows that there have been some noticeable changes in the pattern of consumer spending, which is projected to grow by around 2% in 2013 and around 2.3% in 2014. And we do not expect positive real earnings growth to resume until 2015 and even then only at a modest pace.

“Total household incomes will be supported by continued employment growth, particular in Yorkshire where total employment has risen by 4.9% over the last three years. But upward pressure on energy and food prices could act as a restraint on growth, as could an eventual rise in interest rates later this decade.

“Consumers are likely to remain highly price-conscious as online retailers and high street discount stores continue to take an increasing share of the market even after the economy recovers.”

 

The Report on Jobs: North compiled by research group Markit for the Recruitment and Employment Confederation (REC) and KPMG, has also been published today. It revealed that the growth of permanent staff placements increased at a sharp, but slower pace, last month and demand for permanent workers rises at second-fastest rate in survey history. It also said the growth of permanent salaries is at its strongest since February 2008.

Chris Hearld, senior partner for KPMG in Yorkshire, said: “On the face of it, the latest figures for the North are great news, with higher numbers of job opportunities emerging alongside the sharpest increase in permanent wages for almost 6 years, as demand continues to strengthen. Whilst this is a sure sign of economic recovery, we must not get complacent because, in the highest earning bracket, left unchecked wage inflation will bring different challenges to businesses who strive for profitable growth.”