Help to Buy will boost region says economist Vosa

THE North West employment market will benefit from the government’s Help to Buy scheme in the next year, but manufacturers in the region need more help export into emerging markets, according to a leading economist.

Tom Vosa, head of market economics, Europe, for National Australia Bank, told business leaders in Manchester at an event hosted by Yorkshire Bank’s corporate team, that he is “at his most optimistic for about six years” as he also addressed the global and national outlook.

Regionally, he said the Help to Buy Scheme would boost the property market and  construction sectors without any fear of there being a “housing bubble”, unlike in Greater London, where there are fears the market is already overheating with strong house price growth.

He said the region would benefit too from infrastructure investment at Manchester’s Airport City, with the recent deal with the Chinese one example.

From an international trade perspective though, Mr Vosa said the region, like the rest of the  UK, was still heavily reliant on what has recently been a troubled euro zone for exports  – and had struggled to quickly penetrate emerging markets.

He said: “It’s difficult to switch markets quickly and I think we need more export credits and administrative help for companies.”

Rather than being an export led recovery, Mr Vosa believes growth has been driven by the consumer, who’s spending has in part been fuelled by some £11bn of payment protection insurance repayments fuelling spending on items such as new cars.

“I don’t think we have seen the full amount in terms of PPI. I believe it is something of a self-funded tax cut, without the Exchequer having to write a cheque.”

He said this “pool of redress” would not last forever though, and generally the domestic recovery had been so far “very uneven, modest and disappointing”.

Looking forward he believes interest rates will start to increase sooner than the Bank of England’s Forward Guidance suggests – Q3 in 2016 – due to stubborn inflationary pressure.

Economic growth will rise to 2.4% in 2014 and the fall slightly in 2015 to 2.2% he predicts. The euro zone will see more modest growth over the next two years, with 1.1% in 2014 and 1.4% in 2015.

He said the general outlook was better than at this time last year, with concerns over the euro, the US and China all abating.

Globally he said there was significant “rotation” occurring, meaning that the hitherto poorly performing advanced economies were picking up and growing, while emerging markets such as the BRICs, were still growing, but not as quickly as previously.

“One example would be China, where growth will be 7.5% this year, but it’s still the slowest growth for 25 years.”.

Mr Vosa said talk of the US Federal Reserve “tapering” its huge stimulus programme had dented currency values in emerging markets.

Hosted by Yorkshire Bank’s regional head of corporate, Owen Malton, guests included a range of existing and prospective customers which included plcs, large owner managed businesses as well as private equity-backed firms.

Mr Malton said: “These popular events are aimed at assisting customers to condense dynamic worldwide macro issues which in turn helps them position their businesses for growth and future prosperity with Tom’s whistle-stop tour certainly providing plenty of food for thought.”