No quick fix to rebalance economy – report

THE region’s economy will grow steadily over the next three years, but will be below the UK average and lag behind regions in the south, a report said today.

The EY UK region and city economic forecast also predicts that the much-heralded Northern Powerhouse initiative to rebalance the country’s economy will not have an impact for at least five years.

EY’s economists anticipate North West GVA growth of 2%  over the next three years, representing a mid-table position of 6th out of 12 UK regions in terms of economic performance.

Manchester will out-perform the rest of the region and enjoy strong annual growth of 2.5% – making it the fastest-growing city outside the south, thanks to the strength of its professional services and digital sectors.

Liverpool’s growth wil be more modest – 1.9% over the next three years. EY predicts.

While the North West’s economy will grow by 2% a year in gross value added terms (GVA) between 2015 and 2018, it will be below the UK average of 2.3%.

London  will enjoy the strongest growth (3%), folowed by the South East (2.5%), the East of England (2.4%), the South West (2.2%) and the East Midlands (2.1%).

The North West is expected to have experienced GVA expansion of 1.8% and employment growth of 0.8% this year, buoyed by the performance of Manchester.

EY estimates that Manchester will have seen employment growth of 4,300 jobs in 2015, representing a rise of 1.2% to outperform both the North West and the wider UK. Professional, scientific and technical services are expected to have led this growth, gaining 1,300 jobs.

Meanwhile, Liverpool’s employment growth will be 0.6% over the next three years.

Simon Allport, North West senior partner at EY, said: “Our report predicts that the North West’s economic growth over the coming years will be steady, supported by a buoyant property market relative to much of the rest of the UK, and its strong financial and manufacturing sectors.

“However, the forecast also points to a clear growth gap over the next three years between the Northern regions and those in the South of the country, which are set to benefit from good corporate investment and growth, healthy property markets and strong migration levels.

“To close this gap, regional expansion needs to be addressed at a national policy level, as well as through devolved measures and infrastructure investment – both of which are already a Government focus and have drawn significant attention.”

On the performance of Manchester, he added: “We predict that Manchester will be the fastest growing city outside of the South over the coming years, which is testament to concerted investment in maximising the city’s strengths, including its infrastructure and research institutions.

“It’s no surprise that Manchester has so far been the poster child for devolution. While the Northern Powerhouse is clearly a long-term vision, Manchester highlights the potential for cities within the North to thrive when they are given clear, continued economic focus – allowing them to find their own competitive position. It points to the opportunity for regions outside of the South of England.”

According to the report, the Northern Powerhouse will have limited impact in the short-term.

Mark Gregory, EY’s chief economist, UK & Ireland, said: “Our forecast predicts that the impact of the Northern Powerhouse and national infrastructure projects will only really start to be seen after 2020.

“HS2 will not open for another decade and the devolution of powers to cities such as Manchester and Liverpool will only become fully effective when budgets are aligned and funds are used efficiently. It will take time for the benefits to translate into real growth.”