Embargoed till 00.01 Tuesday 31 July 2007
UK Regional Press Release
UK Regional Growth Divide
to Widen
Cambridge Econometrics today publishes its latest edition of Regional Economic Prospects, containing detailed macroeconomic and industrial forecasts to the year 2020 for the regions of the UK.
In 2007 GVA in the UK is expected to continue to grow steadily at around 2¾%. Although investment growth in 2007 is expected to be slightly slower than in 2006, spending in investment in the UK is still expected to rise by 6%. Growth in household spending is also forecast to pick up to 2¾%, supported by a recovery in income growth.
Growth is being led by the Wider South East of England ...
GVA growth in London and the South East is expected to be 3-3½% in 2007. In London all services are expected to experience fast growth, especially Financial & Business Services and Transport & Communications, while output in Construction is expected to increase by 3%, boosted by speculative office space projects. In the South East growth in services will be slightly slower than in London, but the region will continue to benefit from the success of its manufacturing sector. In the East of England GVA growth is expected to be 3% in 2007; output in services grows at the UK average rate but manufacturing continues its strong performance led by mechanical engineering, electronics and transport equipment.
... while growth in the rest of the UK lags behind
Outside the Wider South East, only the East Midlands is expected to match the UK average growth rate. At the other end of the scale the West Midlands and the North East are expected to see the slowest GVA increase at 2-2¼% in 2007, at least ½ pp lower than the UK average (see table: Short-term Macroeconomic Indicators).
In Wales GVA growth of 2¾% in 2007 and 2% in 2008 is driven by Construction and Services, but will be held back by the poor performance of Manufacturing. In Northern Ireland and Scotland GVA growth will also trail the UK average. Financial & Business Services are expected to be boosted in both countries; in Scotland manufacturing is expected to come out of recession and see growth faster than the UK average rate in 2008 while manufacturing in Northern Ireland continues with its strong performance. In Yorkshire & the Humber and the North West GVA growth will be slower (at 2½% in 2007) held back by slow growth in consumer services.
The gap in growth between the Wider South East and the rest of the UK is not likely to be closed even in the longer term
In the early years of this decade the gap between the rates of growth in the Wider South East and the rest of the UK narrowed, and over 2003-05 the gap either reversed or disappeared altogether. The forecast, however, is that the gap is going to increase and remain at ½-¾ pp pa through to 2015. Construction projects necessary for the hosting of the 2012 Olympic Games; transport and other infrastructure work planned or brought forward because of the Games (eg the first phase of the Thameslink 2000, which was given the go-ahead in July); ever bigger speculative construction schemes in the capital's office market; regeneration in east London; and house building in all three regions are going to boost GVA growth in the Wider South East compared with the rest of the UK. Although all regions are expected to feel the impact of slowing government spending in 2008 and 2009, regions in the Wider South East are expected to benefit from relatively fast growth in Construction, Distribution, Hotels & Catering, Transport & Communications and Financial & Business Services. The South East and the East of England are also expected to enjoy respectable growth, 1½%, in manufacturing in both 2007 and 2008.
This trend for regional divides to widen in the long term echoes the same findings in our European Regional forecast published on 30 July http://www.camecon.com/press_releases/erp.htm.
Notes for Editors
Cambridge Econometrics is an independent private limited company and has been providing detailed economic and industrial forecasts since 1978. Our work also includes regional and energy forecasts for the UK, and regional and sectoral forecasts for the EU.
We provide the most detailed long-term economic, industrial and regional forecasts available for the UK. These are published in Regional Economic Prospects twice a year, and on our Knowledge Base website.
The cut-off date for the information used in the report was 5 June 2007.
Subscription to Cambridge Econometrics’ Knowledge Base website is normally obtained by subscription to the company’s UK regional service at £7,205 pa, although hard copies may be purchased individually at £2,185.
Volume 1: xviii+227 pages, with 110 tables, 126 charts and 3 figures
Volume 2: 174 pages with 116 tables
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