Positive growth prediction for North East

The North East is projected to grow by 1.4% in 2014 following sluggish growth in 2011 and 2012.

Regional analysis in PwC’s annual UK Economic Outlook report suggests the region is set for more promising growth following meagre 0.5% gains in 2013.

The report also shows there has been a 1.6% in rise in the region’s total employment over the last three years and the workforce was shown to be aging as the number of workers aged between 50-65 increased 3.6%.

Marcus Robinson, partner, PwC Newcastle said: “These projected figures are positive news for the region after a period of generally disappointing growth in 2011 and 2012. And if our expected UK GDP growth is achieved it would make us the best performing of the large EU economies boosting the region’s confidence further.

“Growth in the North East continues to be led by the services industry, however surveys suggest that the manufacturing and construction sectors are showing signs of stabilising and we would expect these sectors to return to modestly positive growth over the next 18 months.

“Average UK house prices in the region are also gradually starting to recover, but are unlikely to return to their previous 2007 peak levels in real (inflation-adjusted) terms until after 2020.”

Predicted North East growth is slightly behind PwC’s national prediction, which is more optimistic than OBR and consensus forecasts.

Regional average real house prices grew between 1997 and 2007, but since then have increased slightly below the national average of 5.2%.

Bill MacLeod, partner, PwC Newcastle added: “Over the next few years, we expect the recent gradual recovery in UK and house prices to continue with the North East also experiencing steady increases in real terms. Affordability will remain an issue for many first time buyers with housing completions remaining subdued despite mortgage approvals picking up. And although recently introduced government initiatives to support the mortgage market are likely to boost demand in the short term, in the longer term other measures will be needed to address more fundamental problems related to lack of housing supply.

“We expect house prices to pick up at average rates of around 3-4% per annum in cash terms over the next four years, which is slightly higher on average than the consensus view. Based on our main scenario, average UK house prices might be back above their 2007 peak in cash terms as early as the end of 2014, but in real terms this might take until around 2021.”

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