Member Article

Yorkshire economic recovery set to slow

Yorkshire’s economic growth is set to slow over the next 12 months, according to the latest research from PwC.

PwC says that Yorkshire’s economic growth in 2014, which is forecast as around 3%, is being largely driven by consumer spending, rather than exports, investment or public spending, key economic drivers necessary to ensure recovery and long-term stability.

However, PwC warn that consumer spending, which has been boosted over the past two years as household dipped deeper into savings, can’t continue as the household savings ratio has fallen steadily and there are limits to how low this savings ratio can go.

The report forecasts that overall consumer spending will decline across the UK, with economic growth in Yorkshire in 2015 now forecast to slip back to around 2.5%, which is in line with UK predictions.

The report says that services sector will remain the main engine of growth in the region and the UK for both output and employment as manufacturing growth has moderated due to renewed stagnation in key European export markets over the past six months.

In addition, the UKEO says that Yorkshire’s average household income per head is just under 87% of the UK average, Ian Morrison, PwC’s Yorkshire & North East regional leader says household budgets are likely to come under greater pressure:

“Consumer spending growth has been relatively strong for the past two years despite weak average earnings growth. This has been due to strong employment growth, increased income tax personal allowances and low mortgage interest rates, all of which have stimulated consumer spending.

“We expect the proportion of household spending on essentials like housing costs and utilities to rise steadily and account for more than a quarter of total consumer spending by 2020.

“In addition, as lending increases and interest rates go up the proportion of financial services spending, excluding mortgage interest is also expected to increase to around 13% of total household budgets by 2020.

“We estimate that, across the UK, real household disposable incomes will have grown by around 1.4% in 2014 – but that’s around 2% less than average household expenditure and there is little indication of that gap closing.

“These increased household spending pressures will further put further pressure on families, particularly if real wages don’t begin to catch up with inflation –Yorkshire has enjoyed a significant increase in job creation over the last 18 months, but this has not translated into wealth creation which is essential to close the gap with the rest of the UK.”

This was posted in Bdaily's Members' News section by Clare Burnett .