MERSEYSIDE and the North West faces the sharpest period of economic contraction since the early 1980s, according to a senior regional economist.
In an interview with LDP Business, Andrew McLaughlin, the new chairman of the Regional Economic Forecasting Panel (REFP), said that, despite talk nationally of signs of the “green shoots” of recovery, immediate prospects for our region remain gloomy.
REFP’s latest short-term forecast indicates that the North West faces a year of weak growth in 2009 (-4.5%), and a further fall in economic activity during 2010 (-1.25%).
However, he added that the Liverpool city region’s larger public sector presence had provided a “cushion” against the worst effects of the recession.
Mr McLaughlin, who is also the group chief economist for the Royal Bank of Scotland, said the widening of the financial crisis into the real economy had prompted both companies and households to repay debt, resulting in lower current spending.
He added: “This has impacted the economy in three ways. Firstly, business investment has been cut both domestically and internationally depriving many of the region’s manufacturing firms of new orders whilst the depreciation in sterling has so far made little compensation.
“Secondly, North West companies that have developed to take advantage ofŠ the region’s higher level of discretionary consumer spending are now more vulnerable. Consumers are choosing to save a higher share of any new income that comes their way, affecting retail businesses across the region.
“Thirdly, the region has been disproportionately impacted by the fall-out in the housing and construction sectors from the financial crisis. These sectors had been the prominent drivers of growth in some parts of the North West.”
Mr McLaughlin said the downturn in construction had particularly impacted in Merseyside where there had been a building boom in recent years.
He added: “Liverpool city region has undergone a renaissance in the past five years and that has now been challenged by the recession.
“There are areas of strength, for example in the biomedical and chemical sectors and there have been big infrastructure improvements.
“And the thing that has often been viewed as its Achilles heel – the size of the public sector – has actually cushioned Merseyside from the worst effects of the recession.
“Merseyside has 21% of the North West’s population but supplies only 18% of its economic output.
“That gap need to be narrowed and the longer-term things that need to be tackled are more improvements to infrastructure and an improvement in enterprise rates.
“The recession has been a setback but there can still be progress over the next decade.”
Mr McLaughlin was appointed following the sudden death of the previous REFP chairman, David Coates, who died in October last year. He has a degree in economics and politics and a prize-winning Doctorate of Philosophy.
The REFP was set up in 2003.Š It consists of 17 senior representatives of business, academia and the public sector in the Northwest.
On an annual cycle, it produces short and long-term state-of-the-region reports for the North West and its sub-regions.
