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Regional economy set to pick up in 2007


The economy of Yorkshire is set to recover this year and next after a slowdown in 2006, according to a new report.

The region grew by 2.1% in 2005 - ahead of the 1.9% figure recorded for the UK as a whole.

However, Yorkshire Bank's latest quarterly economic update suggests it slowed markedly last year as growth in the private sector and construction moderated.

Growth locally was only 1.6% in 2006, which was much less than the national figure of 2.7%.

Tom Vosa, chief economist at Yorkshire Bank, said: "It should be remembered that Yorkshire was the envy of most regions in the first half of the decade with the kind of above average growth that could not realistically be sustained in the long term.

"Against that backdrop, its current performance is robust, and reflects the ongoing vitality and diversity of the region.  We certainly expect to see the gap between the local and national economies narrow in the next couple of years."

Yorkshire Bank is predicting growth nationally averaging 2.75% in both 2007 and 2008.  Locally, it is expected to be around 2.0% this year, rising to 2.2% next year.

Yorkshire has benefited from the Government's public sector investment in recent years but the bank believes improvements in the next few years will come from expansion in private sector services.

Firms continue to report rising input costs, but not at the levels seen previously.  They are also seemingly now able to rebuild margins with output price increases at their highest level for two years.  

Manufacturers were reporting strong order books both at home and overseas towards the end of 2006, with early indications that this has continued in to 2007. However, the overvalued exchange rate will continue to provide a headwind, especially if demand from the eurozone falters in the second half of the year.
Unemployment - already at a six-year high of around 6% - is expected to rise still further due to "sluggish" growth in new jobs.

Tom Vosa said: "The unemployment rate continued its upward trend during 2006 as growth in employment was outpaced by an increase in the number of people looking for work."

House prices rose broadly in line with what was being seen nationally in 2006.  The Department for Communities and Local Government reckons they were up 7.4% nationally and 6.9% in Yorkshire.

Although the average price of a house in Yorkshire has risen 173% to around £144,500 in the last 10 years, it is still less costly to buy here than elsewhere.

"The average price of a house in the UK remains around 1.3 times higher than the average price of a house in Yorkshire," said Tom Vosa.

Higher interest rates are expected to dampen house price growth across the country in 2007 and Yorkshire should prove no exception.

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