North East preparing for difficult future
Oct 28 2008 by Adrian Pearson, William Green and David Black, The Journal
THE North East economy will have to adjust to a recession lasting well into 2009, business leaders have been warned.
Durham could be one of the worst hit parts of the region as the credit crunch and a looming recession force regeneration bosses to refocus efforts on backing up the county’s faltering businesses.
Figures released to The Journal reveal the North East is already suffering the key signs of a recession, with a huge growth in unemployment benefit claims alongside a sharp drop house sales, a rise in repossessions and a warning from city treasurers that 2009 will not bring any relief.
In just 12 months, the region saw claims for Jobseekers Allowance rise from 48,113 to 53,434. The claims date up to the end of the summer and are expected to continue to rise well into the new year.
In Durham, JSA claims went from 6,645 to 8,037 in just 12 months. The 20.8% increase is well above the 11.1% increase for the region, a worrying trend for regeneration bosses.
And despite Government efforts to make banks return to lending, house sales have continued to fall.
In Blyth Valley, councillors will today be presented with a credit crunch report compiling the deepening economic gloom and housing market collapse.
Since April, only nine council house sales have been completed in the borough. In Newcastle, councillors have seen sales drop from 154 to 39 over a similar period.
In Tynedale, the council has not had a single application from tenants wishing to buy their home as mortgage lenders increasingly refuse to lend to potential homeowners.
Blyth Valley councillor Bob Watson said his and other authorities were preparing for a difficult future, and warned an upcoming council restructuring could have an “horrendous” impact.
Mr Watson said: “You have to wonder what impact the Northumberland Unitary merger will have on this. When they scrap all the districts and bring us all together next year, there will be a lot of job losses. I know they say they want to make voluntary redundancies but that really could not have come at a worse time.
“If they get rid of 800 well-paid jobs, that could be around £16m or more taken out of the economy next April.”
In Durham, the city council’s director of financial services, Paul Darby, has warned council leaders not to expect any immediate improvement.
While stopping short of predicting a recession, Mr Darby said in his report: “Growth in the economy is expected to be a good deal weaker that the Bank of England is forecasting and a recovery in 2009 seems less likely.”
John Wright, North East businessman and chairman of the Federation of Small Businesses, said: “We are well placed to get through this in relatively good shape, the potential is all here. But what is essential for that recovery is that the banks start meeting their responsibilities to small businesses.
“Right now we are not fully seeing the impact of Government intervention in the banks and if that is not sorted out it will be very damaging.”
Ross Smith, head of policy at the North East Chamber of Commerce, said: “The UK economy has contracted but we have to put this into some sort of perspective.
“The 0.5% contraction, while not good news, does in reality mean we have seen the economy shrink back to about the position we were at the start of the year, which is historically quite strong.”
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We'll do all we can to help struggling businesses, says agency boss
REGENERATION bosses have promised to do all they can to support businesses in Durham and the North East.
Ian Williams, One North East director of business and industry, last night acknowledged the tough times facing the county but insisted the agency could meet the challenge. Mr Williams said: “County Durham has been hard hit by the economic downturn and One North East is working with its partners to support businesses at this tough time.
“In the 12-month period until the end of August this year, we have offered £1.8m in grant support to 26 County Durham firms, with the potential to create more than 1,000 new jobs and protect a further 200. Examples of our support include £245,000 in Selective Finance for Investment grant assistance to Stanley-based Intersnack Limited, to create 45 new jobs as part of expansion plans and support to back a £4.5m investment by 3M in its Aycliffe manufacturing plant. We have also unveiled a £10m support package to help firms access finance and receive help to cut energy bills while Business Link North East has specialists in place. One North East is also working to put in place the building blocks of future job and business creation in County Durham through investment in facilities at the major science, engineering and technology base at NETPark.”
