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Growth of 2.2% forecast for region


According to the new EY UK region and city economic forecast, the South Coast economy is predicted to grow by 2.2%, and the city of Southampton by 2.1%, in terms of GVA between 2015 and 2018.


Richard Baker, EY‘s managing partner across the Thames Valley and South Coast, commented: ”Overall, this is great news for the Thames Valley and South Coast region, with an average economic growth rate of 2.5% and average employment growth of 1.0%, making it one of the UK‘s fastest- growing areas outside of London.


”Southampton and the South Coast fall slightly behind the UK growth average (2.3%), having suffered from the loss of automotive manufacturing and pressure on defence spending, with the latter affecting both Portsmouth Dockyard and many contractors within the area.


”As well as the exchange rate, which will have hurt other regions with large manufacturing


sectors, the pattern of growth we‘re seeing across the Thames Valley and South Coast with its service sector focus has benefited from the strength of consumer demand.


It


will also have benefited service sectors more than manufacturers because of their lower exposure to imports.”


South outpacing rest of UK


Economic growth is also thriving for the rest of the southern regions, with London and the south continuing to outpace the rest of the UK over the next three years.


Mark Gregory, EY‘s chief economist, UK & Ireland, commented: ”We predict growth in the UK will slow slightly while remaining stable, as inflation impacts consumer confidence, interest rates begin to rise and public expenditure reform bites. Compared to the rest of the country, these factors will be felt less in the southern regions, which should be buoyed by good corporate investment and growth, alongside healthy


property markets. Strong migration growth in the southern regions compared to the rest of the country – bringing with it an enlarged labour force and skills – is also supporting this expansion story.”


National and regional policies must be designed to work in tandem


Concluding, Baker said that national economic policies such as the rebalancing of public expenditure and support for manufacturing and research and development must be aligned with regional activity.


”Faster regional growth is an extremely laudable objective but will not be achieved by devolved activity alone. A more aggressive manufacturing strategy, with real resources to back reshoring, support for developing and retaining STEM skills and an approach to trade that matches capabilities across the UK to opportunities overseas, must make up the core of national support to regional development.”


Confident consumers protecting UK business


Increasing employment, rising wages and low inflation put a spring in consumers‘ step for 2016. According to the latest Business Trends Report by accountants and business advisers BDO LLP in Southampton, consumers are enjoying their best start to the year since the financial crisis and are contributing to an upbeat business outlook despite global economic concerns.


BDO‘s employment index, which indicates firms‘ intentions to hire, remains positive at 105.1. This suggests that employment will continue to increase over the coming months even though the latest ONS labour market figures show that a record 31.3 million people are already in work.


Rising wages are also contributing to the UK‘s buoyant consumer outlook, with total pay packages up 2.4%*, according to the latest ONS labour market figures. The introduction of the National Living Wage is also set to give those on the lowest incomes a welcome boost this April. Coupled with low prices rises (the Consumer Prices Index rose by 0.1% in the year to November 2015) consumers should


THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – FEBRUARY 2016


Consumer power is protecting UK business confidence for 2016 from global headwinds. BDO‘s Optimism Index – which predicts growth six months ahead – remains above the long-term trend at 100.5, despite other major economies facing turbulent times.


Commenting on the findings, Malcolm Thixton (pictured), lead partner of BDO LLP in Southampton, said: ”Consumers are really seeing the benefits of the UK‘s strong economic recovery, and this is helping British firms to withstand tremors in the global economy. However, there is no room for complacency, and the Government needs to protect economic growth by focusing on business investment.


have a spring in their step to start the New Year. Businesses are feeling the benefits of low price rises too with the BDO Inflation Index remaining at 96.4 for the second month running.


”Initiatives such as raising the annual investment allowance would provide a greater incentive for companies to innovate and help to insulate the UK economy from risks abroad.”


* December‘s ONS Labour Market figures from August – October 2015


www.businessmag.co.uk


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