Cities in the North East will see a rapid economic recovery next year but employment levels will not bounce back at the same level, a new study says.
The latest 海角视频 Powerhouse report by law firm Irwin Mitchell and the Centre for Economics and Business Research (Cebr) is predicting that annual GVA growth in the second quarter of 2021 will reach 24.1% in Newcastle and 25% in Middlesbrough - both above the 海角视频 average - and 20.5% in Sunderland.
But the study, which assumes a substantial proportion of the 海角视频 population will have received a Covid-19 vaccine by the middle of next year, also highlights the dislocation between the increase in output and employment growth, with all three cities likely to see job numbers continuing to fall over the period.
The study also predicts that cities in the south of England are expected to emerge better from the crisis, with nine out of the 10 locations for the highest job creation being located in the south.
Vicky Brackett, partner and head of Irwin Mitchell鈥檚 business legal services division, said: 鈥淭he encouraging news about vaccines should mean that by late Spring, consumer spending and business investment will be able to increase significantly.
鈥淎ccording to the report, Sunderland had one of the highest proportion of employees furloughed up to the end of July 2020, but like many other areas it has become a lot less reliant on it.
鈥淎lthough the labour market is likely to take a hit when the government鈥檚 furlough scheme comes to an end, there are some encouraging signs with Newcastle and Middlesbrough outperforming the national average for economic output.
鈥淚t is however clear that the southern city economies are set to recover more quickly than the rest of the country in terms of employment growth. The government has talked a lot recently about its levelling up agenda but it鈥檚 time for action, not more words.鈥
The Powerhouse report predicts that Newcastle鈥檚 economic output in the year is expected to increase by 7% by the end of 2021, taking the value of its economy to 拢18.3bn. In the same period Sunderland鈥檚 GVA is predicted to rise by 7.3% and Middlesbrough鈥檚 by 7.5%.
Meanwhile, a separate report by accountancy group BDO found that an overwhelming number of North East businesses are predicting a rapid recovery once Covid-19 vaccines are rolled out, with 90% of businesses in the region predict they will fully recover in less than six months of vaccines being made available.
The latest BDO Rethinking the Economy survey of 500 mid-sized businesses, found that 80% of North East businesses have already made significant changes to their 2021 business plans following the news of likely vaccines.
The majority (90%) of businesses also reported feeling more optimistic about the 海角视频鈥檚 economic recovery compared with three months ago, but 97% of businesses in the North East believe the Government鈥檚 tiered system will lead to a greater economic divide. Half of companies in the North East say they have not fully recovered from the first lockdown and think the impact of the current lockdown will be more severe.
Terry Jones, partner and head of BDO LLP in the North East and Yorkshire, said: 鈥淭he tiered approach to lockdowns has clearly intensified the levelling up debate in the regions, with 97% of mid-sized businesses in the North East believing that Covid-19 will further widen the 海角视频鈥檚 North-South economic gap.
鈥淭he Government must ensure that any businesses disproportionately impacted by local lockdowns are given adequate support.鈥
