November 30, 2020 @ 12:12 by Richard Dawson
A new study of economic trends has found that cities in the North East will stage a rapid recovery in the second quarter of 2021.
The UK Powerhouse report, published by law firm Irwin Mitchell in partnership with the Centre for Economics and Business Research (Cebr), expects that average annual gross value added (GVA) will be 23 per cent across the UK in Q2 2021.
The report believes Newcastle will outperform this average with GVA growth of 24.1 per cent over the quarter.
Middlesbrough is expected to record a 25 per cent boost, while the figure for Sunderland is 20.5 per cent.
The study, which assumes a substantial proportion of the UK population will have received a COVID-19 vaccine by the middle of next year, also highlights a disjoint between the increase in output and employment growth.
For example, while Newcastle is expected to see rapid GVA growth going into Q2 2021, employment levels could actually fall by 0.2 per cent.
This is in line with the end of the Coronavirus Job Retention Scheme (CJRS), which runs through until March 31, 2021.
Middlesbrough is forecast to see a bigger reduction in employment levels (0.7 per cent).
Looking ahead to the end of next year, Newcastle’s economic output by Q4 2021 is expected to increase by 7 per cent taking the value of its economy to £18.3 billion.
Over the same period, Sunderland’s economy could grow by 7.3 per cent, while the figure for Middlesbrough is 7.5 per cent.
Vicky Brackett, partner and head of Irwin Mitchell’s Business Legal Services division, said: “The encouraging news about vaccines should mean that by that by late Spring, consumer spending and business investment will be able to increase significantly.
“According 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.
“Although the labour market is likely to take a hit when the government’s furlough scheme comes to an end, there are some encouraging signs with Newcastle and Middlesbrough outperforming the national average for economic output.
“It 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’s time for action, not more words.”
Josie Dent, managing economist at Cebr, added: “The decision by the Chancellor to extend the CJRS has saved hundreds of thousands of jobs.
“The impact of the ending of the scheme in March 2021 is expected to be far smaller than it would have been in October 2020, as there is considerable hope that in Spring 2021 the virus will be much more containable.”