Greater Manchester will grow by 0.7 per cent during 2017 despite the challenges of Brexit uncertainty according to a report out this week.
The UK Powerhouse report, produced for Irwin Mitchell by the Centre for Economic and Business Research (Cebr), reveals that despite greater uncertainty, rising inflation and falling investment by businesses, all of the 38 cities in the quarterly study will see their economies expand and are set to post growth in job creation during 2017.
Mancheste’s economy by the end of 2017, will be £58.9bn – £634m larger than it was in the three months following the Brexit vote. The authors also expect over 22,000 jobs to be created during the period.
However there are warnings for cities such as Manchester.The sharp fall in the value of the pound against other currencies following the Brexit vote will continue to drive higher inflation in 2017. With price rises putting pressure on modest wage growth, consumer spending strength will be drastically weakened next year. Consumer spending is expected to grow by only 0.9% in 2017, down from an expected 2.7% this year, and this is expected to hit key retail hubs such as Birmingham, Manchester and Leeds hardest.
Greater Manchester’s economy, for example, grew by 2.4% in the 12 months to Q3 in 2016 but growth is expected to slow to 0.6% by the end of 2017.
The report also revealed that that not one of the top 10 fastest growing cities in 2017 will be in the Northern Powerhouse.
UK Powerhouse says that Brexit is likely to have a key role in determining the prospect of cities around the UK in 2017 and states that suggestions of a ‘hard Brexit’ will bring greater uncertainty for Britain’s firms which could hold back investment and therefore limit growth in many cities.
Rising import costs are also putting increased pressure on the manufacturing sector and these increased costs could constrain factory output with tighter margins. Key manufacturing hubs in the UK, such as Derby, Hull and Sunderland are the most vulnerable to slowdowns in the sector. The report adds that overall the manufacturing sector should pick up as exports strengthen, but questions whether this will be the case in years to come.
Jack Coy, an economist at Cebr, said: “The delayed effects of Brexit have been in the pipeline for a while, and there will be some difficult economic pressures in 2017. These are likely to be felt throughout cities across the UK, and threaten to slow growth in the short and medium term. For example, rising inflation under a sharply depreciated pound challenges profits for producers nationwide. With consumer spending also sapped by rising prices, and a labour market which has probably passed its peak, growth may slow across the country. Retail hubs may also see spending growth soften, while consumers rein in budgets.
“However, investment at city and national level can help promote job growth and boost local economies. The report from quarter three highlights the importance of innovation, digital technology, and service-led economic growth within UK cities. Despite uncertainty for the year ahead, the best performing cities will be those who adapt to changes and capitalise on new opportunities. For example, the weaker pound gives UK exporters a competitive advantage, and those cities exporting goods internationally may profit from this – the contribution of trade to GDP in Q3 shows this potential.”