Many South West businesses should gear up to help the economy grow in future, analysis by economists at the South West RDA suggests.
In their annual business review, RDA economists show that the opportunities for the next wave of growth lie in exports and investment, and the region’s businesses need to engage more directly in those areas.
The review demonstrates that growth in the recent past has come from an expanding public sector and rising consumption driven by the property market. These two areas are unlikely to expand as much in future, and therefore growth will have to come more from a combination of investment and international trade. By analysing the full range of indicators such as skills and international trading figures, the review suggests South West businesses are not yet in a strong position to exploit this new emphasis for growth.
For example, only 12 per cent of South West businesses surveyed at the end of 2009 intended to invest more in plant and machinery. Engagement with investment in private sector expansion has been relatively modest and involvement in exporting remains a low priority for many South West firms, even when they do export at all. This, the review explains, is cause for concern as it may affect their ability to expand quickly into new areas as the economy moves into full recovery.
Looking ahead, businesses may be able to take advantage of developments in broadband access which will help them compete in the global economy, say the review. There are also opportunities with rising demand for low carbon goods and services. Given the right aspiration and information, the South West is in a favourable position due to its strength in renewable energy technologies and lifestyle goods and services, including regional food and its tourism offer.
Nigel Jump, South West RDA Chief Economist, said: “Our economy will rebalance itself by businesses in the South West being more proactive in accessing new technologies, new processes and new markets. At the moment, many of the region’s businesses have yet to make that adjustment. They are investing less and finding access to new markets difficult. Future success will depend on more South West businesses exploiting new areas of growth and changing their business model to focus on more than just domestic consumers if they are to benefit in the next recovery. The South West business community faces an upturn that might look very different from the last one.”
Sarah Morris, Assistant Director CBI South West, said: “At this time, when the South West economy still faces change and uncertainty, this review shows where the region’s business sector has strengths on which to build further recovery, and where it can raise its game. South West businesses have demonstrated an appetite for world class research and development, which is underpinned by the region’s excellent universities. But they need to get better at innovation more widely in order to take advantages of new opportunities and compete on the global stage. As the public sector contracts, people will need to learn new skills.
“The CBI’s Economic Forecast published on 22 September 2010 predicted that the recovery will continue, but will slow next year as the rise in VAT hits consumers’ pockets. Exports will become increasingly important, and the South West is very much open for business.”
The full report can be found on the Economy Module section of the South West Observatory website www.swo.org.uk/economy
