East economy more

THE Suffolk economy is more “sheltered” than many parts of Britain exposed to the economic storm unleashed by the banking crisis, a Bank of England expert told businesses yesterday.

Speaking at a Suffolk Chamber event held at The Best Western Ufford Park Hotel in Woodbridge, Bank of England agent of the south east and East Anglia Phil Eckersley expressed guarded optimism about the future of the economy but warned there was still a long way to go, and that we were building from “a very low base”.

Measures employed by the Bank of England such as quantitative easing and interest rate cuts would have an effect, he said.

“It will work. I feel assured it is starting to work already. It's a giant machinery and it's starting to crank up again,” he said.

While Suffolk businesses had suffered as a result of the recession, there were factors which had helped it and the wider region from an even bigger downturn, he said.

“The economy here is more sheltered from external storms or more external influences,” he said, although he recognised there were businesses, such as Felixstowe port, which would feel the full brunt of outside forces.

A diverse base from farming, to a reasonable amount of manufacturing and a good services industry meant that Suffolk had weathered the recession more readily than regions such as Northern Ireland, his last posting, he said.

“These sorts of diverse economies tend to absorb shocks much better,” he said.

“It's the breakdown of industry that's here that helped.”

Mr Eckersley, who took up his current post in October of last year, gave Suffolk Chamber of Commerce members an overview of the UK economy and how it was affecting the region.

“This is about the rate of contraction, so we are still shrinking, but we are not shrinking at quite the same pace as we were earlier this year,” he said.

“Although the economy is not expanding again, we are seeing some easing in that rate of contraction.”

The eastern region, London and to a certain extent the south east remained relatively sheltered, he said.

Unemployment, however, was likely to rise, he said.

There was a lot of strong evidence to suggest wage growth was “quite muted”, he added, and wage flexibility had enabled companies to cut costs without cutting head count quite as much as they might have done in previous recessions, he said.

The soundings he was taking from the region, in his job at the Bank of England, were “probably more positive” than his colleagues elsewhere in the country, he added.

“It's a relatively sheltered community but it seems to be doing quite well,” he said of Suffolk. “I would take great heart, great consolation from it.”

Reflecting on the plunge into recession, he said: “I think the degree of the downturn, the sharpness if you like, took a lot of people by surprise including the Bank.”

It was “quite a shock” that GDP fell so sharply, particularly in the fourth quarter, he said.

However, companies had taken a lot of remedial action to deal with their short-term problems, such as through cutting workforces. Moving into the first quarter, they had set their budgets at quite depressed levels and a lot of companies were “pretty pessimistic”. Sales falls had not met their pessimistic forecasts and they were “surprised on the upside” when revenues shrank less than anticipated.

Now “intentions have picked up, but not actions”, as businesses moved beyond hunkering down and began to look at future plans.

When they did decide to carry out their ambitions, the financing issue would come to the fore, he said.

“One of the big challenges the Bank of England has is to restore lending to previous levels,” he said.

Suffolk Chamber chief executive John Dugmore said: “Suffolk has perhaps weathered the storm better than most.”

He said the county had been helped by its entrepreneurial flair through difficult times.

“We have all felt the effect of this recession - everybody has wherever you are. I just think that Suffolk has performed more admirably than other counties and regions around the UK because we have a far more diverse economy and a lot of businesses have shown entrepreneurial flair,” he said.

The “c” word was back, and confidence was returning, he said.