- guardian.co.uk, Monday July 23 2007 09.14 BST
Britain's economy is likely to see a better balance of growth between regions as the traditional divide between northern manufacturing and southern services blurs and more companies opt to move out of the overcrowded south-east and London, according to a leading City economist.
However, the gap between the richest and poorest could become worse, according to Roger Bootle, chief economic adviser to professional services firm Deloitte and Touche. Writing in the latest issue of the Deloitte economic review, Mr Bootle argues that the UK economy is seriously unbalanced, with London and the south-east outstripping other regions, especially the east Midlands, the north-east and Wales, which have been disproportionately affected by the decline in manufacturing's share of the economy.
He warns that the coming squeeze on government spending, which accounts for less than a third of gross domestic product in the south-east but up to 60% in Wales, coupled with the continuing strength of London's financial services sector, will mean "the 'haves' are likely to become 'have mores' and the gap in incomes between the country's richest and poorest regions is likely to increase".
Regions with leading financial centres such as Leeds and Edinburgh should see their prospects improve as the relative decline in manufacturing slows. "Over the next few years Scotland and Yorkshire and Humberside could well see their share of UK output rise, after falling over the past 10 years."
Mr Bootle argues that some of the "haves" may move away from the south-east as pollution, congestion and the lack of affordable housing push workers towards other regions. Among the likely winners are Northern Ireland and the south-west, with Wales, the Midlands and the north "left fighting for the wooden spoon, at least in relative terms".
It is not all bad news, however, even for the most disadvantaged. "The key point is that although some regions will receive a shrinking share of the (economic) pie, the pie itself is getting bigger. Indeed, all regions should see a decent rise in output over the next decade or two. The upshot is that I expect the different regions of the UK to start to contribute more equally to the economy's progress - and share the fruits of it."
In the shorter term Mr Bootle predicts that the Bank of England's monetary policy committee will raise interest rates to 6% in order to keep inflation in check.
