Page last updated at 09:35 GMT, Friday, 23 January 2009

Recession's impact in south west

By Neil Gallacher
Business correspondent, BBC South West

Job centre
The number of unemployed people in Cornwall is the same as in 2004

So we find ourselves in recession at last.

But if the world around you does not seem any different from last week or last month, do not be surprised.

Our economy is nowhere near grinding to a halt. In the last quarter it will still have produced nearly all the goods and services it did before.

It will probably have shrunk by a percentage point or so - and that is unusual - but it is still a marginal change.

There is another reason for this too and this has more to do with the nature of the South West itself.

In the past our economy has often been slow to go into recession, and slow to come out the other side.

It may very well be that the full effect of the recession just is not being felt here yet. A couple of recent pointers back up this view.

Employment figures

Take this week's rising unemployment figures, for example.

Across most of the region, the claimant count is now back to levels last seen in 2001, but in Cornwall it is only back to the levels of 2004.

One probable reason for this is that Cornwall is less well blessed - some might say cursed - with jobs in an industry at the forefront of the crunch; financial services.

But that is no reason for the county to rest on its laurels. The first wave of job shakeouts may well have affected Taunton or Exeter more than Truro, but as the recession widens out Cornwall's turn will almost certainly come.

Another reason for suspecting the South West is going into this recession more slowly than much of the country comes in a report out this month from the corporate recovery specialists Begbies Traynor.

This compares the numbers of businesses in each region that have "critical problems" - county court judgments totalling 5,000 or more, or winding-up petition actions.

In all regions these increased between the third and fourth quarters of 2008, but in the South West and Wales the change was less marked than most, at 29%.

Devon's increase was just 24%. Cornwall's was 91%, but with very low numbers indeed - four going up to seven.

So in this region, we may on the whole be relatively lightly-hit - so far.

Tourism boost

This is no cause for celebration however. In twelve months or more we could find ourselves waiting to come out of the other side when the UK as a whole is officially recession-free.

One or two economic factors look as though they will have particularly significant impacts on the South West in this recession, although it would be a mug's game to predict whether this is good or bad. One seems to help us, one to hinder.

On the one hand, the weakness of the pound should bolster one of our key industries, tourism.

It should deter Brits from flying abroad, and could remind a whole generation of UK holidaymakers of this region's unique potential.

And it might finally open the peninsula to a significant influx of holidaymakers from countries such as France and Spain, or even the USA.

Until now, foreign tourists going west of Bath have been mainly from Germany and the Low Countries.

On the other hand, the benefit of all this to the economy could be offset by ultra-low interest rates.

The South West has an unusually high proportion of pensioners, 80% of whom rely on savings or investment income.

Interest rates

Low interest rates mean a steep reduction in the income of a big chunk of the region's population.

The conclusion? The UK as a whole has gone into recession, and at best the South West cannot be far behind.

There are few reasons for thinking we'll escape any better overall than the rest of the country.

It has been a long time now since we have been here, so what is happening will come as a shock, especially to those who are too young to remember previous recessions - and that is a lot of people in the workforce.

One key thought to hang onto today is probably this - although some people will have been hit hard in recent months, the vast majority of people have not lost their jobs or seen their incomes fall.

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