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Service Sector Growth Boost North East Recovery


Businesses across the North East continue to see growth despite the country falling back into recession and ongoing crisis in the Eurozone.

NECC's Quarterly Economic Survey shows service sector growth in Q2 2012Businesses across the North East continue to see growth despite the country falling back into recession and ongoing crisis in the Eurozone.

The first half of this year has seen the largest increase in business positivity since 2008, according to the North East Chamber of Commerce's (NECC) Quarterly Economic Survey (QES), even though this quarter could not maintain the outstanding growth levels of Quarter 1 2012.

The Quarter 2 QES also demonstrates that regional service sector growth is now outpacing the North East's highly successful manufacturers for the first time since the beginning of the recession.

Domestic business continues to be flat and there has been a drop in export sales growth, which is below the six-year high seen in Q1 2012.

But with the exception of the previous quarter, scores remain higher than at any time since early 2008, showing the North East business community in relatively robust health despite the challenging economic climate.

NECC Director of Policy, Ross Smith, said:

"It must be remembered that these figures arrive on the back of an incredibly strong performance in manufacturing exports and continued positivity on recruitment and investment shows manufacturers are still confident of their underlying growth prospects.

"It is also reassuring that our service sector continues to build on last quarter's improvement with growth now outstripping manufacturing, although it remains the bedrock of the regional recovery."

NECC's North East Business Barometer, produced in partnership with Barclays, is a trends survey that shows the health and direction of the North East economy measured across 11 separate indicators. Any score above zero indicates trading conditions are improving.

The Quarter 2 QES, published today, includes a comparison between Local Enterprise Partnership areas that continues to show a slightly healthier picture in Tees Valley on several indicators.

The indicators demonstrate that while both domestic and overseas sales and orders have increased in the region, investment and recruitment remains muted.

Ross added:

"Future expectations of turnover and profitability have noticeably dipped on last month's incredibly positive figures and uncertainty in Europe and shifting exchange rates are likely to be key factors, but the continued increase in overseas and domestic trade is an extremely positive indicator.

"It is encouraging to see growth continuing among North East businesses. It was too early in Q1 to be confident the region was entering a prolonged period of strong recovery and so it has proved.

"Public sector cuts will also have an impact on the overall economy which is not fully reflected in a business survey, the official return to recession is bound to dent confidence and businesses have also had to cope with not only the extra Diamond Jubilee bank holiday, but with many employees taking that whole week off work.

"With a huge amount of uncertainty surrounding the Eurozone and global markets, it is no surprise to see a slightly less optimistic set of results than last quarter.

"Our manufacturers and exporters continue to do well, but it is great to see the resurgence in the service sector – an industry that has been in the doldrums throughout the economic downturn."

Nomad Digital is a global provider of wireless solutions to the transport sector including passenger WiFi on Eurostar and Virgin Trains, with its head office in Newcastle.

The company was the Sunday Times Fast Track 100 11th fastest-growing technology business in the UK after generating sales revenues of £19m in 2011, an increase of 120% on 2010.

This rapidly-growing, privately owned company is now the largest global provider of on-board internet connectivity to the rail industry, with its networks and solutions deployed in Europe, North America, the Middle East and Asia on more than 7,000 vehicles, serving over a billion passengers and covering 50,000 km of track.

Employing over 200 people, Nomad was the first company to provide continuous high speed internet connectivity in tunnels and the first to stream high quality live video to and from moving trains.

"We've consolidated our position in a new, but massively expanding niche and last year increased our market share to around two-thirds of the global market," said Ian McLaren, Chief Financial Officer (CFO) at Nomad.

"We expect to see further growth through a range of 'connected' applications such as CCTV and condition-based monitoring, not previously thought possible within prevailing communication networks constraints."

Chris Rigg, North East Team Director, Barclays, said:

"The Survey mirrors what we are seeing in our customer base in the region as consumers and businesses take measured investment and purchasing decisions. Despite an apparent slowdown in growth though I believe the North East has many factors to be hopeful for the future."

Below is a summary of the QES indicators:

NECC Quarterly Economic Survey - Q2 2012 Results