Economic growth has ground to a halt in Britain nationally – but how is the north west affected?

Is it worse or better here . . . or just different? Ben Rooth investigates.

RISING inflation, tightening credit conditions and reduced consumer confidence - just a few of the reasons why UK economic growth officially ground to a halt between April and June.

But are the doom and gloom just as bad among the business of Greater Manchester, or can we ride out this `perfect storm'?

The consensus is that Manchester is in a better position than London to weather the problems, by virtue of the sheer variety of businesses here.

But the same professionals also believe that the fall-out is now starting in Greater Manchester - or is about to do so - and it could get worse.

David Bills, partner in charge of audit for KPMG in Manchester, said: "Until very recently, confidence levels among local businesses seemed to be holding up reasonably well.

"Indeed, there were certainly arguments in some quarters at the beginning of the year that it was primarily the City of London that had been caught in the eye of the economic storm, and that the rest of the British economy might escape relatively unscathed.

"However, there's now no denying that businesses in the north west are feeling the impact of this so-called `perfect storm' of rising inflation, tightening credit conditions and reduced consumer confidence. Clearly some sectors are feeling this more than others."

KPMG's National Business Confidence Survey, carried out every quarter, indicated a significant change in the level of optimism from quarter one to quarter two this year.

Last month, only 40 per cent of those surveyed in the north west felt optimistic about their own company's prospects for the forthcoming year, compared with 60 per cent who were bullish in March.

David added: "When you add to this the fact that nobody really knows how long all this is going to last - some predictors have said 2009, while others have indicated a much longer term - it is no surprise that local management are cautious.

"We have learnt from previous difficult economic periods that a `business as usual' strategy is simply the wrong approach.

"Those businesses which tackle the issues head on will stand a greater chance of emerging from this part of the economic cycle in a stronger, more competitive position."

KPMG's findings accord with those of the Confederation of British Industry (CBI) which says optimism levels are down 70 per cent in this region on the start of the year. The national average is down 40 per cent.

But it's not all bad - the region's order books are up by five per cent, while output is up by nine per cent compared with the beginning of the year. Nationally, orders are down by three per cent, and output is down by one per cent.

Damian Waters, regional director CBI north west, said: "Business sentiment - and consumer confidence - fell sharply in the past three months, more so than in any other region.

"This seemed to reflect an extremely sharp rise in costs, the highest in the UK, which firms struggled to pass on.

"Despite this, both the volume of new orders and the volume of output picked up, although by less than expected in the previous survey.

"One of the strengths of Greater Manchester's economy is its sheer diversity, and the feedback that I'm getting at the moment is that some retailers are having a tough time.

"But other companies - in the service and manufacturing sectors - remain busy."

Professor John Wilson, head of Salford University Business School, was more upbeat about the future. "Not all businesses will be adversely affected by the downturn, ranging from career and coaching advisers to low-price supermarkets such as Lidl," he said.

"However, most businesses will be affected, and it's essential for them to take a close look at the balance sheet and cash flow and to take into account how the recession is affecting their customers' cash flow.

"In any recession, it's also very important not to lose sight of the long term. This will vary with the business, but cutting staff development budgets or the marketing budget can prove a false economy. The economy goes in cycles, and any business has to be ready to capitalise on the upturn."

What's your view? Have your say below.

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