Manufacturers in Yorkshire and the Humber have a vital role to play in ensuring the UK economy moves up into the next gear, according to one of Royal Bank of Scotland’s senior economists.

David Fenton said that although there are signs of recovery, the national and regional economy is “only really in about third gear just now”. Speaking to the Yorkshire Post, he said: “To get up into fourth gear, fifth gear, we really need exports growth to kick in. Clearly, to achieve that there’s a key role for the manufacturing sector.”

Mr Fenton said that the UK economy is seeing a fairly broad-based recovery across a range of sectors.

“So far a lot of improvement has come from consumer spending, which is important and welcome because consumer spending accounts for about two thirds of the UK economy… it’s vitally important to the economy that we see that recovery.

“But there are limits to how much more momentum we’re going to see from the consumer sector and obviously we know that fiscal austerity still has a good few more years left so really that leaves exports and investment, we think, as the two things that can take the recovery up to the next level,” said Mr Fenton.

But he said: “What we typically find is that investment tends to lag the recovery as companies wait, hold back and make sure the recovery is for real, so that’s why we’re stressing the importance of exports as the area of demand that we think is the best contender to really take the recovery.”

The vast majority of companies in Yorkshire and North Linconshire do not sell their goods or services overseas, according to the latest Close Brothers Business Barometer. Ninety four per cent of local businesses polled in the quarterly survey of small and medium-sized enterprises, SMEs, across the UK, said they did not export.

The main reasons provided for not pursuing opportunities abroad were cash flow concerns and that businesses think they have nothing to export.

“SMEs must be more active in seeking and exploiting opportunities overseas. Even companies that are well positioned to export often do not,” said Mike Randall, CEO of Close Brothers Asset Finance.

“We need to understand the barriers – perceived or otherwise, take measures to lower those barriers for local businesses, and make exporting a possibility for them once again.” Meanwhile, Capital Economics recently predicted that Yorkshire’s future prosperity rests on support services and the professions as manufacturing and financial services dwindle over the decade.

The research, carried out for the Yorkshire Post, predicts Yorkshire’s manufacturing workforce will shrink from 265,000 this year to 231,000 in 2020 because the region’s factories have failed to specialise in the out-performing automotive and aerospace sec- tors.

Mr Fenton said: “Manufacturing sector accounts for 15 per cent of the West Yorkshire economy compared to just 11 per cent for the UK as a whole so it’s even more important in terms of looking at the performance of the manufacturing sector in West Yorkshire given that the sector is somewhat more prominent than this part of the world.”

Asked about the economic picture in Yorkshire in comparison to the rest of the UK, Mr Fenton said: “We are probably seeing a recovery taking hold in Yorkshire and the Humber as well, albeit some analysis we’ve done does suggest that Yorkshire and the Humber isn’t quite as competitive as some other regions in the UK economy which might at the margin have shaded it down ever so slightly, but it is overwhelmingly quite a positive story.”

During a visit to Hull and Leeds recently, he said he received positive feedback from customers.

“I was pleased to discover when I was speaking with customers in Hull and in Leeds that what they were seeing matched what we were seeing in the data which is that things are a lot better than they were six months ago, and an awful lot better than they were 12 months ago,” said Mr Fenton.

Region in front on global path

EXPORTS from Yorkshire and the Humber climbed to a value of £4.43bn in the last quarter, up 4.5 per cent on the previous three months and boosted by the Asian and North American markets.

The figure for the three months to the end of June was up from £4.24bn for the first quarter of the year and up from £3.93bn for the same period last year.

The statistics from HM Revenue & Customs show that machinery and transport equipment, mineral fuels and chemicals are the key export commodities for Yorkshire and the Humber, with America, Germany and Holland the region’s top three export partners. Yorkshire and the Humber was the only northern region to show second quarter growth.