Unemployment could hit 10% in the regions

One in 10 will be unemployed in half of UK regions over the next five years, says the Centre for Economics and Business Research.

Over this period the unemployment rate is expected to break 10% in the North East, Yorkshire & the Humber, West Midlands, Wales, Northern Ireland and the North West.

The South, East and London are to escape the largest increases in unemployment  but the outlook is bleak for the North, West and Northern Ireland.

The cebr says this will have a negative impact on these regions in terms of weak consumer spending and housing market demand.

With the exception of Northern Ireland, the rest of the UK is likely to see a drop off in their share of UK economic output, with the North West expected to face the biggest reduction.

The manufacturing sector is expected to increase by 4.8% in 2010 on the back of the effect of weak sterling on exports.

This is good news for regions such as the West Midlands where the manufacturing sector accounts for nearly 20% of total output.

In all, the outlook for households in each region does not look like improving rapidly over the period forecast in this report.

Owen James, economist of the cebr, says the effect on employment will be shocking.

He adds: “The gloomy figures released in this report may come as a surprise to some given the tentative signs of recovery in the UK labour market over recent months.

“Ignoring the scale of public sector job cuts over the forecast period, however, would be misleading, as would any view that the cuts will not hit some regions harder than others.”

Douglas McWilliams, chief executive of the cebr, adds: “Bankrolling public sector employment in the North through the tax base in the South is clearly not going to be possible over the near future.

“It will take some time for the private sector adjust and fill the vacuum left once the public sector cuts are felt. As our figures show this is likely to be a agonising transition.”