South East Economy Review

The 18-month long global recession bottomed out in spring 2009 and the economy has been gradually heading towards recovery since summer 2009. Following six consecutive quarters of negative growth, the UK economy emerged from its deepest and longest recession for 60 years in the final quarter of 2009, with output growth of 0.3%. At UK level, the production and construction sectors saw the largest drop in output in absolute terms over the course of the recession, but the relatively large contribution that the service sector makes to the UK economy means that services made a greater contribution to the overall GDP decline. In the South East, business activity has shown sustained growth in recent months, largely driven by a strong increase in manufacturing output. The proportion of firms reporting improvement in the business climate also increased over the course of 2009. However, profit margins continue to be squeezed as sales fall, customers demand lower prices, and input costs increase. Smaller companies in the region have been hardest hit by the recession, particularly in the manufacturing, construction and distribution sectors. Smaller firms still face difficulties in accessing credit from banks. The volume of new orders has been increasing at its fastest rate for more than two years in the South East, as a positive signal of future growth. At the same time, following a large drop in business investment over the course of the recession, there are signs that investment is picking up amongst South East businesses.