By Maximilian Clarke

The division between the North and the South of the UK, in terms of jobs, income, and house prices, has grown wider since the start of the recession.

Much of the change has been driven by cuts to the public sector, which employs a disproportionately larger share of the workforce in the North than in the South. This has resulted in retail decline as unemployment insecurity and higher unemployment from the jobs cuts erodes consumers’ willingness to spend. The result, the PwC Household Financial Stress Index shows, has been an significant increase in household financial stress in the North of the Country.

“Increased financial stress caused by the recession is a concern for households, government and business,” said PwC’s chief economist. “Uncertainty about money leads people to stop spending, reducing overall demand and growth. In general, the regions of the South East and the East of England fare better on the index compared to those of the North, the Midlands and devolved territories. This is consistent with the general pattern of regional development that existed before the recession.

“Our research also highlights how different London’s experience of the recession has been from the rest of the economy. London performs worse than many other regions on measures such as unemployment rates, but our index demonstrates that the impact of the recession on household financial stress has been less in London than in other regions, although it remains a region with high unemployment.

“We expect UK GDP growth to remain subdued at only around 1% in 2012, with consumer spending flat in real terms next year and unemployment likely to edge up as public sector job cuts outweigh private sector job gains. Unfortunately there will therefore be no early end to the financial pressures on households across the country, while our regional growth estimates suggest some further widening of the North-South divide next year.”

Regional household financial stress differences
· The North East and Wales are the regions that have suffered the greatest increases in household financial stress since the recession began, followed by the West Midlands. A mixture of relatively large increases in unemployment and economic inactivity rates, marked falls in house prices, and significant increases in personal insolvencies have all contributed to these results.

· In contrast, the South East, the East and particularly London have suffered less since the onset of recession and this pattern echoes the long term trend in UK regional development of a widening North—South divide that has existed for a period extending well before the recession (although London continues to score badly on some measures such as relative unemployment rates).

· Straddling this geographical divide, the East Midlands region has performed more strongly than the West Midlands on these measures of household financial stress since the start of the recession.

Join us on