GROWING pressure on the public sector will bring more pain to the North-East economy, a leading market analyst has said.

Renowned commentator Nick Parsons, head of market strategy at the National Australia Bank and UK economist for Yorkshire and Clydesdale Banks, was in the region this week to address more than 100 business people at seminars held in Thornaby, near Stockton.

He said: “The good thing about the public sector over the past couple of years is that it has helped insulate the North-East from some of the worst of the downturn – it has provided a cushion.

“But crucially, with the Government set to borrow more than £700bn over the next five years, there is going to be much less of a positive contribution from the public sector.

“If anything, what has been a help over the past few years is going to turn into a drag for the next three to four years.

“A relative strength of the region is going to have an opposite effect.”

But he said that after meeting business people in Teesside, there seemed to be long-term optimism in the private sector.

Mr Parsons believed companies which exported goods were in a good position.

He said: “The private sector is currently being helped by a fall in the exchange rate, which I think is a real positive.

“We speak to lots of exporters and export industries that are going to benefit.

“You still need somebody to be buying them.

“The German, Spanish and French economies are going to contract. It is a positive but is not going to help us straight away.”

Although he would not predict that the recession was ending Mr Parsons said that in terms of economic growth: “The past 18 months has been bad followed by worse.

“What we are going to see for the next six months is that things are going to get worse more slowly. It has to happen before things do get better.”

And Mr Parsons predicted that there would be some good news for retailers at the end of the year, with retailers encouraging consumers to buy before VAT rises again.

He said: “Because the cut in VAT is reversed at year end, it will lead to a massive advertising campaign in the press and on billboards.

“Advertising will be everywhere because people will have had some savings from mortgage rates.”

And he believed small businesses had a crucial role to play.

He said: “The SME (small and medium-sized enterpise) sector is the backbone, not just of the North-East, but the whole UK economy.

“It is massively overlooked, they don’t get the attention or credit they deserve.”