Government action on economy will hit North hardest

Pubs in the North of England could suffer from the knock-on effect of rising unemployment during the next five years as the government's cuts take effect, according to an economic think-tank.

Research by the Centre for Economics and Business Research (CEBR) argues that the jobless rate in the North East, Yorkshire and the Humber, West Midlands, Wales and Northern Ireland is set to break 10 per cent between now and 2015.

Meanwhile London, the South and the East of England are likely to avoid the worst effects of the government's attempts to bring the nation's finances round.

The CEBR said the outlook for households in all regions did not look like improving rapidly between now and 2015, although there were marked differences between the North and West and the South and East.

Pubco bosses have for some time been fearful of the impact public sector job cuts would have in areas where the state is the main employer, such as parts of the North East.

Owen James, an economist at the CEBR, said while such gloomy forecasts were at odds with what appeared to have been tentative signs of economic recovery in recent months, it would be a mistake to ignore both the scale of public sector job cuts and their geographical spread.

"The government's fiscal austerity measures will not only affect the public sector, it will also have an impact on those sectors supplying the public sector," he added.

CEBR chief executive Douglas Williams warned: "It will take some time for the private sector to adjust and fill the vacuum left once the public sector cuts are felt. This is likely to be an agonising transition."