TIGHTER consumer spending is set to slow West Yorkshire’s economic growth over the next 12 months leading business advisers have warned.

The latest UK Economic Outlook from PwC says that Yorkshire’s economic growth in 2014, forecast at around three per cent, is being largely driven by consumer spending, rather than exports, investment or public spending – the key economic drivers of recovery and long-term stability.

PwC warns that consumer spending, which has been boosted over the past two years as households dipped deeper into savings, cannot continue as the household savings are under pressure and household income in Yorkshire is only 87per cent of the UK average.

Economic growth in the region is forecast to slip back to 2.5 per cent in 2015, in line with the national trend, according to PwC.

It says the services sector will remain the main engine of growth in the region for both output and employment as manufacturing growth has moderated due to renewed stagnation in key European export markets over the past six months.

Ian Morrison, PwC’s Yorkshire & North East regional leader, says household budgets are likely to come under greater pressure: He said: “Consumer spending growth has been relatively strong for the past two years despite weak average earnings growth. This has been due to strong employment growth, increased income tax personal allowances and low mortgage interest rates, all of which have stimulated consumer spending.

“We expect the proportion of household spending on essentials like housing costs and utilities to rise steadily and account for more than a quarter of total consumer spending by 2020.

“In addition, as lending increases and interest rates go up the proportion of financial services spending, excluding mortgage interest is also expected to increase to around 13 per cent of total household budgets by 2020.

“We estimate that, across the UK, real household disposable incomes will have grown by around 1.4 per cent in 2014 – but that’s around two per cent less than average household expenditure and there is little indication of that gap closing.

“These increased household spending pressures will put further pressure on families, particularly if real wages don’t begin to catch up with inflation. Yorkshire has enjoyed a significant increase in job creation over the last 18 months, but this has not translated into wealth creation, which is essential to close the gap with the rest of the UK.”