The North-South economic divide is getting wider and will continue worsening for the next five years.

Economic analyst Business Strategies said employment rates in the southern regions of Britain were heading towards 1980s boom levels.

But traditional manufacturing regions in the north of England and Scotland were falling or showing weak growth, with unemployment rising.

And while the widening pace of the gap will slow slightly in the coming years as manufacturing companies improve, it will definitely continue, the survey said.

Dr Neil Blake, Business Strategies' research director, said a recovery in factory output and higher Government spending on health and education announced in the Budget should help the northern regions.

"But this will not be sufficient to eliminate the gap," he said. "Indeed, taking a five-year view, the southern regions, the east Midlands and Northern Ireland are all set to increase their share of the nation's output while the remainder lose out, widening the North-South divide once again."

The forecasters predicted UK economic growth, measured by gross domestic product, would accelerate to 3.1 per cent in 2000, from two per cent last year.

Despite this strength, inflationary pressures would ease and interest rates would peak at 6.25 per cent. There may even be cuts in the cost of borrowing by the end of the year, the report said.

While unemployment levels worsened in the North, parts of the South-East were seeing severe skills shortages which were forcing employers to pay extra for good staff.

Dr Blake added: "The southern house price boom has been the most obvious sign of the recent widening of the North-South divide."

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.