TORBAY has a real chance of improving its economic fortunes with the arrival of the Kingskerswell bypass, an economist has predicted.

In his annual 'state of the nation' report on Torbay's economy, Owen Nankivell (pictured) said the go-ahead for the road represents 'a new and exciting opportunity for the Bay'.

But Mr Nankivell said it might not bring the benefits some people have been expecting.

For example, he suggested it could boost day visitors to the Bay rather than more long-stay visits.

"It would be ironic if the main beneficiaries of the bypass turned out to be the recently established 'short stay' hotel sector; leaving our traditional hotels sector, who have waited in vain for a boost to their business, high and dry and missing out on the benefits that should flow from the bypass," said the former Treasury economist.

Mr Nankivell said the Bay had the opportunity to improve its position in the tourist market and the potential to regenerate much of Torbay's economy.

"It represents a radical change in the business environment in which Bay businesses will operate. The radical change will fortunately be matched by the other radical and innovative plans coming on stream to exploit the new situation.

"If these opportunities are seized and some, if not all, of the determined attempts by the local authority to improve the Bay's infrastructure throughout the Bay's three towns encourage new business to locate here, we will have for the first time in many years a robust launching pad for an economic revival."

In his report on the economy in 2010, Mr Nankivell said it has recovered slightly compared with 2009.

Though the rate of decline in manufacturing and construction accelerated, there were increases in distribution, hotels and catering, real estate and business activities, education and health and social work.

Retail and wholesale trade showed a little increase in 2010.

But he warned with so many jobs dependant on the public sector, the Bay will feel the impact when the Government funding cuts begin to bite.

The hotels and catering sector had so far withstood the economic decline, but he warned of trouble ahead as incomes fall.

He said there appears to be some evidence that the structural change in the accommodation sector are beginning to have a beneficial effect.

The redeeming feature of the Torbay economy over the past five years had been the public sector, but growth has flattened out.

"Taking a wider view, it must be assumed that there is almost certainly worse to come for Torbay's economy. It is presently resting temporarily on a plateau, braced for a further difficult period," he said.

The income per head gap between Torbay and the national average remained at 40 per cent, he said.