RIU
North West Economy Resilient in Recession The North West had one of the most resilient economies in the UK throughout the recession, as indicated by the latest release of Office for National Statistics (ONS) Regional Accounts data. Regional GVA totalled £119.1bn in 2009 having declined by £1.9bn from the previous years figure; this equates to a 1.6% reduction, significantly lower than the UK average of 2.1%. Contributory factors include the continued growth of the public sector as well as its greater share in this region compared to nationally. Also the performance of manufacturing, a strong and significant sector in the North West economy which held up better than nationally (see Sector Analysis). The North West annual decrease between 2008 and 2009 was the third lowest of the English regions with only the North East and London experiencing smaller reductions (1.5%); all other regions recorded losses of over 2.5% the largest of which was -3.2% in the East of England.
GVA per head figures released further emphasised the resilient nature of the North West economy over the recession. Over the period of the economic downturn the North West was able to maintain its 6th place ranking among English regions in GVA per head terms; indexed to the UK (UK=100) the region recorded a figure of 86.4. In the North West GVA per head decreased from £17,604 in 2008 to £17,263 in 2009 a loss of 1.9% this compares with the UK average fall of 2.7%. The reduction in GVA per head in the North West was the lowest of all the English regions; the North East was the only other region to record a fall of less than 2.5%; the South East experienced the largest reduction in GVA per head of -3.5%. Figure 2: Regional GVA per head growth 2008-09 0.0
Figure 1: Regional GVA growth 2008-09
-0.5 -1.0 Growth Rate %
0.0
Growth Rate %
-0.5 -1.0 -1.5
-1.5 -2.0 -2.5 -3.0 -3.5
-2.0 UK Average
-2.5
-4.0 -4.5
-3.0
East of England
-3.5 East of West South East Yorkshire South England Midlands East Midlands and The West Humber
Source: Regional Accounts 2010 Note: UK less Extra-Regio & statistical discrepancy
North West
North East
South Yorkshire West East London East and The Midlands Midlands Humber
South West
North East
North West
London
Source: Regional Accounts 2010 Note: UK less Extra-Regio & statistical discrepancy
Sub-regional GVA – latest available 2008 Regional accounts publish estimates of GVA to NUTS 2&3 geography. These lag the
If you would like to know more about the work the RIU could do for you on this topic, please contact Nicola Christie on 01925 400 293 or Nicola.Christie@nwda.co.uk. We are always looking for new ideas to help you improve your decision making, please get in touch if you want to discuss any of your ideas with us.
RIU headline figures and give estimates up to 2008. There are five NUTS2 areas in the North West; of these Greater Manchester has the largest GVA £47.7bn, followed by Lancashire (£23.4bn), Cheshire (£22.2bn), Merseyside (19.8bn) and Cumbria (£7.9bn). GVA growth between 2007 and 2008 varied across the NUTS2 areas, whilst Cumbria experienced the largest growth rate in the region for the 6th successive year, albeit from a low base; it also saw the largest slowdown in its rate of growth. For the second successive year Lancashire experienced the lowest growth rate of the NUTS2 areas, 2.2%. Going forward the industrial structure of these sub-regional economies will impact on future GVA growth prospects. Figure 3: NUTS2 GVA & GVA per head growth 2007-08 GVA GVA per head
4.0 3.5 Growth Rate %
3.0 2.5 2.0 1.5 1.0 0.5 0.0 Cumbria
Cheshire
Greater Manchester
Lancashire
Merseyside
In 2008 Cheshire recorded the highest GVA per head of the NUTS2 areas in the North West, £22,138, followed by Greater Manchester £18,497, Lancashire £16,170, Cumbria £15,883 and Merseyside £14,698. Indexing the GVA per head performance of areas to the UK average shows that Cheshire remains the only area above the UK average. In the last three years Cheshire has halted the decline in GVA per head relative to the UK average, a trend it experienced over the period 1995-2005. Both Lancashire and Greater Manchester have seen the continued deterioration of their GVA per head positions relative to the UK, although the rate of decline has slowed in recent years. Merseyside and Cumbria have the lowest GVA per head levels in the region, however over recent years their performances relative to the UK average have improved. At the NUTS3 level within the North West Liverpool experienced the largest GVA growth rate 4.6%, the third highest of all NUTS 3 areas in England; whilst Blackpool experienced the smallest (1.0%). Only five of the 13 NUTS3 areas in the region experienced GVA growth above the UK average (3.1%), Liverpool, West Cumbria (3.9%), Greater Manchester South (3.7%), East Cumbria (3.3%) and East Merseyside (3.2%), the first three of these were in the top 10 NUTS 3 growth areas for England. At the other end of the scale Blackpool, Sefton (1.0%) and Greater Manchester North (1.1%) were in the bottom 10 NUTS3 growth areas for England; significantly these are some of the areas highlighted as vulnerable to public sector cuts. In terms of GVA per head at the NUTS3 level in the North West Liverpool experienced the largest growth rate 4.9%, the second highest of all NUTS 3 areas in England; whilst Greater Manchester North experienced the smallest (0.8%). Eight of the 13 NUTS 3 areas in the region experienced GVA per head growth above the UK average (2.4%), of these five where in the top 10 NUTS3 areas for England; Liverpool, West Cumbria (4.0%), East Cumbria (3.6%), East Merseyside (3.2%) and Blackburn with Darwen (3.0%).
Source: Regional Accounts 2010
Sector GVA – latest available 2008
In terms of GVA per head both Cumbria and Merseyside experienced growth above the national and regional averages between 2007 and 2008, Greater Manchester saw the lowest growth rate at 2.2%.
Real estate, renting and business activities (also known as business services) is the largest sector in the North West economy, contributing £26bn in 2008. Growth in business services has been sluggish in 2008, growing 2% on 2007, compared to the overall growth rate for 2008 of 2.8%. This is also well down on the trend growth for
If you would like to know more about the work the RIU could do for you on this topic, please contact Nicola Christie on 01925 400 293 or Nicola.Christie@nwda.co.uk. We are always looking for new ideas to help you improve your decision making, please get in touch if you want to discuss any of your ideas with us.
RIU the sector, which has been growing by 6.3% per annum (pa) for the last 10 years. This weakness is possibly linked to problems in the property market in 2008, when house prices declined by 15% as the onset of the credit crunch hit. Business services has become a very important sector across the North West, overtaking manufacturing in the last 10 years as the biggest contributor to regional GVA. In 1998, the sector accounted for 18% of the economy; by 2008 this had increased to 21.5%. In Cheshire and Greater Manchester the sector accounts for roughly a quarter of all output, above the national share. Business services is important to the recovery going forward, given the increasing dominance of the industry and the potential for it to absorb public sector workers. At a national level, growth has been picked up well in the sector since the recession ended, growing by 2.6%. This may bode well for the economy as a whole, but especially Greater Manchester and Cheshire where the sector is prevalent. Figure 4: North West Sector GVA 2008 35,000
30,000
25,000
£m
20,000
15,000
10,000
5,000
0 1989 Primary
1991
1993
Manufacturing
Source: Regional Accounts 2010
1995
Utilities & Construction
1997
1999
Hotels and Retail
2001 Financial
2003
2005
Business Services
2007 Public and other
Financial intermediation (FI) has received a considerable amount of attention over the last 2 years. In 2008, FI made a significant contribution to both the local and the national economy; 0.8% of the 2.8% overall growth came from financial services. The sector is worth £8.4bn to the North West economy and increased by £1bn in 2008. This growth could be related to the asset bubble in the lead up to the recession. The sector makes a major contribution in Cheshire (MBNA and Lloyds) and Greater Manchester (Co-op), both of which have significant financial services presence. In Greater Manchester alone, the sector grew by almost £500m. However, Chester has since been affected by major job losses at the former HBoS site and Manchester has also seen significant job losses. Growth in 2008 was well above trend, although the sector has seen a sharp decline nationally since the recession hit. Manufacturing has been a traditional strength in the North West and has maintained its place as the largest regional manufacturing sector. However, manufacturing declined in 2008 by 2% (less than the UK decline of 3%) and data for the UK suggests 2009 was also a tough year for the sector. There was a particularly sharp decline in Cheshire (4%), but manufacturing declined across all parts of the North West. The economic restructuring of the economy has been strong in the last 10 years; in 1998 manufacturing accounted for 24% of the economy. In 2008 this was down to 16% as low level manufacturing moves to cheaper production locations in East Europe and Asia and more output comes from services. The decline has been particularly strong in Cheshire and Lancashire. The Cheshire economy has diversified into business services, while there has been a far greater shift to the public sector in Lancashire. Cumbria derives the greatest share of output from manufacturing, at 25%, while in Greater Manchester and Merseyside the figure is around 12%. Although national data indicates 2009 will also be a tough year for the sector, data from the UK and surveys like the Purchasing Managers’ Index indicate the rebound in 2010 is being led by manufacturing. This bodes well for the North West given the large share of regional GVA from manufacturing. The large public sector in the North West has sheltered the economy from some of the worst effects of the downturn. The public sector has increased from 17.5% of the economy in 1998 to just under 20% in 2008. In the UK the sector accounts for 18.5% of the economy, with only the North East and Yorkshire and the Humber having a higher share in England than the North West. In Merseyside, the sector accounts for 27% of GVA, while in Cheshire it is just 13%. When public sector cuts hit in the next 5
If you would like to know more about the work the RIU could do for you on this topic, please contact Nicola Christie on 01925 400 293 or Nicola.Christie@nwda.co.uk. We are always looking for new ideas to help you improve your decision making, please get in touch if you want to discuss any of your ideas with us.
RIU years, it is likely areas will be affected at different levels. Nationally approximately 20% of all growth has come from public sector over the last 10 years; over the next 10 years it is likely the sector will actually decline. This will impact on growth rates and the private sector will be expected to fill the gap, which will be easier in places like Cheshire where there is a vibrant private sector.
If you would like to know more about the work the RIU could do for you on this topic, please contact Nicola Christie on 01925 400 293 or Nicola.Christie@nwda.co.uk. We are always looking for new ideas to help you improve your decision making, please get in touch if you want to discuss any of your ideas with us.