North East Devolution and Levelling Up

North East economic targets: hits and misses

The North East is on track to hit some of its ten-year economic targets by 2024 but to miss at least two, while others remain in the balance, according to today’s annual report from NELEP, the North East Local Economic Partnership.

NELEP gives itself the thumbs up for the economic activity rate, and the thumbs down for private sector employment and productivity.

The overall jobs picture, impacted by Covid-19 over the past 18 months, is more complex. The total number of jobs in the local economy has fallen back in the past year after increasing in earlier years, but the number of more senior jobs has continued to strengthen.

A second report published by NELEP today provides insights into the impact of COVID-19 and Brexit on the North East economy

When NELEP was established in 2014 it set itself the target of creating 100,000 new jobs by 2024, of which 60% (later increased to 70%) were to be ‘better’ jobs in professional, technical and leadership roles.

By March 2020 the overall number of new jobs had reached 68,900, leaving the area well placed to hit its target, and the proportion of these that were ‘better jobs’ was 113%, indicating that growth in ‘better’ jobs had outstripped the loss of other jobs as the economy had changed.

A year later, however, and with seven of the ten years passed, the number of new jobs has fallen back to 59,500, suggesting that the 100,000 target by 2024 will be hard to achieve unless there is a strong economic rebound from Covid. But the proportion of ‘better’ new jobs has risen to 121% of the total new jobs figure – well ahead of target..

NELEP’s aim is to eliminate the gap in the overall employment rate between the North East and the rest of England excluding London altogether by 2024 and so far it has been reduced by 31%. NELEP indicates that its target is in the balance, through with only three years to go it looks challenging.

The picture looks brighter for the economic activity rate. The target is to reduce the gap with the rest of England excluding London by 50%, and by March 2021 it had been cut by 29%. But the North East’s performance in the past year has been relatively strong, with the rate 0.6% higher than a year earlier, contrasting with a 0.5% decrease in England excluding London. The downside, however, was that the employment rate in the area did not increase correspondingly in this period, resulting in an increase in the proportion of unemployed working age people. NELEP judges the chance of meeting its target by 2024 as in the balance.

For private sector employment, the target is to reduce the gap with England excluding London by 50%, but between 2015 and 2019 it widened by 14%. According to NELEP, this reflects the fact that the 1.9% increase in the number of private sector employees in its area was much smaller than the 5.1% increase elsewhere. NELEP gives itself the thumbs down.

The prospects for productivity are also challenging. The target for the productivity measure – gross value added (GVA) per hour worked – is again to reduce the gap with England excluding London by 50%. Between 2014 and 2019 the gap widened by 1%, with productivity in both areas increasing by just under 12%. The record was better In the most recent year, when productivity in the North East increased by 4.6%, much more than the increase for England excluding London of 1.7%. Nevertheless, NELEP gives its chances of meeting its target by 2024 the thumbs down.

The NELEP report also records the North East’s performance against a range of other economic indicators which are not specific targets. In the NELEP area, for example, gross domestic product (GDP) increased by 14.9% between 2014 and 2019, compared to an increase of 18.8% across England excluding London.

The North East gets a green thumbs up for 17 other measures, a red thumbs down for 13 and a yellow in-the-balance indicator for four.

According to NELEP: ‘The reports state that whilst the short-term impact of COVID-19 on the North East was highly disruptive and challenging, the region has continued to sustain increased levels of employment compared with its baseline in 2014, with continued growth of the proportion of better jobs…

‘They also show the impact of Covid-19 on business and the labour market has been significant. Some sectors, including retail, culture and hospitality, have seen severe changes. Local, regional and national intervention has had an impact in protecting businesses and jobs, but the impact now many of these support measures have ended is unclear.

‘Inequalities within the region have been exacerbated by the pandemic too, with employers in many industries struggling with skills shortages.

‘The reports also include data showing that the region’s engagement with the global economy is changing, with the impact of EU Exit creating barriers to trade and the future trading environment still evolving’.

Richard Baker, Strategy and Policy Director at NELEP said: ‘The economic shock has accelerated a number of opportunities for the North East, with growth and new jobs in some of the key areas of strength and opportunity we have been focused on – in energy, life sciences and digital industries for example.

‘Many firms across the economy have changed their operational models, with rapid deployment of digital technology, changing approaches to delivery of goods and services locally and growth in online exporting. There are genuine opportunities for the region to drive forward greener businesses and to drive productivity’.

Lucy Winskell, NELEP chair, said: ‘This year, perhaps more than any other, developing our shared understanding of change in the regional economy is crucial.

‘The work we have done to track, analyse and interpret data and evidence about the performance of our regional economy is central to our role at the North East LEP and a core part of the support we offer our partners.

‘It is integral to our economic leadership, our influencing work with government, and underpins our investment decisions and stewardship of public funds, ensuring that regional programmes of delivery are targeted at addressing the key opportunities and challenges we face.’