North East Devolution and Levelling Up
Penshaw Monument

The North East’s productivity top spots

Stockton and Sunderland are the only council areas in the North East with productivity above the UK average, according to figures this week from the Office for National Statistics (ONS).

The two locations are significant because they suggest an approach to productivity based on manufacturing skills rather than (or as well as) graduate qualifications and white-collar services, in contrast to a report discussed here on June 30.

All English regions apart from London, as well as Scotland, Wales and Northern Ireland, have seen their relative productivity fall since the current records started in 2004.

London’s economy is so large and its productivity so high, skewing the national figures so much, that every other nation and region of the UK apart from the South East registers below-average productivity.

GROSS VALUE ADDED

This week’s ONS statistics measure gross value added (GVA) per hour worked at current prices for the years 2004-2020. They measure how GVA at various sub-regional levels, including by local authority, differ from the UK average in any given year stated according to an index on which UK=100.

The North East’s rating as a region declined between 2004 and 2020 from 89.4 on the index to 86.1. It ended the period above Northern Ireland, Wales and Yorkshire & the Humber but below every other part of the UK. London was on 134.4 and the South East on 108.8.

The North East’s lowly position will come as no surprise, as the region has a long-standing record as a lagging economy.

However, when broken down further to local authority and other sub-regional levels the statistics are more informative and hold lessons about how to tackle the region’s relative under-performance.

Stockton had the highest productivity of any local authority area in the North East in 2020 at 101.7, though it had fallen from 105.2 in 2004. Sunderland was not far behind on 101.4 in 2020, having risen from 97.4 in 2004.

Darlington had the highest GVA in the region back in 2004 with 105.5 and North Tyneside was also above the national average on 104.3. But both these local authority areas suffered relatively steep declines to reach 84.5 and 93.1 respectively by 2020.

Darlington and North Tyneside both suffered particularly sharp falls between 2005 and 2006 – down from 106.1 to 97.3 in a single year in the case of the former and from 105 to 100.9 in the latter. Why this should have been is not clear, but neither of them ever recovered.

The only local authority areas to have enjoyed an improvement in relative productivity between 2004 and 2020 apart from Sunderland, already mentioned, were Hartlepool, Middlesbrough and Newcastle. But their index positions still remained relatively low – on 84.4, 82.1 and 87.1 respectively.

Eight council areas altogether, of the 12 in the region, suffered productivity declines relative to the UK average.

Measured according to other sub-regional geographies, among 47 local enterprise partnership (LEPs) and other functional economic areas in England and Wales, of which the North East region has two, Tees Valley ranks 27th with 87.6 and North East (NELEP) ranks 33rd with an index of 85.6

Both areas have seen their productivity relative to the UK average fall since LEPs were established in 2010 – NELEP from 86.6 and Tees Valley more steeply from 90.2.

Among 24 city regions and combined authorities in the UK, Tees Valley ranked 16th in 2020 on 87.6, the North East 18th on 85.8 and North of Tyne 20th on 85.3.

All three have seen their index ratings slip since 2016, when they made their decisions whether to accept or reject government devolution deals. Following its rejection of devolution the North East’s indexation fell slightly from 85.9 in 2016 to 85.8 in 2020.

North of Tyne, which broke away from the North East and signed a separate deal, also suffered a slight fall from 85.5 to 85.3 over the same period. But Tees Valley’s acceptance of a deal in 2016 did not immediately do it any apparent good in terms of productivity, which fell from 90.4 to 87.6.

COMMENT

The North East regional picture looks familiar – an under-performing region with productivity consistently below the national average over an extended period and with little sign of sustained improvement.

Depressingly, none of the government’s initiatives to level up the region, under whatever name – LEPs, combined authorities or devolution deals – appear to have resulted in any significant improvement. Indeed, all have coincided with declines in the relative positions of their corresponding geographical areas of responsibility.

But the more detailed break-down by smaller geographies is worth examining, for it tells a more nuanced story and holds lessons for the future.

On June 30 this site discussed a report from the Resolution Foundation which suggested that the way to increase the productivity of the UK’s provincial cities was to increase its human capital, graduate share of the workforce and population size.

Human capital, when discussed alongside factors such as intellectual property and graduate share of the workforce, suggests professional, white-collar services, or perhaps the digital and creative sector.

That is certainly one approach to raising productivity and has clearly worked for London, the South East and the Oxford-Cambridge corridor for many years. But the new statistics suggest it is not the only way.

Human capital can mean blue-collar as well as white-collar skills. Few can believe that Stockton and Sunderland have above-average productivity because they have London-Oxford-Cambridge types of economy. Their human capital takes the form of highly skilled workers like those at Nissan Motor Manufacturing and its supply chain, and similar productions facilities rather than white-collar professional service providers.

That is why developments like Teesworks, the International Advanced Manufacturing Park at Sunderland-South Tyneside, battery factories like Britishvolt and Envision and the other green industrial developments on the Tyne, Wear and Tees and at Blyth are the right path for the region to be following.

They require investment in skills at both higher and further education levels, particularly in the STEM subjects – science, technology, engineering and mathematics.

That is the way the North East will raise its productivity up to or above the national average – not by becoming a second-rate copy of London and the South-East but a better version of itself as it has been since the industrial revolution, a first-rate producer of goods.

There remains the question of Newcastle as regional capital. To be sure, it has industrial areas to which the same considerations apply as to Stockton, Sunderland and other parts of the region. But it also has a city centre providing professional white-collar services, where there would be a benefit from more white-collar graduates, as well as retail, hospitality, leisure and entertainment sectors which would benefit from a larger city-region population.

More graduates, it can reasonably be hoped, will become available as the job opportunities for them arise – either by young people staying in the region after completing university here or returning after graduating elsewhere.

A larger population, it might be thought, cannot be conjured out of thin air – though Newcastle did see an increase in residents of 7.1% between the 2011 and 2021 censuses, the only part of the region to see an increase in its number of residents.

But if actual population cannot be increased more quickly, effective population can be by improving local public transport so more people can travel into the city either to work or to enjoy its leisure facilities. That is why the Northumberland rail line currently under construction is so important and why the Leamside Line, other rail and Metro extensions and bus service improvements are such a priority.

To the extent that North East leaders are prioritising skills and public transport, they are on the right track to a high-productivity, high-pay region. It is just a frustration that politicians, whether national or local, cannot get their act together to deliver.

Six years after the North East Combined Authority (NECA) rejected a devolution deal local politicians have still not cleared up the governance mess they created and found a way of collaborating across the Tyne. And now, to add to the uncertainty and paralysis, national politicians have created turmoil at Westminster, leaving North East devolution and levelling up in limbo again for an unknown period and with an unknown outcome. Meanwhile all the North East public can do is look on, ill-informed at best and even in the dark. As far as devolution and levelling up are concerned, democratic accountability this is not.