Tees Valley Economic Assessment Is the Core Statistical Document Related to Economic Development in Tees Valley

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Contents

1. Introduction 3 2. Executive Summary 4 3. Area Profile 12 4. High Streets 31 5. Economic Growth and Productivity 43 6. Business Growth 70 7. Education, Employment & Skills 83 8. Research & Development, Innovation & Energy 131 9. Transport & Digital Infrastructure 141 10. Place and Culture 153 11. Performance Gaps and Baselines 180 12. Bibliography 184

Section 1: Introduction The Tees Valley Economic Assessment is the core statistical document related to economic development in Tees Valley. It is based upon data and analysis for key areas that contribute towards growth in our economy including:

o Economy and Productivity (economic conditions, innovation activity, the business base and key sectors); o Skills and Labour Market (education attainment, employment and future demand); and o Growth Enablers (infrastructure, transport, physical connectivity, digital connectivity, education, place and culture). The Economic Assessment is updated annually. It reflects the priorities in the Tees Valley Strategic Economic Plan, the Local Industrial Strategy (locally agreed) and the Investment Plan. It is also focused on supporting the development of business cases, as well as helping to inform local authority assessments and other policy and strategy documents.

Data is presented for Tees Valley wherever possible, and sometimes at Local Authority level. When available, performance is benchmarked against the wider region and nationally.

Coronavirus and EU Exit

This year has seen the greatest shock to the world economy in a century. Data presented in the Economic Assessment reflects as far as possible Coronavirus impact, to inform recovery planning and economic interventions for 2021 and beyond. However, due to the rapidly changing path of the pandemic and the consequential but necessary health-related restrictions on people and business, any economic forecasts or projections should be viewed as point-in-time predictions and strongly dependent on changing circumstances.

At the time of publication for this assessment, Tees Valley has experienced varying degrees of restrictions necessitated by Coronavirus for over 10 months, with an unprecedented economic impact. Although the ongoing vaccine rollout offers optimism for a potential return to normalcy by the second half of 2021, the duration of current restrictions and approaches to re-opening the economy remain unknown. Impact is likely to be felt for a considerable period of time. This assessment has attempted to contextualise and detail the economic impact of the pandemic, but it must be highlighted that considerable economic uncertainty remains.

On 31 December 2020, the UK left the European Union. Whilst different forecasts predict varying levels of economic impact, there is a consensus view that the value of the UK economy will be smaller in the short-medium term, with a particular impact on the North East of England. Whilst this document is retrospective in data analysis, it reflects impacts of EU Exit where practical and possible to do so, and baseline data that will be critical for responding to economic needs post-EU Exit.

Section 2: Executive Summary Coronavirus has impacted the world economy to an unprecedented degree. As an outward-facing, globally interconnected country, the UK has been one of the most badly affected in both health and economic terms.

Whilst the pandemic itself leads to reduced economic activity, the necessary government restrictions aimed at protecting the nation’s health play perhaps an even greater role.

Given that the prevalence of the virus amongst the population determines the level of government restrictions, the prevalence of the virus therefore determines economic activity.

Coronavirus is an entirely new virus but scientists have remarkably produced a vaccine in under a year. It is likely the world will have to live with the virus for the foreseeable future and therefore it is usage of the vaccine that will enable government to gradually reduce its restrictions which in turn will allow the economy to recover.

Because of the extreme degree of uncertainty and ever-changing level of restrictions, economic forecasts should be viewed with even greater caution than usual. In addition, in such rapidly changing times, point-in-time data can quickly become dated.

Whilst Coronavirus has led to identifiable outcomes at the national level, data constraints (largely around sample sizes) have meant identifying local outcomes has been more challenging. To build an understanding of impact of the pandemic on the Tees Valley economy, national datasets have been analysed alongside local intelligence. Key Tees Valley findings are summarised below.

• Government support schemes have mitigated against many of the negative impacts flowing from the necessary restrictions designed to protect the nation’s health. A notable example is the Coronavirus Job Retention Scheme (CJRS) which has prevented a great proportion of the job losses that would have otherwise occurred. This scheme, alongside the Self- Employment Income Support Scheme (SEISS), has received similar take-up rates across the country and has meant that unemployment increase has been limited and of a broadly similar scale across the country, including for Tees Valley. At its peak in the summer, over 100,000 Tees Valley workers were receiving support from these two schemes, over one third of the working population. However, and despite this support, by November 2020 the Tees Valley Universal Credit claimant rate had risen to 6.9% compared to 4.3% in February. • At the time of publication1, the above schemes are due to end in April 2021 and it is then the full extent of the impact of Coronavirus will start to be felt on the labour market and unemployment. However, the full extent of the impact will not become evident immediately, unwinding through the remainder of 2021 and continuing into subsequent years. • The Coronavirus pandemic has created unprecedented levels of uncertainty and unemployment both nationally and locally, unemployment has risen significantly as a result of Coronavirus, particularly amongst men, the young and those working in certain industry sectors such as accommodation and food, manufacturing, retail, tourism and culture. This

1 January 2021 4

exacerbates a situation in which unemployment levels in the Tees Valley were already much higher than national. • The closure of schools during lockdown has been linked to a negative impact on disadvantaged children, in particular those without the digital infrastructure and equipment in place to support home-schooling. The Tees Valley contains some of the most deprived areas in the country according to the Index of Multiple Deprivation with a large percentage of students on Free School Meals. • However, there will also be opportunities to be made from the Coronavirus pandemic. The rise in health issues, both physical and mental, could provide an opportunity to expand the already sizable Tees Valley health and social care sector, meeting local and national needs through the local skillset. Digitalisation, both within businesses and households, may create new opportunities and a shift to ecommerce has also resulted in an increased demand for logistics. There could be significant opportunities if the workforce is able to meet these demands. • After falling sharply in April and only recovering slowly through the Summer, September saw a notable uplift in Tees Valley vacancies and rates are now running at or above pre- pandemic levels. There is particularly strong demand across health-related occupations.

2.1. Coronavirus and Tees Valley recovery planning

Directly following the outbreak of the pandemic, Tees Valley Combined Authority (TVCA) commissioned independent support and analysis to inform Coronavirus Economic Recovery Planning. The point-in-time commission was therefore completed before the full extent and persistent nature of Coronavirus became clear and before the start of the second wave of the virus beginning in the Autumn. It does however provide a robust and informed analysis based upon projected impacts of the pandemic for key sectors and residents in Tees Valley. This work identified economic support needs for Tees Valley, that can enable our economy to recover, be resilient to future economic shocks and chart a path to sustainable economic growth. Economic support sits within a wider context of the response across Tees Valley, including that led by Local Authorities and other partners focused around communities and health.

The analysis found three main trends impacting Tees Valley’s economy as a result of Coronavirus:

• Lockdown and Social-Distancing: limiting capacity to supply goods and services, and demand for face-to-face consumption; • Recession: A global, likely severe, recession, reducing both national and international demand for goods and services; and • Structural Change: Acceleration of digitalisation of economy and emphasis on local supply chain resilience.

Sectors within the region were broadly categorised into three groups:

• Severe and immediate impact: Retail, arts and leisure services required immediate support, as many struggled to survive, with significant impacts on unemployment;

• Rebound with support: Construction and manufacturing were identified as suffering most from lost investment and a recession-based hit to demand. Without support, this risks the loss of strategic sectors for Tees Valley and many thousands of skilled jobs; and • Recovery and growth: Health and parts of the Education sector were identified as most able to survive and grow, offering jobs in care and skills development to meet increased demand. Priority LIS sectors including Digital and areas of Manufacturing can also benefit from structural change, including rapid digitalisation of the economy and domestic supply needs, providing growth opportunities.

Going forward, we will focus on addressing these issues and developing a profile to respond to the opportunities available to the region, including:

• Supporting young people and the newly unemployed; • Creating confidence to boost demand and enable the region to chart a path to recovery; • Protecting the Manufacturing and Construction sectors, while ensuring continued activity among SMEs; and • Creating the building blocks for future growth, by stimulating investment and creating the right conditions for the development of digital technology and clean energy.

2.2. Tees Valley Economic Overview

Key economic messages for Tees Valley include: • Coronavirus has exacerbated Tees Valley’s underlying economic weaknesses, particularly relating to the area’s labour market and relative lack of jobs. Tees Valley has consistently recorded some of the highest economic inactivity and unemployment rates in the country. However, economic output per job is closer to national averages and above the North of England average, demonstrating that there are well paid and productive jobs in the region with the opportunity for further growth. • Throughout the past three years, the Tees Valley employment rate has broadly matched its pre-recession highs observed during the mid-2000s. However, with 294,000 Tees Valley residents aged 16+ in employment in the year to June 2020, the Tees Valley employment rate of 70.1% remains significantly below the UK rate of 76.1%. This difference in employment rates translates to an employment gap of 24,500. • Economic output across Tees Valley, measured in terms of Gross Domestic Product or GDP, stood at £16.2bn in 2018. Tees Valley GDP per capita was £24,085 or 75.3% of the UK rate. High rates of economic inactivity and low levels of employment are major determinants of this performance gap. • Productivity – GVA per hour worked – was £31.8 in 2018, third highest of all North of England LEPs and at 90.9% of the UK rate, far closer to the national average than the GVA per capita measure (71.5% of UK rate). The GVA per hour worked indicator is the best measure of an economy’s underlying productivity and removes employment rate, economic inactivity, demographic, and commuting considerations that are present within GVA per capita. This again highlights that whilst Tees Valley has relatively low numbers of jobs, some of the jobs it does have are amongst the most productive of those anywhere in the North of England. 6

• Tees Valley has significant sectoral strength and relatively high employment in higher productivity sectors such as Chemical & Process, Clean Energy, Low Carbon & Hydrogen and Advanced Manufacturing. Construction sub-sectors including civil engineering and specialised construction together with Logistics sub-sectors such as road freight transport are also well represented. • Employment is high in Health and Social Care, Education, Retail, Creative, Culture and Leisure and Professional and Business Services. Tees Valley also has sectoral strengths in: Chemical and Process; Health and Social Care; Public Services; Advanced Manufacturing and Clean Energy and Low Carbon. Whilst Coronavirus has impacted negatively on many of these sectors in numerical terms, particularly Retail and Creative, Culture and Leisure, Tees Valley’s relative sectoral strengths remain. In addition, certain sectors such as Health & Social Care and Digital in particular are likely to see faster growth than pre-pandemic trends were suggesting. • The area has a relatively aged population profile and, as with many other areas, an ageing population. There has been slow population growth over recent years, below national increases, along with significant out migration of working age people. Future projections show increasing labour supply constraints, which could result in there being a lack of local workers. The number of working age residents aged 16-64 is projected to fall by around 1,000 every year for the next two decades. However, there is significant scope to mitigate this constraint by addressing the area’s particularly high rates of economic inactivity and unemployment. • A key limitation on the Tees Valley economy is the relatively small size of its private sector, reflected in its persistently low business density at less than two-thirds the size of the UK average. If the Tees Valley public sector broadly mirrors national public sector trends, private sector growth must significantly out-perform the UK rate just to keep up with aggregate UK GDP or GVA growth rates. However, with local private sector business growth metrics typically running at or a little below national rates, the Tees Valley economy was 3.5% smaller in 2018 than in 2015. • Enterprise – the number of business enterprises located in Tees Valley stood at 17,610 in mid-March 2020. This total represents 63.7% of the UK rate for enterprises per resident adults aged 16+. The number of Tees Valley business enterprises increased by 1,110 between 2015 and 2020, an increase of 6.7%. However, this rate of growth was a little slower than for the UK resulting in Tees Valley business density falling from 65.5% of the national rate in 2015 and the business gap increasing from 7,700 to 10,000 over this time. Business density remains a key challenge for Tees Valley going forwards. However, with historical sectoral strength in those sectors where fewer but larger firms tended to predominate e.g. traditional heavy industry, the ongoing diversification of the economy can only help to close the present enterprise gap. • The skills levels of residents can present a challenge in meeting labour demands; Tees Valley residents are less well qualified than those of many other parts of the country. In terms of Degree/Level 4+ qualifications in 2019, the area needs an additional 43,400 residents qualified to that level to match the UK rate. • Tees Valley primary schools achieve above average Key Stage 2 results across all subject areas, with females consistently outperforming males. The quality of Tees Valley Primary schools is high with continually above-average Ofsted results. The quality and attainment levels of Tees Valley secondary schools, are below the national average, with females 7

continuing to outperform males. Tees Valley is below the national average for secondary achievement in English Baccalaureate subjects. However, Post-19 provision is above average with all five local authorities having a consistent track record of securing a Good rating by Ofsted for Adult Education provision. • Tees Valley remains a strong exporting region. In 2019, Tees Valley goods exports totalled £3,313m with imports at £3,361m, with the deficit of £48m down from £145m in 2018. No English region now runs a trade in goods surplus (Scotland and N. Ireland still do) but the North East remains the region with the lowest deficit (£1,267m in 2019). However, since 2019 North East exports have declined markedly, down 13% on the year to September 2020 with Coronavirus affecting the second quarter of 2020 in particular. • Tees Valley exports more goods to the EU (£1,709m in 2019) than to the rest of the world combined (£1,604m). Tees Valley’s EU goods exports alone are equivalent to over 10% of the area’s GDP. The region runs a trade in goods surplus with the EU but a deficit with the rest of the world. The UK sealed a trade deal with the EU on Christmas Eve 2020 which came into force on 1 January 2021. This deal will help mitigate the impacts resulting from the fact Great Britain is now outside the EU single market and customs union. • Congestion is less of a problem in Tees Valley than in many other areas. The average speed on ‘A’ roads (30.4 mph) is quicker than that for the North East region as a whole (29.3 mph), and this is in turn significantly quicker than the averages for other regions such as Yorkshire & Humber (26.1 mph) and the North West (23.0 mph). • The relatively low cost of living in the Tees Valley boosts the local quality of life. With median wage rates (Tees Valley £28,100 p.a., England £31,800 p.a.) far closer to the national average than median house prices (TV £139,000, England £244,000), Tees Valley has some of the most affordable homes in the country (TV ratio of house price to salary 5.0, England 7.7). Average housing rental costs also account for a significantly smaller share of wages than nationally e.g. % of take-home pay on two-bedroom home in TV 25%, England 38%. • Tees Valley has a relatively high proportion of localities within the most deprived 10% nationally, as ranked by the 2019 Index of Multiple Deprivation, and out of 38 English LEP areas it ranks as the second most deprived. Whilst this ranking is unchanged since 2015, there has been a slight increase in relative deprivation across Tees Valley in this time. • Digital connectivity in Tees Valley is well above the national average, especially for Ultrafast broadband for which 91% of all residential and business premises are covered, compared to 63% nationally. • The Tees Valley is home to the single biggest industrial development opportunity in the UK in the form of Teesworks. This significant opportunity means that Tees Valley’s private sector business and economic growth potential, particularly across our strong Advanced Manufacturing and Clean Energy, Low Carbon & Hydrogen sectors is among the greatest in the country.

2.3. Tees Valley SWOT assessment Strengths Weaknesses High levels of employment already concentrated The capacity for traditionally job rich service sectors in the Health & Social Care sector puts Tees to continue to provide new routes into employment Valley in the best possible position to grow this has been severely impacted by the pandemic. sector further. This sector is seeing the greatest number of new vacancies following Coronavirus With goods exports representing a relatively high and is now expected to be the fastest growing proportion of Tees Valley’s economy, the global sector across the country. recession and its associated reduced export demand will have a relatively greater negative economic Structural economic change is likely to support impact in Tees Valley than in some other parts of the growth across many sub-sectors of Tees Valley’s UK in 2020/21. already strong Advanced Manufacturing sector and its rapidly expanding Digital sector. Some of the country’s highest economic inactivity Coronavirus has accelerated existing trends rates – closely correlated with relatively low levels of towards more flexible ways of working involving health and well-being – and high unemployment digital technology and the EU exit is likely to rates across all age groups when compared to other provide new trading opportunities that can allow areas. Advanced Manufacturing to start to reverse its long-term employment decline. A relatively small private sector and strong reliance on public sector employment - reflected by Tees Underlying aggregate productivity one of the Valley having the lowest business density rate in the highest of the Northern LEPs and the area is well country including for scaleup/high growth firms. represented in relatively high productivity sectors such as Clean Energy, Low Carbon & Hydrogen Lack of business churn with enterprise start-up rates and its internationally renowned Chemical & constrained by lack of demand. Process sector. Lack of jobs and the second lowest jobs density of all Tees Valley is a strong exporting region and is combined authority areas in England. supported by England’s largest port in terms of outwards traffic tonnage with strong links to The quality and performance of Secondary schools is Northern Europe and considerable potential for below average. School performance at a local level expansion around the world. Whilst Coronavirus varies between Local Authorities with pockets of has impacted exports through 2020, EU exit will under-achievement in both primary and secondary. free outward-facing areas such as Tees Valley to diversify its export markets over the coming The number of Tees Valley residents with higher years. level/degree level skills is less than three in ten, giving us the third lowest proportion of all the Above average Tees Valley performance across English LEP areas. Tees Valley also has the second primary school level and above average highest LEP rate (11%) of working age residents with participation in Higher Education. no qualifications at all.

Staff costs and other business overheads such as Variable housing stock and relatively low house office rental costs are amongst the most price prices. competitive in the country.

Major East Coast rail hub at Darlington providing fast north-south connections across Great Britain. Excellent road connections including the A1(M) running through the area.

Relatively low levels of traffic congestion.

Attractive and affordable towns, countryside and coast. Low cost of living and a healthy place to live. Opportunities Threats Existing sector strength in Advanced The pandemic is already leading to higher Manufacturing puts Tees Valley in prime position unemployment, despite strong government support. to take advantage of the disruptive effects of the Tees Valley already has some of the highest levels of pandemic on global supply chains and trade in health deprivation in the country and goods. unemployment (particularly long-term unemployment) is a key determinant of peoples’ With Coronavirus accelerating the existing trend health and well-being. Coronavirus has had a towards more use of digital technology, Tees greater impact on the employment chances for Valley’s emerging strength in the Digital sector young people but has had a significantly greater will contribute to growth through the wider impact on the health outcomes of older people. economy and through industrial digitalisation. High risk of increasing and persistent drags on the Within a rapidly changing labour market, Tees local economy from rising rates of unemployment Valley’s flexible and hard-working labour force and associated reductions in income, consumption have the transferable skills, knowledge and and investment confidence. experience to enable them, with the appropriate bespoke training if necessary, to take up To maintain its relatively high aggregate productivity opportunities in new and emerging spheres of rate, Tees Valley has to fully embrace the rapidly work, jobs and occupations e.g. across Digital, increasing trend of digitalisation across all sectors Health & Social Care and Clean Energy sectors. including through the development of skills, on-site technology and remote working practices. Coronavirus has led to a reversal, perhaps in the short-term only, of the long existing trend of A relatively aged population profile and a shrinking population growth being concentrated in cities. workforce aged 16-64, exacerbated by significant This provides a strong opportunity for non-city out-migration of younger residents together with areas such as Tees Valley to boost their declining low levels of in-migration generally. working age populations, particularly so given the area’s outstanding natural assets and high quality Pre-Coronavirus, the percentage of Tees Valley of life. employers reporting skills shortages has dropped since 2017, however pockets of skills shortages The single biggest development opportunity in remain and have risen in some key sectors, including the UK in Teesworks. Development here, in Logistics and Construction. 2020 has seen significant conjunction with the burgeoning Offshore Wind changes in the labour market and this is highly likely sector, can strongly support the government’s to lead to substantial skills mismatches and growth levelling up agenda. constraints from skills shortages in the short-term.

An extensive supply of affordable and easily Over-reliance on a small number of high productivity accessible employment sites. sectors, often with a stagnant or declining

As a region with some of the most affluent and employment base and, to date, relatively restricted the most deprived areas of the country in close new job opportunities. proximity, great potential exists for boosting economic efficiency and growth through the EU Exit will require a period of adjustment during reduction of inequality. which trade could be negatively impacted. This period of adjustment may persist for many years, Large economic benefits of a clean energy particularly affecting Tees Valley’s Chemical Process approach to industrial production supported by and Manufacturing sector. strong local innovation assets and a workforce with up-to-date technical expertise.

Build on Tees Valley’s already strong position as an exporting region.

Increasing demand for innovation in products and services, particularly in delivering government’s Net-Zero targets.

Extending the economic benefits of transport investment with new developments at Darlington, Middlesbrough, Hartlepool, Eaglescliffe and Billingham rail stations and a new Tees Crossing.

Increasing the role and impact of Teesside International Airport.

Possibility to build on area’s existing strengths in energy to create a Hydrogen Transport Hub.

Increasing leisure and visitor market, including outdoor and cultural tourism.

Continued promotion of the affordability of Tees Valley as a place to live, work and invest in.

Section 3: Area Profile

Introduction

This section outlines the demographics and geography of the Tees Valley, which inform the Combined Authority’s Strategic Economic and Investment Plans.

The Tees Valley comprises five distinct local authorities. Combined, these areas have the unique natural assets and sectoral strengths to offer huge potential to build a diverse and inclusive economy for local residents and businesses with specialisms in Chemical & Process, Advanced Manufacturing, Clean Energy, Low Carbon and Hydrogen.

The River Tees runs through all Tees Valley districts, and together Tees Valley forms a functioning economic geography. It has a conterminous, fully integrated Combined Authority and Local Enterprise Partnership in the area, responsible for overseeing economic growth. The Tees Valley also includes the South Tees Development Corporation - Teesworks, which is the UK’s largest industrial development zone. It is the first Mayoral Development Corporation outside of Greater London and the 4,500-acre site is six times bigger than the City of London.

Nonetheless, the area continues to experience high levels of deprivation and comparatively weak health outcomes, as well as an ageing population, creating economic challenges that have been exacerbated by the impact of Coronavirus. Key messages Area Profile - Coronavirus impact o Age, in terms of variation between the young and old (particularly those of retirement age of which Tees Valley has relatively high numbers), recorded the largest disparities in health risk and outcomes from Coronavirus. Therefore, areas such as Tees Valley with relatively high numbers of older people have seen relatively greater health problems than areas with average age population profiles. o Risk was also higher in males, higher in those living in more deprived areas (of which Tees Valley has the second highest numbers amongst LEP areas) and higher in those in Black, Asian and Minority Ethnic (BAME) groups (of which Tees Valley has relatively fewer of). Underlying health conditions are also strongly associated with higher risk of poor outcomes from Coronavirus. Tees Valley ranks as the second most deprived LEP areas in the country in terms of health deprivation. o Young people were disproportionately affected economically by Coronavirus as they were more likely to have been employed in less secure forms of work such as zero-hour contracts and in more customer-facing sectors such as accommodation and food where furloughing has been more common. These forms of work are also more likely to see permanent job losses as well as fewer opportunities for work and apprenticeships. • Tees Valley is a predominantly urban area, covering five distinct town centres. The unique natural assets and sectoral strengths across the five Tees Valley local authorities combine to create the opportunity to build a diverse and inclusive economy for Tees Valley residents and businesses. • In addition to ranking as one of the most deprived parts of the country, Tees Valley has a highly-polarised distribution of deprivation. This contributes to significant levels of 12

inequality. Tees Valley ranks as the second most deprived LEP area in England with all five districts ranking in the most deprived 15% of local authorities nationally.

• Tees Valley is most deprived in the Health domain, with Employment deprivation second and Income deprivation a close third. However, Tees Valley shows relatively low levels of deprivation in both Barriers to Housing & Services and Living Environment domains. • Measures of Social Mobility in Tees Valley local authorities show that there are low levels of pay for those from disadvantaged backgrounds, in particular in Hartlepool and Stockton-on- Tees. The pay gap between those from poorer and more affluent families, a key indicator of inequality, was largest for Stockton-on-Tees, whilst the education gap was largest in Middlesbrough.

• Tees Valley has a wide range of extensive development sites, opportunities and financial incentives including the Mayoral South Tees Development Corporation – Teesworks, together with three Enterprise Zones offering Business Rate Relief. • The Tees Valley total resident population stood at 675,900 in 2019 – the smallest Combined Authority in terms of total population numbers. However, in terms of the wider economic catchment area population, around three million people live within an hour’s drive of Tees Valley – on a par with the core population of other urban areas in the North of England such as Greater Manchester and Leeds City Regions. • The Tees Valley can be defined as a functional economic area with close to 9 in 10 local jobs filled by Tees Valley residents and similarly close to 9 in 10 local residents employed within Tees Valley i.e. relatively small and balanced levels of in and out-commuting. • The population of Tees Valley has grown in recent years, albeit at a slower rate of growth than that seen nationally. Whilst the working age population has been declining, the majority of the increase in our population size can be attributed to those aged 65+.

• Compared to national averages, Tees Valley has a relatively aged population profile. There is a smaller than average labour force with relatively more residents aged 65+ and relatively fewer aged 16 to 64 compared to the UK. Projections indicate that this trend is set to continue, with population growth driven mainly by those over retirement age in the next two decades. However, decreasing numbers of 16 to 64 residents (year on year decline from a recent high of 424,000 in 2011 to 413,100 in 2019 and projected to fall by over 1,000 p.a. on average up to 2039) will be potentially offset to a degree by ongoing increases in the State Retirement Age. With Coronavirus impacting older people to a far greater extent than younger people, Tees Valley’s relatively aged population profile has therefore led to a relatively greater than average impact on the area’s population. This is turn has led to greater than average demands on the local area’s Health and Social Care services. • There is a risk that these demographic trends lead to skills shortages as highly skilled staff leave the workforce.

• The region has relatively poor levels of health impacting negatively on the pool of available labour supply. Tees Valley has some of the highest deprivation scores across the highly correlated health, employment and income IMD domains.

• Tees Valley international net migration increased (up 3%) in 2019, however international in migration rates were around half of that observed nationally (0.6 compared to 1.0) whilst out migration rates were around a third (0.2 compared to 0.6). • Migration flows are relatively low in compared to many other parts of the country. Whilst this does result in a more stable population, it does exacerbate the Tees Valley’s relatively aged population profile as migrants tend on average to be younger people.

The following section provides a geographical overview of the Tees Valley, taking into consideration the emerging demographic profile of the region, the urban/rural split in terms of population and the location of key industrial sites and Enterprise Zones which offer Business Rate Relief. Relative deprivation rates at the community level are also examined.

A focus on geography is particularly important in the Tees Valley Strategic Economic Plan, which calls for capital investment to be focused in urban settlements and enterprise zones. It is also important to plan local programmes and make the case to attract national resources based on need, which can maximise economic impact and increase social inclusion. By understanding our geography, we can develop initiatives and plan for developments that play to our region’s strengths, including our natural assets, and address areas of challenge.

3.1. Geography

Covering over 300 square miles and located on the North East coast, Tees Valley comprises five local authority areas including: Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton- on-Tees.

The Tees Valley area represents 1.2% of the population of England and 0.6% of the English land mass; it is highly urbanised, with 90% of the population in urban areas. Around one third (35%) of the total population is concentrated in the five main town centres with the remaining population located in the suburbs, in smaller settlements, or rural areas.

Figure 3.1. Tees Valley area

Source: TVCA As a major settlement with a growing service industry, Stockton-on-Tees is the largest of the Local Authority areas in employment and population terms. The borough’s economy is diverse, with sectoral strengths in Chemical & Process, Advanced Manufacturing, Clean Energy, Low Carbon & Hydrogen and Construction. Key companies include Fujifilm Diosynth Biotechnologies and Johnson Matthey, heavy industries include the expansion of the SUEZ UK energy from waste site, and a growing digital sector includes fast growing Visualsoft. A range of office and industrial business accommodation is available, such as Wynyard Business Park, Teesside Industrial Estate, Teesdale Business Park and Belasis Business Park, together with the industrial areas of North Tees and Seal Sands, plus incubation facilities. Numbers of overseas students in the area continue to grow with Durham University’s International Study Centre. A relatively large percentage of the population of Stockton-on-Tees is located in the wider Stockton town centre area, with the remainder of the population spread between several other town areas including Billingham, Thornaby, Yarm, Ingleby Barwick, Norton and in rural villages.

Middlesbrough continues to diversify its economy with a stronghold in advanced manufacturing companies across the borough, the thriving TeesAMP site has continued to develop through 2020 and provides world-class research and commercial premises, including a home to TWI, an internationally renowned research institute. The digital and creative cluster centred in the Boho area is becoming nationally recognised and has a unique opportunity to play a critical role in the productivity growth of the Tees Valley’s industrial base in its adoption of Industry 4.0 (industrial

digitalisation). Middlehaven continues to develop as a mixed-use regeneration site with a leisure element (for instance it is home to Middlesbrough FC), offices including Boho 5, innovative residential developments and education facilities. In addition to Middlesbrough College with its new T-levels offer, with the Teesside University campus located in the centre, the development of modern student facilities and proposals for a student village integrates the important role of the both college and university within the town. The town is also home to a major employer in South Tees NHS Trust, with almost 9,000 employees. The introduction of direct rail services to London and improvements at the station and the surrounding area will form the stimulus for independent businesses in the Historic Quarter and link centre to the Boho area. A significant amount of the population of Middlesbrough is located in Middlesbrough’s built-up area with the remainder of the population spread between numerous local areas such as Acklam, Linthorpe, Coulby Newham, Grove Hill & Beechwood and Marton.

Darlington is a gateway to Tees Valley, with direct connections to the A1(M) and the East Coast mainline as well as Teesside International Airport. Sectoral strengths are Advanced Manufacturing, Digital, Logistics and Health & Social care, with the town host to some major engineering and specialist services companies (Cleveland Bridge, Magnet, Cummins and Wood). At Central Park, the home to CPI’s National Biologics Manufacturing Centre and Teesside University’s National Horizons Centre, the town is the ideal location for the development of the biologics market. With its proximity to the A1(M) the borough is a growing location for logistics distribution centres – Amazon opened a fulfilment centre in May 2020, recruiting more than 1,000 new permanent jobs – with the opportunity for further developments at key sites. It has a rich heritage including the world’s first railway in the Darlington to Stockton line (with a bicentenary in 2025). A large percentage of the population of Darlington is located in the Darlington built-up area, with the remainder of the population spread between a number of towns and villages. Outside of the town centre the largest population shares are in Middleton St. George, Hurworth, Faverdale, Heighington and Harrowgate Village.

Redcar and Cleveland, which contains the coastal town of Redcar and is historically associated with the steel and chemicals industry, has the third largest population. It has a broad range of sectoral strengths including Raw Materials and Agriculture, Chemical & Process, Clean Energy, Low Carbon & Hydrogen, Advanced Manufacturing, Logistics and Creative and Culture & Leisure. Redcar & Cleveland is home to the UK’s largest integrated industrial complex with Wilton International one of the UK’s most important locations for process manufacturing including global companies, Sabic, Sembcorp Utilities, Ensus, Lotte Chemical, Huntsman and Falck. The South Tees Development Corporation is one of the biggest industrial and coastal development sites (4,500 acres) in Britain and it presents a unique opportunity to develop the Tees Valley’s strength in clean growth. With the combination of assets including large scale sites, deep access port facilities, global companies and innovation organisations including the Materials Processing Institute and the Centre for Process Innovation, the area can become the clean growth centre of the UK. The mining and processing of minerals is growing with Boulby mine, one of the deepest in Europe, and the new £2.3bn polyhalite mine under construction in North Yorkshire with processing to take place at Wilton. A large amount of the population of Redcar and Cleveland is located in the Redcar area with the remainder of the population spread between a number of local towns and villages such as Guisborough, Eston, Marske, Skelton, Grangetown, Ormesby, Saltburn and Brotton.

Hartlepool is the smallest Local Authority in Tees Valley in both population and employment terms. It is home to Hartlepool Port, has strong historic links to the maritime industry and its sectoral strengths include Clean Energy Low Carbon & Hydrogen, Chemical & Process, Advanced Manufacturing, Health & Social Care and Education and a growing Creative industries sector. The BIS, an award-winning facility in the town’s cultural quarter, is home to a vibrant community of creative firms. Hartlepool is also home to the Northern School of Art, the leading provider of specialist creative art and design in the north, counting Sir Ridley Scott among its alumni. It is central to the opportunity to create the biggest film studios outside London on the former council depot site, which will put Hartlepool at the centre of film making in the north. The town, also home to the National Museum of the Royal Navy, offers excellent opportunities for port-related industries with more than 300 acres at the Port of Hartlepool owned and operated by PD Ports, with deep water access, warehousing and open storage. Engineering companies employ around 1,700 people with Liberty Steel and with Able Seaton Port as one of the largest dry dock facilities in the world and a recycling facility of international significance (currently dismantling the Shell Brent Delta platform). The chemicals industry is still also important to the town and clean energy production at EDF’s Nuclear Power Plant generates 60GW (2% of GB’s peak electricity demand). A smaller percent of the population of Hartlepool is located in and around the town centre area, with the population mainly spread between a number of local areas such as Throston, West View, Seaton Carew, Middle Warren and Clavering.

Figure 3.2 compares the urban/rural composition of the Tees Valley area:

Figure 3.2. Rural/Urban split of Tees Valley area

3.3. Enterprise Zones

There are a range of cost-effective sites and premises across Tees Valley, with three Enterprise Zones offering Business Rate Relief. The list of Business Rate Relief Enterprise Sites includes:

• Northshore, Stockton-on-Tees; • Central Park, Darlington; and 17

• Middlesbrough Historic Quarter. The Business Rate Relief sites offer a discount of up to £55,000 each year for five years, totalling £275,000 for businesses that enter the zone before 31st March 2022. The sites benefit from excellent transport links, simplified planning and broadband connections.

These sites are ideal for small and medium-sized businesses active in local and national supply chains such as process and chemicals, energy and advanced manufacturing/engineering, or the Tees Valley’s emerging and fast-growing life sciences, digital and professional services sectors.

3.4. South Tees Development Corporation - Teesworks Special Economic Area

The South Tees Development Corporation, now marketed as Teesworks, is the UK’s largest industrial development zone and covers 4,500 acres south of the River Tees. It is the first Mayoral Development Corporation outside of Greater London and is six times bigger than the City of London.

The Mayoral Development Corporation was established in 2017 with the express purpose of remediating and redeveloping the land for inward investment, with a master plan to create 20,000 jobs and drive £1bn per year into the regional economy.

The plan will see the area transformed into a hotbed of new industry and enterprise, focused on the clean technologies of the future, including carbon capture, Hydrogen, and offshore wind.

Devolved powers allowed the Combined Authority to purchase outstanding developable land and kickstart remediation work in 2020. It has also enabled talks with investors and helped to bring them on-site more quickly. This includes Net Zero Teesside, the UK’s ground-breaking carbon capture, utilisation and storage (CCUS) project aiming to develop the UK’s first decarbonised industrial cluster.

The site offers access to the River Tees as well as one of the deepest water ports on the east coast of England, making it ideal for companies looking to export to global markets.

The area has excellent transport connections, with rail-connected port-side facilities and access to the wider strategic road network and the rest of the UK. It is less than 30 minutes away from Teesside International Airport.

Figure 3.3 shows the Development Plan for the Teesworks site.

Figure 3.3 Teesworks Development Plan

Source: www.teesworks.co.uk

3.5. Demography

The mid-2019 population of Tees Valley is estimated to be 675,900, with a total of three million people living within an hour’s drive of the area. Figure 3.4 illustrates the overall population change in Tees Valley over the last 28 years.

Figure 3.4. Total resident population in Tees Valley, 1991-2019 Key Findings:

• There has been an upward trend since the turn of the millennium of the population size of Tees Valley.

• This population growth of 3% has still lagged below that in the North of England (8%) and England as a whole (17.6%).

Source: ONS Population Estimates

Figure 3.5. Age split of current population Key Findings:

• 19.5% are aged between 0-15 years old (132,100 people), compared to 19.2% nationally. • 61.1% are aged between 16-64 years old (413,140 people), compared to 62.4% nationally). • 19.3% are aged over 65 (130,690 people), compared to 18.4% nationally.

Source: ONS Mid-2019 Population Estimates

1 Based on the Census results from Office for National Statistics (ONS), the majority, 94.9% (628,100) of the Tees Valleys population are white, with 10,600 of the population being Pakistani (1.6%), 6,900

Mixed race (1.0%), 4,000 Indian (0.6%), 3,400 ‘Other’ Asian (0.5%), 2,800 Black African (0.4%), 2,500 Chinese (0.4%), and the remainder of the population 4,400 (0.6%) being from other backgrounds.

2 Based on the ONS 2019 mid-year estimates the balance of males and females within the Tees Valley is fairly evenly split with 49.1% (331,800) of the population being male and 50.9% (344,200) female.

3 In the Tees Valley, the Census 2011 showed that 68% of residents (449,000) define themselves as Christian, 0.3% (1,800) as Hindu, 2.4% (16,200) as Muslim, 0.3% (1,700) as Sikh, and 0.4% (3,100) as other. Almost 23% of residents (150,000) define themselves as having no religion and 6% (41,510) of people in the Tees Valley did not state their religion - a lower rate than that observed nationally.

4 There are few statistics on protected characteristics generally available, however there were 7,037 civil partnerships (3,446 male and 3,591 female) formed in the UK in 2012, of which 48 (12 male and 36 female) were in the Tees Valley.

5 The 2011 Census looks at self-certified limiting long-term illness. The Tees Valley has a higher percentage of people who consider themselves to have a limiting long-term illness at 20.8%, higher than the average of 17.9% for England & Wales.

Table 3.1 compares the demographic profile of Tees Valley to England as a whole:

Table 3.1. Demographic profile, Tees Valley and England Tees Valley as % Description Tees Valley England of England Population (2019) 675,900 56,287,000 1.20% Population projection (2029) 681,400 58,969,500 1.16% Population projection (2039) 682,700 60,961,800 1.12% Geographical coverage (hectares) 79,400 13,027,800 0.61% Population density 8.5 4.3 Birth rate 1.06% 1.08% Death rate 1.35% 0.88% Life expectancy (2016-18) 79.3 years 81.4 years Healthy life expectancy (2016-18) 59.5 years 63.6 years International in-migration rate 0.58% 0.96% International out-migration rate 0.17% 0.60% Internal in-migration rate 4.02% n/a Internal out-migration rate 4.24% n/a Median age 40.1 39.0 Population growth rate 0.2% 0.6% Sources/notes: ONS mid-2019 population estimates, ONS 2018-based population projections, Census 2011. Tees Valley life and healthy life expectancy are simple averages of district estimates, ONS. Rates are a percentage of population in mid- 2019.

3.6. Impact of Coronavirus on population groups

The Public Health report ‘Disparities in the risk and outcomes of Coronavirus' (2020) found that the largest disparity was by age. Among people already diagnosed with Coronavirus, people who were 80 or older were seventy times more likely to die than those under 40. Risk of dying among those diagnosed with Coronavirus was also higher in males than females; higher in those living in the more deprived areas than those living in the least deprived; and higher in those in Black, Asian and Minority Ethnic (BAME) groups than in White ethnic groups. Underlying health conditions are also strongly with higher risk of poor outcomes from Coronavirus.

Work undertaken to inform Coronavirus recovery planning in Tees Valley suggests that the Coronavirus pandemic has impacted on different population groups within communities. Whilst Coronavirus impacts most negatively on elderly people in terms of health, a disproportionate number of young people were likely to have been furloughed and are more likely to lose their jobs. Young people and school leavers will also be affected through loss of work and apprenticeship opportunities, risking long-term career damage.

There is also evidence that there may be long term health implications from Coronavirus, around 10% of mild Coronavirus cases who were not admitted to hospital reported symptoms lasting more than 4 weeks and symptoms lasting more than 8 weeks were reported for some people following hospitalisation. This long-term health impact will only add to the Tees Valley’s already high level of general ill-health which in turn impacts negatively on the local economy and labour market through high rates of economic inactivity and unemployment 3.7. Migration

Following the vote to leave the EU in 2016 and reflecting national trends, there was a sharp drop in international net migration in Tees Valley in 2017. However recent figures show that in the year to Mid-2019 international net migration in Tees Valley increased by 3%, up by 70 on the year from 2,700 in the year to mid-2018 to 2,770 in the year to mid-2019.

Figure 3.6. International Net Migration trends by Local Authority Key Findings:

• International net immigration was higher in Hartlepool and Stockton-on- Tees and lower in Darlington, Middlesbrough and Redcar and Cleveland, with Stockton-on-Tees seeing the largest rise of 160 when compared with 2018. • After a drop in 2017 followed by a rise in 2018, which mirrored trends seen across the North East and England, Tees Valley international net migration increased 3% over the last year Source: ONS compared to a 22% drop nationally and 14% drop across the North East.

Migration flows are relatively low in Tees Valley compared to many other parts of the country. Whilst this does result in a more stable population, it also exacerbates the Tees Valley’s relatively aged population profile as outward migrants tend on average to be younger people. Compared to England as a whole, Tees Valley international in migration rates were around half of that observed nationally (0.6 compared to 1.0) whilst out migration rates were around a third (0.2 compared to 0.6). Rates were highest in Central London, the university cities of Oxford and Cambridge and large cities across the country.

Figure’s 3.7 and 3.8 illustrate the international inflow and outflow rates for the Tees Valley compared with the wider North East and England.

Figure 3.7. International Inflow Figure 3.8. International Outflow

Source: ONS 3.8. Local level deprivation

The Ministry of Housing, Communities and Local Government (MHCLG) published the latest Index of Multiple Deprivation (IMD 2019) in September 2019. This comprises deprivation scores and national ranks for all Lower Super Output Areas (LSOAs) in England, plus Local Enterprise Partnership (LEP) and local authority (LA) results. A wide variety of indicators are combined to form seven domains – Income, Employment, Education, Health, Crime, Barriers to Housing & Services and Living Environment. The Income domain includes two sub-domains namely IDACI (Income Deprivation Affecting Children Index) and IDAOPI (Income Deprivation Affecting Older People Index). The seven domains are then combined into overall deprivation scores (the IMD) for every LSOA in England.

IMD is a nationally recognised measure of deprivation in small areas across England and is used widely to target programmes that tackle inequality and deprivation. Inequality is a key challenge for Tees Valley with deprivation levels varying widely, often in close geographical proximity, throughout the region.

The IMD also provides a useful means to guide the allocation of resources, with the potential to be used to inform allocation of funding, for instance the UK Shared Prosperity Fund (UKSPF).

Key messages for Tees Valley

• IMD 2019 shows a slight increase in relative deprivation across Tees Valley compared with 2015, with little change to the overall pattern of highly polarised deprivation in the area.

• Tees Valley has a relatively high proportion of LSOAs within the most deprived 10% nationally, ranking as the second most deprived LEP in England (out of 38 LEP areas). This ranking is unchanged since 2015. • 121 or 29% of Tees Valley’s 417 LSOAs are in the 10% most deprived nationally, almost three times the national rate. • Tees Valley is most deprived in the Health domain, with Employment deprivation second and Income deprivation a close third. • More positively, Tees Valley shows relatively low levels of deprivation in both Barriers to Housing & Services and Living Environment domains. • At the local authority level and out of 317 districts nationally, Middlesbrough has the highest proportion of LSOAs within the most deprived 10% nationwide, with Hartlepool 10th, Redcar & Cleveland 29th, Stockton-on-Tees 39th and Darlington 47th • All five local authority areas now rank amongst the 15% most deprived local authorities in England. The figure below depicts the distribution of deprivation levels across Tees Valley. It shows how the most deprived neighbourhoods are generally concentrated within the urban areas of Tees Valley.

Figure 3.9. Indices of Multiple Deprivation, Tees Valley LSOAs, 2019

Source: MHCLG. English Indices of Deprivation 2019

Ranking by domain - key points

• Tees Valley ranks as the least deprived LEP area on the Living Environment domain. This domain covers two sub-domains; the indoors sub-domain measuring the quality of housing and the outdoors sub-domain measuring air quality and road traffic accidents. Tees Valley

also ranks as relatively less deprived on the Barriers to Housing and Services domain as discussed in Section 10. • Tees Valley ranks as the most deprived LEP area on the Income deprivation affecting children index (IDACI) sub-domain. All five Tees Valley local authority areas record higher levels of relative deprivation on the IDACI sub-domain as compared to the IDAOPI – the Income deprivation affecting older people index. With Tees Valley also ranking as the fourth most deprived LEP on the IDAOPI sub-domain, this suggests that child poverty is relatively more of an issue than pensioner poverty in the Tees Valley. • Reflecting Tees Valley’s overall IMD of second most deprived LEP area, the area also ranks second most deprived on many domains including the overall Income domain, the Employment domain, the Education domain and the Health domain. Tees Valley ranks as the third most deprived LEP in terms of the Crime domain.

The table below summarises the IMD domain ranks by local authority.

Table 3.2. Rank of proportion of LSOAs in most deprived 10% nationally Rank out of 317 LA areas Rank out of 38 LEP areas Darlington Hartlepool Middlesbro’ R&C Stockton Tees Valley Income 41 7 1 24 33 2 - IDACI 30 3 1 13 37 1 - IDAOPI 79 15 11 52 55 4 Employment 52 5 2 12 39 2 Education 42 38 3 46 61 2 Health 35 16 4 18 28 2 Crime 20 14 3 58 84 3 Barriers 199 250 250 250 219 35 Living Env. 251 251 251 235 251 38

IMD 47 10 1 29 39 2 Source: IMD 2019

The Joseph Rowntree Foundation’s recent report into poverty in the UK emphasises the role of in-work poverty in deprivation, with around 13% of workers in poverty as of 2018/19. It highlights how in-work poverty is characterised by sector differences- for instance, around 12% of workers in health and social care are in poverty, and this has been on an upward trend in the past 5 years. Tees Valley has a higher concentration than nationally in this occupation which could go some way to explain its higher ranking on deprivation metrics. The North East also ranks 5th among 12 UK regions for rates of in-work poverty at around 13%. The report also demonstrates how coronavirus has exacerbated this issue across the UK, with low-paid workers more likely to face reductions in their pay than those working in more high-paid sectors. 3.9. Social Mobility

‘The long shadow of deprivation – Differences in opportunities across England’ research report published by the Social Mobility Commission (2020) provides an assessment on social mobility across local authorities in England. The report looks at state-educated sons2 born between 1986 and 1988, where they grew up, their family circumstances, their educational achievement etc. through to the

2 Reliable estimates for daughters were not available as adult earnings measures cannot be adjusted for part- time work.

labour market. It shows how the earnings outcomes of children from different backgrounds vary across lower-tier local authorities.

The report finds that depending on where they grew up, sons from disadvantaged families can earn on average up to twice as much as similar sons who grew up elsewhere in the country. The difference in adult earnings between sons from the richest and poorest families who grew up in the least mobile areas is up to two and a half times as large as the difference in earnings between sons who grew up in the most mobile areas.

Table 3.3. shows the findings for the North East local authorities:

Table 3.3. Measures of Social Mobility by North East Local Authority

Source: The long shadow of deprivation – Differences in opportunities across England Research report published by the Social Mobility Commission (2020)

In summary, Tees Valley is characterised by:

• Relatively low earnings for disadvantaged groups, particularly in Hartlepool and Stockton. • Large pay gaps between most and least deprived residents, particularly in Stockton, implying lower social mobility. This results from family circumstances at age 16 being relatively more dominant in determining pay outcomes at age 28. Similar results are found after allowing for educational achievement. • Across all areas, including Tees Valley, education is a key contributor to pay gaps between sons from different backgrounds, accounting for around 80% of pay gaps. • Tees Valley exhibits a mixed picture for educational inequalities. Local authorities with large educational inequalities tend to have greater school segregation in terms of both achievement and socio-economic status. In Tees Valley, Middlesbrough has the largest education gap / education inequalities.

3.10. Population Trends and Projections

The population projections shown in this section are taken from ON’S 2018-based subnational population projections. ONS recognise that these projections are not forecasts and take no account of local policy or development aims that have not yet had an impact on observed trends.

The Tees Valley population is projected to continue its long-term growth seen since the start of the millennium of approximately 1,000 per year until 2021, growth is then projected to slow both locally and nationally, dropping slightly in 2037 and reaching around 682,700 by 2039.

Figure 3.10. Projected total resident population in Tees Valley, 2019-2039 Key Findings:

• The Tees Valley population is projected to increase by 0.8% over the next 10 years (to around 681,400 by 2029), however this is a small increase compared to a 4.7% increase nationally and a 3.3% increase across the North of England.

• Over the next 20 years (2039) the population is expected to increase by 1% compared to a 8.2% rise nationally and a 5.9% rise across the North of England.

Source: ONS Population Projections

Although there is projected growth in the following 20 years, growth is not expected in all age groups. Figure 3.11 shows the age make-up of the Tees Valley population in 2019 and then projected make-up in 2029 and 2039:

Figure 3.11. Demographic Projections

2019 Estimates 2029 Projection 2039 Projection

Source: ONS Population Projections

Currently (ONS mid-2019) 0–15-year-olds make up 20% of the population. We have reached the projected peak of this age group in 2019, with an extra 690 children over the last year, and numbers are predicted to fall steadily each year until 2038.

The working age population (16-64s) is predicted to be almost 22,600 lower in 20 years’ time, from 61% of the total population in 2019 to 57% in 2039.

There will be an increase in the proportion of over 65s with the percentage of the population over the retirement age expected to grow from 19% in 2019 to over a quarter of the population in 2039; this, coupled with the fall in the working age population, will bring skills shortages when experienced and highly skilled staff leave the workforce. There will also be implications on health services as pressures increase.

Figure 3.12 illustrates the change in detailed age group from 2002 until 2039.

Figure 3.12. Population estimates and projections by age group

Source: ONS Population Projections

3.11. Area Profile SWOT analysis

Strengths Weaknesses Reflecting the area over which the local economy Tees Valley is at higher risk of the impact of operates, Tees Valley operates as a compact, Coronavirus due to an above national average well-connected functional economic area. older population, poor levels of health and high levels of deprivation. There are a wide range of cost-effective sites and premises across Tees Valley, with three Health levels in Tees Valley remain lower than Enterprise Zones providing a range of financial those observed nationwide. The number of incentives to companies choosing to locate in the people with a long-term illness is above region, as well as simplified planning and super- national average, affecting the working age fast broadband. population.

Tees Valley demonstrates low levels of In addition to high levels of Health deprivation in relation to Living Environment and deprivation, Tees Valley ranks as highly Barriers to Housing and Services. This makes the deprived on Employment, Income and Crime area one of the most pleasant places to live in the domains. country with easy access to coast, countryside, hills, affordable housing and widely available Low levels of pay for those from health services. disadvantaged backgrounds.

In terms of protected characteristics, Tees Valley’s population is comprised of relatively high numbers of older people and relatively low numbers of the BAME community. Opportunities Threats Tees Valley contains Teesworks – the first The population growth in Tees Valley is now Mayoral Development Corporation outside of projected to slow, with the growth rate much London, and the UK’s largest industrial lower than national. However, these ONS development zone. Teesworks was set up to projections do not consider local policy or promote economic growth and commercial development aims, such as schemes aimed at development by converting assets in the South reversing the loss of young talent to other Tees area into opportunities for business parts of the country, that have not yet had an investment and economic growth. impact on observed trends.

Tees Valley’s sector strengths and natural assets The Tees Valley has a rapidly ageing across the five local authority areas present population and declining working age opportunities for the area to become a global population / labour force. There is a risk of leader in clean energy including carbon capture, skill shortages when experienced and highly Hydrogen and offshore wind. skilled staff leave the workforce with an added implication on health services. The cost and quality of living in Tees Valley create an opportunity to attract and retain skilled Following the vote to leave the EU in 2016 workers, with the area having relatively low and reflecting national trends, there was a levels of deprivation in both Barriers to Housing sharp drop in international net migration into & Services and Living Environment domains. This Tees Valley in 2017. Although this has seen a may be particularly attractive post-Covid as rise in 2018 and 2019, there is a risk that EU dense urban centres become less popular Exit will affect international net migration in

Retaining young people – making Tees Valley an the coming years, and therefore access to attractive area with career opportunities in key skilled workers. sectors. The coronavirus pandemic has exacerbated the problem of in-work poverty, with those in low-paid roles feeling the effects of the pandemic more acutely than those in higher- paid occupations.

Section 4: High Streets Introduction

This section outlines the economic conditions facing high streets across each of the Tees Valley’s local authorities (LAs). High streets covered by this analysis include the five primary town centre business districts of each local authority in addition to high streets in other locations covering Middlesbrough LA’s Coulby Newham and Marton, Stockton LA’s Billingham, Norton and Yarm and Redcar & Cleveland LA’s Eston, Normanby, Marske, Skelton, Saltburn, Loftus and Guisborough.

Coronavirus restrictions and resultant behavioural change have reduced footfall on our high streets – which had already reduced by 20% in the previous decade. Nonetheless, with 86,000 Tees Valley residents living within 200 metres of a high street, potential exists to reimagine and revitalise these economically and locally significant assets.

Across Tees Valley, packages of support and regeneration are being designed to drive the revival of town centres and high streets and ensure businesses and people within the Tees Valley are resilient and confident as the country reopens.

Key messages

High streets and town centres already faced challenges due to strong competition from online competitors, and the fragmented ownership of commercial properties. The Coronavirus pandemic has placed a further burden on shops and businesses, threatening closure or having to adapt to continue operating during lockdowns.

Retail sales

• In September 2020 retail sales volumes increased by 1.5% when compared with August; this is the fifth consecutive month of growth, resulting in an increase of 5.5% when compared with February's pre-pandemic level. These increases reflect the pent-up demand that built- up in the early stages of the initial lockdown. • When compared with February, volume sales within food stores were 3.7% higher in September. Food retailers had suggested that the peak in March 2020 was because of panic buying at the start of the pandemic, and despite seeing a notable fall in sales following this peak, spending remained high. This may be a result of the government tightening restrictions for other services such as bars and restaurants at the end of September, leading to increased spending in food stores. • Many stores within non-food stores were classified as non-essential retailers and were negatively affected by the pandemic because of many temporary store closures within the sector. Non-food stores also have now (in September) recovered to 1.7% above their February levels. • Fuel was the only main sector to remain below February's pre-pandemic level with volume sales 8.6% lower in September when compared with February 2020. • In September, the proportion of online spending was at 27.5%; this is a slight fall from the 29.4% reported in July. The declines may be because of many businesses reopening from July, resulting in less online spending. • Despite monthly declines across all sectors except department stores, the proportion of online sales was over 7% higher than in February. The proportion of online sales increased

across all sectors with food stores nearly doubling their online proportions from 5.4% in February to 10.4% in September. • Volume sales within non-store (wholesale) retailing increased sharply in April and May, and sales in September were 36.6% higher than February 2020. This was driven by a shift to online orders during lockdown because of temporary closures for non-essential stores. Despite some contraction from the sharp rate of increase in non-store retail, consumers were still carrying out much of their shopping online when compared with February.

Demographics, employment and land use

• 86,000 Tees Valley residents live on or within 200 metres of a high street. • Relatively fewer Tees Valley residents live on or near a high street than nationally – particularly so in Stockton and Hartlepool. This is reflected by relatively low proportions of ‘Residential’ addresses on Tees Valley high streets compared to nationally. • High street areas are home to relatively higher proportions of working age residents compared to non-high street areas. • Total Employment in high street areas in Tees Valley fell faster than in non-high street areas between 2015 and 2018 (Hartlepool is an exception). • There are significantly higher proportions of people employed in ‘Retail’ in Tees Valley’s high streets than nationally (Hartlepool is an exception). This is also reflected in the area’s high proportions of high street addresses classified as Retail outlets (again Hartlepool is an exception). • Whilst retail employment fell only marginally in high street areas between 2015 and 2018, it increased by nearly 1,000 (over 5% up) in non-high street areas. Coronavirus has accelerated this trend with ever increasing amounts of retail business being done digitally.

4.1. Footfall

The over-riding determinant of footfall at the local level has been the extent of lockdowns and the tier level the area is under. Tees Valley has spent relatively more time under the higher tier levels than some other areas and so footfall has been impacted to a somewhat greater extent. However, a secondary determinant of footfall is the pre-existing ‘size’ of the urban area with large cities such as London seeing far greater footfall impacts than towns such as Middlesbrough. This has acted to mitigate the effect from the higher tier restrictions.

• The reopening of many non-essential shops and businesses in England on 15 June 2020 coincided with a large rise in footfall to retail parks, shopping centres and high streets. • From 14 June to 15 June 2020, there was a large rise in the three footfall indices of Retail Parks, Shopping Centres and High Streets, coinciding with the reopening of many non- essential shops and businesses in England on 15 June. • On 28 June, footfall in retail parks rose to around 70% of its level the same time last year, while footfall in shopping centres was just under 50% and that in high streets was below 40% of its level in the same period last year.

Centre for Cities footfall figures

Centre for Cities’ High Street Tracker only contains information for Middlesbrough as it is mainly used to look at cities and large towns. Nonetheless it is indicative of the overall footfall trends that

the pandemic has caused in Tees Valley. The trough for footfall was on April 5th, just under two weeks after the national lockdown came into force, when the number of people in Middlesbrough town centre was just 10% of the pre-lockdown baseline. Footfall remained at a low level in the months between April and June, before increasing rapidly following the opening of non-essential retail stores and pubs. The peak for footfall was observed on October 2nd, when it reached 117% of its pre-lockdown level. Since the imposition of a second wave of lockdown restrictions from October 5th, footfall has again slumped, although, reflecting seasonal trends, on the 5th December the number of people in the town centre was 90% of the pre-lockdown baseline.

The general trend is demonstrated by the following chart which shows an index for the number of people in the town centre during the daytime on weekends:

Centre for Cities’ analysis of the Eat out to Help Out scheme show that this had a pronounced effect on visitors to Middlesbrough town centre, with Monday to Wednesday footfall in August up 20% from the level observed in the last week of July.

Closely reflecting lockdown and tier restriction timings, the latest findings from the Business impact of Coronavirus survey is outlined below.

From BICS Waves 11 to 16 (27th July to 4th October)

• Between 27th July and 6th September, the % of businesses in the UK reporting an increase in footfall in the two weeks prior to being surveyed ranged between 23.5% to 24.8%. The % of businesses reporting that footfall stayed the same ranged between 3.7% to 4.5%. The proportion of businesses reporting a decrease in footfall ranged from 10% to 11.6%. • By contrast, between 26th September and 4th of October the % reporting an increase in footfall was much lower at 1.6% and between 5th October and 18th October there was an only slight increase on this figure at 2.7%. o The rate reporting that footfall stayed the same in the first period rose to 10.5%, and in the second period the rate was 13.8%. o The % reporting decreased turnover rose dramatically to 29.6% in the first period and was then 22.9% in the second period. • The information is presented in the chart below:

35.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

0.0% 27 July- 9 August 10 August- 23 24 August- 6 21 September- 4 5 October- 18 August September October October

Footfall increased Footfall stayed the same Footfall declined

The charts below show the differences in changes in footfall between sectors that contribute the most to the Tees Valley high street economy3 and the total of all industries.

Proportion of businesses reporting Proportion of businesses reporting footfall footfall decreases: 'high street' sectors stayed the same: 'high street' sectors compared to all industries (27th July to compared to all industries (27th July to 18th October) 18th October)

60.0% 15.0% 40.0% 10.0% 20.0% 5.0% 0.0% 0.0% 27 July- 9 10 August- 24 August- 6 21 5 October- 27 July- 9 10 August- 24 August- 21 5 October- August 23 August September September- 18 October August 23 August 6 September- 18 October 4 October September 4 October

HS industries All Industries Avg. stayed same for HS industries All Industries

Proportion of businesses reporting footfall increases: 'high street' sectors compared to Reflecting tier restriction timings, for the survey all industries (27th July to 18th October) waves between 27th July and 6th September, the 40.0% proportion of businesses in ‘high street’ sectors 30.0% 20.0% reporting an increase in footfall was greater than 10.0% that for the general business population. By 0.0% contrast, the proportion of high street businesses 27 July- 9 10 August- 24 August- 6 21 5 October- August 23 August September September- 18 October reporting a decrease in footfall was higher than 4 October that for all businesses for the reference period Avg. increased for HS industries All Industries 21st September to 18th October.

3 Includes: Accommodation and food, Public Administration and defence; education; human health and social work; information and communication; real estate; professional, scientific and technical activities; administration and support service activities; arts, entertainment and recreation; other services; wholesale and retail trade; repair of motor vehicles and motorcycles.

4.2. Demographics

• There were 674,300 people residing in Tees Valley in 2018 of which 86,000 were living on or within a short walk of a main shopping or ‘High’ street. • On average, relatively fewer people live on or close to a high street in Tees Valley (12.8%) than nationally (around 16%). Cities and larger urban centres have the highest proportion of residents living near a high street with parts of London recording over 60%. There is a significant variation in rates across the five Tees Valley districts as shown in Table 4.1 below. • Middlesbrough in particular has a relatively large high street population (32,900) which accounts for around 38% of Tees Valley’s total high street population.

Table 4.1. Total and High Street resident populations, Tees Valley districts, 2018 Total population Proportion residing on or Resident population on around High Streets or around High Streets Darlington 106,600 15.6% 16,600 Hartlepool 93,200 5.7% 5,300 Middlesbrough 140,500 23.4% 32,900 Redcar and Cleveland 136,700 13.0% 17,800 Stockton-on-Tees 197,200 6.8% 13,400 Tees Valley 674,300 12.8% 86,000 Note: ‘On or around’ is equivalent to on or within about 200m of. Totals may not sum due to rounding.

Students living on or near high streets

• Middlesbrough’s high street population includes 4,700 students (representing 14.3% of its high street population) whilst the other four districts of Tees Valley sum to 1,700 students in total. These figures are summarised in Table 4.2 below.

Table 4.2. High Street student population, Tees Valley districts, 2018 Resident population Proportion residing on Student population on or on or around High or around High Streets around High Streets Streets who are students Darlington 16,600 2.7% 400 Hartlepool 5,300 3.3% 200 Middlesbrough 32,900 14.3% 4,700 Redcar and Cleveland 17,800 2.4% 400 Stockton-on-Tees 13,400 4.9% 700 Tees Valley 86,000 7.4% 6,400 Note: ‘On or around’ is equivalent to on or within about 200m of. Totals may not sum due to rounding.

Age breakdown

• The population living within easy walking distance of a Tees Valley high street is predominantly in the 16 to 64 years age group, more so than in non-high street areas. However, this is less pronounced in Redcar & Cleveland which has a similar proportion of working age residents living in high street and non-high street areas and a significantly older population profile.

• Redcar & Cleveland lies within the top quintile nationally for the proportion of older residents aged 65 and over living in high street areas with almost one quarter (24.1%) of the district’s total high street population being aged 65+. • Middlesbrough has the highest proportion of working age (16-64) residents in its high street areas (68.7%) of the five districts whilst Redcar & Cleveland the lowest proportion (60.8%). • Across all five Tees Valley districts the population profile for non-high street areas is more uniform than for high street areas as shown in Table 4.3 below.

Table 4.3. High Street age population, Tees Valley districts, 2018 Aged 15 and Aged 16 to Aged 65 plus: Aged 15 and Aged 16 to 64: Aged 65 plus: under: High 64: High High street under: Non Non high Non high street street population high street street street population population population population population No. % No. % No. % No. % No. % No. % Darlington 2,800 16.9 11,000 66.2 2,800 16.9 17,400 19.3 53,800 59.8 18,800 20.9 Hartlepool 1,000 18.6 3,600 67.7 700 13.7 16,900 19.2 53,800 61.2 17,200 19.6 Middlesbro’ 6,500 19.9 22,600 68.7 3,800 11.4 22,800 21.2 65,700 61.1 19,000 17.7 Redcar and 2,700 15.1 10,800 60.8 4,300 24.1 22,100 18.6 70,600 59.4 26,200 22.0 Cleveland Stockton 2,400 18.2 8,800 65.8 2,100 16.0 36,800 20.0 113,600 61.8 33,500 18.2 Tees Valley 15,400 17.9 56,800 66.1 13,700 16.0 116.0k 19.7 357.5k 60.8 114.6k 19.5 Note: ‘On or around’ is equivalent to on or within about 200m of. Totals may not sum due to rounding.

4.3. Employment by sector

National comparison, 2018

Employment is defined in this analysis as the number of working business owners plus the number of employees. Whilst accounting for the vast majority of jobs, this definition does omit significant numbers of the self-employed.

Key points

• Tees Valley high streets are characterised by relatively high proportions of employment in retail. This is particularly so in Middlesbrough which has almost twice the concentration of retail employment as nationally. However, Hartlepool has relatively low numbers employed in retail on its high street areas. • Tees Valley high streets also have relatively high numbers employed in the public sector i.e. Health, Education and Public Administration. However, Middlesbrough does have a slightly lower proportion of employment in this sector compared to nationally.

Table 4.4. Employment in High Streets by sector, Tees Valley districts, 2018 Darlington Hartlepool Middlesbrough Redcar&Cleveland Stockton-on-Tees Tees Valley GB No. % No. % No. % No. % No. % No. % % Accommodation & Food Services 920 12.0 420 18.2 1,330 14.3 720 16.1 870 15.6 4,260 14.5 15.0 Health, Education and Public Admin 1,210 15.8 410 17.7 1,100 11.8 950 21.2 1,030 18.5 4,700 16.0 13.2 Other industries 700 9.1 290 12.6 300 3.2 210 4.7 260 4.7 1,760 6.0 9.2 Other service industries 2,350 30.6 980 42.4 2,770 29.8 1,070 23.9 1,830 32.9 9,000 30.7 40.1 Retail 2,500 32.6 210 9.1 3,800 40.9 1,530 34.2 1,570 28.2 9,610 32.8 22.4 Total 7,680 100.0 2,310 100.0 9,300 100.0 4,480 100.0 5,560 100.0 29,330 100.0 100.0

Employment change, 2015 to 2018

Tees Valley key findings

• Total employment in Tees Valley high streets fell by 12.7% (down 4,260) between 2015 and 2018. Employment in non-high streets fell by a similar amount in numerical terms (down 4,060) but in percentage terms the decline was far smaller at just 1.7%. • All sectors saw total high street employment decline between 2015 and 2018 but employment in Retail (down just 1.2% or 120 jobs) and Accommodation & Food Services (down only 5.5% or 250 jobs) held up relatively well. • However, these two key high street sectors saw widely differing trends for employment in non-high street areas between 2015 and 2018. Retail employment in non-high street areas in Tees Valley increased by 5.4% (up 950) whilst Accommodation & Food Service non-high street employment fell by 9.9% (down 1,310). • Aside from Retail, ‘Other industries’, including sectors such as Manufacturing, Construction, Utilities, Wholesale and Transport & Storage, was the only other industry to see non-high street employment growth, up by 2,330 or 3.5% between 2015 and 2018.

Tees Valley by district key findings

• High street employment fell in four of the five districts between 2015 and 2018 with Hartlepool the only district to see a small increase, up by 1.3% or 30 jobs. • Darlington saw the greatest fall in high street employment, down by 1,720 (18.3%) with Middlesbrough a close second with a 1,690 decline (15.4%). High street employment fell in Stockton by 500 and by 380 in Redcar & Cleveland. • Whilst all districts saw total employment fall between 2015 and 2018, Middlesbrough did record an increase in non-high street employment of 1.4% or 720 jobs.

Table 4.5. Employment in High Street & Non High Street areas, Tees Valley districts, 2015 to 2018 High Street employment Non High Street employment Total employment 2015 2018 % 2015 2018 % 2015 2018 % change change change Darlington 9,400 7,680 -18.3 42,120 40,530 -3.8 51,520 48,210 -6.4 Hartlepool 2,280 2,310 1.3 28,410 27,550 -3.0 30,690 29,860 -2.7 Middlesbrough 10,990 9,300 -15.4 50,070 50,790 1.4 61,060 60,090 -1.6 Redcar and 4,860 4,480 -7.8 36,510 34,960 -4.2 41,370 39,440 -4.8 Cleveland Stockton 6,060 5,560 -8.3 79,830 79,050 -1.0 85,890 84,610 -1.5 Tees Valley 33,590 29,330 -12.7 236,940 232,880 -1.7 270,530 262,210 -3.1

4.4. Tees Valley districts by sector key findings

Retail

Retail sector employment on high streets fell only slightly between 2015 and 2018 across all five districts. Outside of Darlington, non-high street retail employment picked up, most notably in Stockton which recorded an increase of 440 and Redcar & Cleveland with a rise of 430.

Accommodation & Food Services

The decline in employment in this sector has been less on the high street than elsewhere. In contrast to falling in every district within non-high street areas, high street accommodation & food services employment picked up in both Middlesbrough (up 150) and Redcar & Cleveland (up 50).

Other service industries

This sector includes all private sector services excluding Retail and Accommodation & Food Services. It covers Information & Communication, Professional & Business Services, Arts, Entertainment & Recreation and Other Services such as hairdressing. Four of the five districts saw falls in high street employment with Darlington (down 1,260) and Middlesbrough (down 1,220) most impacted. Hartlepool saw a small rise of 180. Non-high street employment trends were more mixed across the districts.

Health, Education and Public Administration

This sector essentially covers public services and saw a mixed picture for high street employment across the five districts. Middlesbrough (down 500) and Redcar & Cleveland (down 310) saw the largest falls whilst Hartlepool picked up by 130. Hartlepool was also the only district to see an increase in non-high street employment (up 160).

Other industries

Other industries, including sectors such as Manufacturing, Construction, Utilities, Wholesale and Transport & Storage, saw high street employment fall in four of the five districts. Employment in Redcar & Cleveland was unchanged. In contrast, four of the five districts saw non-high street employment increase with only Redcar & Cleveland recording a decrease (down 690).

Table 4.6. Employment in High Street areas by sector, Tees Valley districts, 2015 to 2018 High Street Darlington Hartlepool Middlesbrough Redcar & Cleveland Stockton-on-Tees Tees Valley employment 2015 2018 2015 2018 2015 2018 2015 2018 2015 2018 2015 2018 Accommodation & 1,010 920 550 420 1,180 1,330 670 720 1,100 870 4,510 4,260 Food Services Health, Education 1,260 1,210 280 410 1,600 1,100 1,260 950 1,040 1,030 5,440 4,700 and Public Admin Other industries 860 700 490 290 330 300 210 210 390 260 2,280 1,760 Other service 3,610 2,350 800 980 3,990 2,770 1,200 1,070 2,030 1,830 11,630 9,000 industries Retail 2,660 2,500 160 210 3,890 3,800 1,520 1,530 1,500 1,570 9,730 9,610 Total 9,400 7,680 2,280 2,310 10,990 9,300 4,860 4,480 6,060 5,560 33,590 29,330

Table 4.7. Employment in Non-High Street areas by sector, Tees Valley districts, 2015 to 2018 Non High Street Darlington Hartlepool Middlesbrough Redcar & Cleveland Stockton-on-Tees Tees Valley employment 2015 2018 2015 2018 2015 2018 2015 2018 2015 2018 2015 2018 Accommodation & 2,640 2,120 2,120 1,950 2,120 1,930 2,190 2,100 4,210 3,870 13,280 11,970 Food Services Health, Education 14,740 13,390 10,080 10,240 26,440 25,710 10,060 9,870 20,880 20,330 82,200 79,540 and Public Admin Other industries 9,890 10,530 7,680 8,290 10,010 10,620 13,290 12,600 25,180 26,340 66,050 68,380 Other service 12,620 12,300 5,290 3,740 9,860 10,860 7,440 6,430 22,570 21,080 57,780 54,410 industries Retail 2,230 2,190 3,240 3,330 1,640 1,670 3,530 3,960 6,990 7,430 17,630 18,580 Total 42,120 40,530 28,410 27,550 50,070 50,790 36,510 34,960 79,830 79,050 236,940 232,880

4.5. High Street addresses by land use

Key points

• As at March 2020 and on average, Tees Valley’s high streets have relatively high proportions of ‘Retailing’ shops when compared to Great Britain. Nationally only 29.1% of high street addresses are classed as Retailing whilst Stockton (43.4% of high street addresses) and Darlington (42.0%) have particularly high proportions of retailing addresses on their high streets. However, Hartlepool has a particularly low proportion of retailing addresses at 22.9%. • In contrast, all five districts have relatively low proportions of ‘Residential’ addresses on their high streets compared to Great Britain (57.7% of high street addresses). This is most marked in Darlington with just 39.8% of high street addresses classed as residential. • Whilst Tees Valley has the same proportion of Office addresses on its high streets as nationally (10.9%), there is a wide variation across the districts with offices accounting for 26.2% of Hartlepool high street addresses and only 5.0% in Redcar & Cleveland. • There were slightly higher proportions of both Community and Leisure high street addresses in Tees Valley than nationally (Community 2.0% and Leisure 0.3% in Great Britain).

Table 4.8. High Street addresses, proportion by land use category, March 2020 Total high Retailing Offices Community Leisure Residential street addresses No. % No. % No. % No. % No. % Darlington 1,902 799 42.0 303 15.9 37 1.9 6 0.3 757 39.8 Hartlepool 795 182 22.9 208 26.2 11 1.4 3 0.4 391 49.2 Middlesbrough 3,018 1,114 36.9 247 8.2 87 2.9 15 0.5 1,555 51.5 Redcar and 1,888 653 34.6 94 5.0 47 2.5 12 0.6 1,082 57.3 Cleveland Stockton 1,719 746 43.4 167 9.7 60 3.5 9 0.5 737 42.9 Tees Valley 9,322 3,494 37.5 1,019 10.9 242 2.6 45 0.5 4,522 48.5

4.6. The impact of digitalisation and online retail

As the chart to the right 25.0% demonstrates, there has been a trend towards 20.0% greater use of online retail in recent years, due to the 15.0% greater convenience it affords customers. Dealing with the greater presence 10.0% of online services has been one of the key challenges 5.0% faced by firms operating on high streets over the 0.0% last decade. The evidence 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 from the Coronavirus Online retail sales as % of total retail sales in UK, 2007-2019 pandemic thus far illustrates that people spending a much greater amount of time at home and the adoption of online retail services has accelerated this trend. ONS’s Retail Sales Index data shows that the % of total retail sales made via the internet has increased dramatically during the pandemic; between March and October 2020 the proportion rose from 22% to 28.1%; the figure for October 2020 is also a marked increase on the rate of 19.1% observed in October last year.

4.7. High Streets SWOT analysis

Strengths Weaknesses Retail employment on Tees Valley high streets Whilst 86,000 people live near a high street in remained broadly stable between 2015 and Tees Valley, this is a relatively low proportion 2018. of the area’s total population (12.8%) compared to the national average (16%). This Stockton and Darlington, both at over 40%, acts to constrain their usage because casual have particularly high proportions of retailing passing trade is reduced and relatively more addresses on their high streets. people have to make a special journey to get to their high street. Tees Valley high streets typically have a similar proportion of office space addresses as All five districts have relatively low numbers of nationally. high street addresses classed as residential.

High streets in non-city locations have retained Although it is accepted that our high streets higher levels of footfall than across cities serve the ageing population well, the offer we throughout the Coronavirus pandemic. currently have is not set up to support the attraction of a younger generation during the day-time economy.

The persistent issue of vacant properties has been further exacerbated during Coronavirus.

Opportunities Threats Coronavirus has hastened the trend towards Overall employment in high streets was on-line retail. Potential exists for re-purposing decreasing in Tees Valley before the pandemic. areas of high streets from commercial use into This is being driven by falls in services sector social or leisure spaces. employment other than retail or accommodation & food services. However, In terms of footfall, towns tend to attract larger both retail and accommodation & food services proportions of local residents than larger cities. have been two of the worst affected sectors This is a function of geographic location/scale during the Coronavirus pandemic. and relatively lower proportions of passing visitor/commuter trade. Coronavirus has Business closures, particularly across retail, as a exacerbated this effect creating even greater result of Coronavirus affecting high streets. potential for reinventing Tees Valley towns as community centres. Other industries such as Manufacturing, Construction, Utilities, Wholesale and Darlington, Redcar, Middlesbrough, Hartlepool Transport & Storage are also seeing high street and Thornaby are all in the process of bidding employment levels trending downwards. for resources from the Towns Fund, central government funding designed to drive long Demand constraints from relatively low term economic and productivity growth in town disposable household income across many centres through investment in connectivity, parts of Tees Valley. land use, economic assets including cultural assets, skills and enterprise infrastructure. Darlington and Stockton have been invited to progress business cases for the national Future

High Streets Fund, designed to revitalise central business districts.

The Indigenous Growth Fund is supporting economic growth in each of the five key settlements of the Tees Valley through the regeneration of vacant and derelict land and property, public realm and housing initiatives aimed at creating vibrant town centres and investment in culture, tourism and business accommodation.

The Tees Valley Culture Programme can strengthen regional cultural and leisure businesses across both high streets and the Tees Valley more widely.

The Combined Authority is investing significantly in improving active transport routes into town centres, including in new cycle and walking routes and the first civic eScooter pilot in the UK. The Tees Flex responsive transport pilot and free town centre parking are also supporting town centre accessibility.

Section 5: Economic Growth and Productivity

Introduction

This section outlines the current economic performance of the Tees Valley region.

Regional GDP fell by up to £2bn in 2020 as a result of Coronavirus – an immediate and deep recession affecting every sector of the economy. The duration of this recession is unknown.

This compounds a situation in which regional productivity has remained largely stagnant over the past decade and currently stands at around three-quarters of the national average. The majority of key sectors, however, continue to achieve above average productivity, including Clean Energy, Low Carbon and Hydrogen, Chemical and Process, Bioscience, and Advanced Manufacturing.

Key messages

• Monthly UK gross domestic product (GDP) grew by 1.1% in September 2020. This is the fifth consecutive monthly increase following a Coronavirus driven record fall of 19.5% in April 2020. As of September 2020, GDP is now 22.9% higher than its April 2020 low. • However, there has also been a loss in momentum through Quarter 3 (July to Sept) 2020. Widespread falls in output, as well as sharp reductions in spending by households and businesses, reflect the mandatory closures of non-essential businesses and voluntary social distancing to protect public health. • GDP is projected to decline by 2.0% in Q4 following the rebound of 16.1% in Q3. • All sectors have been impacted, particularly Construction, in percentage terms. However, in sub-sectoral terms impact has been more variable with Information Technology and Health and Social care performing relatively well. • The Service sector (80% of UK and 78% of the Tees Valley economy) has been most affected in the downturn in numerical terms. Accommodation & food, Arts, entertainment & recreation and Other services have seen the greatest falls. • The Bank of England expects UK unemployment to rise to around 6.3% by the end of the year. This is a smaller rise than expected in August, largely reflecting the impact of government support schemes. The outlook for the economy remains uncertain. • Inflation was 0.6% in Q3, below the Monetary Policy Committee’s 2% target. That largely reflected the temporary impact of lower energy prices and the cut in VAT, as well as some downward pressure from spare capacity. Inflation remains below target in the near term. • North East goods exports fell by £1.4bn, or 41.5%, between 2019 Q4 and 2020 Q2, making it the second most impacted UK region. Exports to the EU were particularly adversely affected, falling by 51.3%, the largest decrease in EU trade out of any UK region in this time. • The fall in machinery and transport exports explains most of the regional impact, although Chemicals have also been adversely affected. • Local level output and productivity estimates have been delayed until 2021 and so the GDP/GVA/productivity estimates presented here remain the same as those presented in our Economic Assessment for 2019 i.e. estimates for 2018. • Whilst Tees Valley economic output contributed £16.2bn to the UK economy in 2018, the region has a significant productivity challenge, particularly in relation to GDP and GVA per head of population. At £24,085 per annum, Tees Valley GDP per capita was some 75.3% of

the UK rate in 2018, representing a Tees Valley GDP gap of £5.3bn. This gap has doubled in current price terms since 2010. GVA per capita in Tees Valley was £20,370 in 2018 at 71.5% of the UK’s £28,489. • However, despite the relatively poor performance of Tees Valley based on GDP and GVA per capita, the region fares much better on GVA per hour worked and GVA per job. Tees Valley GVA per hour worked was 90.9% of the UK rate in 2018 whilst GVA per job was 88.8% - both rates being broadly around English LEP medians and above North of England LEP averages. • In real terms the Tees Valley economy (GDP) was marginally smaller in 2018 than it was in 2011. Only two of the intervening seven years saw any economic growth i.e. 2014 and 2015. • Tees Valley has relatively high employment concentrations in some higher than average productivity sectors and sub-sectors, particularly within the Chemicals/Process, Advanced Manufacturing, Bioscience, Construction and Clean Energy, Low Carbon & Hydrogen sectors. • Tees Valley exported over £3.3bn of goods during 2019, equivalent to around 20% of Tees Valley GDP. This proportion is well above the equivalent UK rate of 16.2%. • Reflecting the area’s strength in Chemicals, 35.3% of goods exported in Tees Valley & Durham are from this sector, compared to 16.0% nationally. • Tees Valley service exports totalled £2.3bn in 2018, with the area running a trade in services surplus of £802m. The proportional contributions of finance & insurance and manufacturing services industries suggest above-average concentrations in these areas. • The majority of goods exports went to the EU, while the majority of service exports went to non-EU countries. • Tees and Hartlepool remained the largest English port for outward tonnage and exported 99% of the UK’s outgoing crude oil. • The North East outperformed the UK in growth of both the number of FDI projects and of jobs associated with these investments during 2019-20.

5.1. Bank of England Monetary Policy Report, November 2020

Summary

• A deep and immediate economic downturn and recession (technically two consecutive quarters of negative growth), a bounce back in 2020Q3, a small decline in 2020Q4 and a gradual recovery in the new year but with output still below pre-pandemic levels by the end of 2021.

Source: Bank of England Monetary Policy Report, November 2020

• All sectors have been impacted

• And the three services sectors below have been particularly hard hit.

Source: ONS

The chart below assumes that Tees Valley GDP matches observed UK GDP monthly change during 2020. The latest Tees Valley GDP value of £16,240m in 2018 was used as the baseline.

Modelled impact of Coronavirus on Tees Valley economy, 2020

Source: ONS and TVCA

• UK GDP recovered in Q3 but remains around 9% below its 2019 Q4 level. Unemployment is expected to rise over the coming months. Inflation is expected to remain below the MPC’s target.

Figure 5.1: UK GDP, unemployment and inflation forecasts, 2020

Source: Bank of England Monetary Policy Report, November 2020

• The latest North East GDP figures for Q1 2020 show a similar rate of decline as nationally. This indicates that the region, including Tees Valley, can expect to see a broadly similar outturn in relative terms going forward as is expected nationally.

Figure 5.2: GDP Index scores, England and North East England, Q1 2016 to Q1 2020

Source: ONS

Coronavirus impact and potential long-term economic effects

Coronavirus has affected the UK economy in several ways. Some of the changes to what we buy, what we make, and how we work are likely to take some time to unwind, while others might persist. Although there could be some positive economic effects from new working practices and innovations, these are likely to be outweighed by the negative economic effects associated with a period of reallocation and reduced investment.

Consumption

• Consumers are spending less on services - particularly those consumed socially - but more on goods. • This pattern may persist if concerns about the virus linger, or consumer tastes change. • Online shopping has surged during the pandemic, accelerating a pre-existing trend. • The rise of e-commerce, a higher productivity form of retail, may already have been a factor in constraining aggregate consumer price inflation. Allied to these moves towards e- commerce, productivity in retail has increased faster than whole economy productivity over the past decade.

Production

• If new expenditure patterns persist, production patterns are also likely to change. • The labour market tends to adjust quickly, although some workers may need to gain new skills. • Capital can often be redeployed, although there is a risk some may be prematurely scrapped. • Capital may be in the wrong place if economic activity moves away from city centres. • Investment in new capital is expected to be weak, which will also lower productivity growth although there is a possibility that compositional effects offset some of this e.g. some of sectors most impacted by Coronavirus are jobs rich/low labour productivity ones such as Accommodation and food services. • New trading arrangements with the EU may also prompt some reallocation. • Overall, reduced investment and a period of reallocation are expected to weigh on supply growth.

Working practices

As well as what we produce, the way things are produced has also changed over the past few months. Remote working has become much more common and businesses have delivered services in new ways, often using technology to reduce personal contact. If these changes persist, they could affect employment, productivity and growth.

• Economic downturns and crises have tended to have negative long-term effects on growth in the past, but the pandemic has prompted firms to innovate, which may have some positive effects. • Working from home is expected to be more widespread after the pandemic. However, Tees Valley has a significantly higher proportion (TV 42.5%, UK 34.8%) of workplace employment across occupations that are typically less likely to be able to be undertaken at home. These occupations cover Skilled trades, including construction roles, process, plant & machine

operatives, elementary occupations e.g. cleaners, waiting staff and security guards and also caring, leisure & other service occupations such as ambulance staff. • Conversely, Tees Valley has relatively fewer occupations that can easily to done at home. Professional occupations (TV 18.2%, UK 22.0%) are on average most likely to be able to be undertaken at home with actuaries, economists and statisticians the highest ranking occupation group. Generally, jobs that can be done at home involve relatively little face-to- face contact, physical activity or use of tools or equipment. • Among the jobs least likely to be able to work from home are also frontline workers, many of which have been designated as ‘key workers’ during the Coronavirus pandemic. Tees Valley has some of the highest proportions of ‘key workers’ in the country. In 2019, 35.4% of the Tees Valley workforce were key workers, the second highest city region rate in the country, compared to 32.6% across the UK. • In particular, Tees Valley recorded the highest rate of the largest key worker occupation group, ‘Health and social care’, of any city region area of the country at 13.9% of the workforce (UK 10.2%). In addition, Health and social care key workers have amongst the lowest rates of key workers that actually did work from home at some point in 2019 – just 8.1% nationally. • Increased remote working could lead to higher working hours and labour market participation. • Studies suggest working from home can boost productivity in specific settings, but it’s unlikely to be appropriate for all workers and all tasks. • In contrast, many of those working from home during the pandemic have reported lower productivity. • The pandemic has led to other changes in working practice, although some changes reflect increased costs of doing business. With innovation a key driver of economic growth and productivity, job automation could boost productivity across some relatively labour- intensive sectors:

5.2. Office for Budget Responsibility (OBR): Economic and Fiscal Outlook, November 2020

The Coronavirus pandemic has delivered the largest peacetime shock to the global economy on record. It has required the imposition of severe restrictions on economic and social life; driven unprecedented falls in national income; fuelled rises in public deficits and debt surpassed only in wartime; and created considerable uncertainty about the future. The UK economy has been hit relatively hard by the virus and by the public health restrictions required to control it.

Output

There is huge uncertainty of the path of output recovery in the UK. The key determinant of the pace of the recovery are the measures/restrictions government will need to put in place in order to protect the health of the population.

Unemployment

The recently announced extensions to the CJRS, SEISS and various business support measures both delay and attenuate the rise in unemployment. Unemployment will take longer than output to recover to pre-pandemic levels. 5.3. Total GDP and GVA

Due to competing priorities at ONS i.e. a reallocation of resources to Coronavirus analysis, there are no updates to the 2018 GDP and GVA estimates for Tees Valley detailed below. These are now due later in 2021.

Office for National Statistics annual GDP and GVA statistics (GDP essentially comprises GVA plus taxes e.g. VAT or Excise duties, less any subsidies) are now published for local level geographies. However, GDP is only available at the aggregate level and so GVA is still used to provide the sectoral breakdown. Whilst current prices are used for point in time headlines e.g. 2018 estimates, change over time is measured in ‘real’ terms i.e. allowances made for inflation. These real term estimates are thus consistent with other economic measures such as the quarterly headline estimates of UK GDP.

Aggregate economic output (as measured by GDP) from Tees Valley amounted to £16.2bn in 2018, a 2.1% real terms decrease on 2017. This compares to real terms increases of 1.4% nationally and 1.2% in the North of England as a whole. Tees Valley GDP now accounts for 3.9% of the North of England’s GDP, 0.88% of England’s and 0.76% of the UK’s.

However, Tees Valley GDP per capita was just 75.3% of the UK rate in 2018, down significantly from 80.8% of the UK rate observed as recently as 2015.

This means that the Tees Valley now has a GDP or output gap of £5.3bn – the additional level of economic output required in Tees Valley to match the UK GDP per capita rate. This gap is now more than twice what it was (in nominal terms) immediately following the 2008/09 recession in 2010.

As an approximate measure of productivity, GDP per capita is dividing a workplace-based numerator (GDP) by a residence-based denominator (residential population). This means that this measure does not account for people commuting into and out of a region and significant commuting flows can lead to highly distorted results. Also, by including all the residential population (including children, pensioners and others not economically active) and not just those who are in employment,

the denominator includes residents who are not directly contributing to GDP i.e. those residents not in employment.

Tees Valley GDP per capita at £24,085 in 2018 is slightly closer to the UK rate of £31,976 i.e. 75.3% than Tees Valley GVA per capita (£20,370 in 2018) at 71.5% of the UK’s £28,489.

This is due to the relatively larger contribution to overall Tees Valley GDP from VAT and other taxes as shown in the table below.

Table 5.1. Components of GDP Tees Valley North of England UK Value (£m) % of GDP Value (£m) % of GDP Value (£m) % of GDP GVA 13,735 84.6% 361,405 87.8% 1,908,608 89.2% VAT 1,388 8.5% 33,225 8.1% 149,240 7.0% Other taxes 1,259 7.8% 19,536 4.7% 94,449 4.4% on products Subsidies on (142) (0.9%) 2,374 (0.6%) (12,019) (0.6%) products GDP 16,240 100% 411,794 100% 2,140,278 100% Source: ONS. Notes: Other taxes on products includes excise duties

5.4. Productivity

Gross Value Added (GVA) per hour worked provides a preferred measure of productivity. This measure removes employment rate, economic inactivity, demographic and commuting considerations with GVA per capita and work pattern issues with GVA per job. The relative performance of productivity looking at GVA per capita, GVA per filled job and GVA per hour worked are outlined in Figures 5.1 and 5.2 below. The figures presented in Figures 5.2 and 5.3 below are the official smoothed estimates. Smoothing helps address the significant year on year volatility issues present at smaller geographies. Whilst official productivity estimates are not published for the North of England geography, TVCA has derived unsmoothed estimates for the North of England LEP average as outlined in Key Findings below.

Figure 5.6. Tees Valley productivity indices, 2018 (UK = 100) Key Findings:

Tees Valley GVA per head of resident population (per capita) at £20,370 was 71.5% of the UK rate (£28,489) in 2018. It was closer to (87.0% of) the North of England average of £23,423.

Tees Valley GVA per filled job at £50,047 was 88.8% of the national rate (£56,387) in 2018. The unsmoothed Tees Valley estimate (£49,425) was around 0.6% above the unsmoothed North of England average of £49,122.

Tees Valley GVA per hour worked at £31.8 was 90.9% of the UK rate (£35.0) in 2018. As with GVA per job, the unsmoothed GVA per hour worked Tees Valley estimate (£31.4) was somewhat higher (1.6% above) the

unsmoothed North of England average of £30.9. Source: ONS

Tees Valley’s underlying productivity (GVA per hour worked) was only 9.1% below the national rate in 2018. Numerous factors have an impact on aggregate GVA per hour worked including company profitability, resource allocation and absorptive capacity, skills mismatches and wage rate differentials, workforce well-being and occupational and industrial employment structures.

In 2018 and at £31.8 per hour, Tees Valley GVA per hour worked ranked third highest of the North of England LEPs behind Cheshire and Warrington with £37.1 and Liverpool City Region with £32.1. Figure 5.7. Historical comparison of Tees Valley productivity indices, 2008 to 2018

Key Findings:

• Both Tees Valley GDP and GVA per capita indices have drifted lower since the 2008/09 recession.

• Tees Valley GVA per filled job has remained above 88% of the UK rate since 2009.

• Tees Valley GVA per hour worked has been broadly steady at less than 10% below the UK rate for the past decade. Source: ONS

5.5. Sectoral GVA

This section examines the most recent five-year Tees Valley GVA trends across 17 broadly defined ONS sectors.

Table 5.2 breaks these 17 sectors down by sub-sector for 2018 and provides an indication as to that sector’s relative share of total Tees Valley GVA as compared to that sector’s share nationally.

Sectors accounting for the same share of total GVA as nationally are said to have a location quotient (LQ) of 1. Those with a higher share have a higher LQ and those with a lower share a lower LQ. Overall Tees Valley GVA makes up 0.7% of UK GVA but in those sectors with an LQ of over one this proportion is higher. The Tees Valley sub-sector that contributes the highest proportion of UK GVA is the one with the highest LQ i.e. Social work activities with 1.3% of the UK GVA total for that sub- sector.

Key points – change since 2013

• Tees Valley GVA was 2% higher in real terms in 2018 than it was in 2013. UK GVA was up by 10% over this time. • Human health and social work activities is now the largest sector in Tees Valley with GVA of more than £1.7bn in 2018 – up by 14% in five years. The sector also has the highest LQ of any sector across Tees Valley and has replaced Manufacturing as the largest sector. Tees Valley Manufacturing GVA has been revised down to £1.5bn (2018), 12% smaller in real terms than in 2013. • Within the Manufacturing sector, Wood, Petroleum, Chemicals & Minerals was down by 26% since 2013 with Metals, Electrical products & Machinery down by 12%. Whilst these two

sectors remain relatively strong in Tees Valley (LQs>1), these strengths are significantly less than previously. However, Food, Beverages, Textiles & Clothing was up by 36%. • Driven by strong growth in Civil Engineering (up 52%) and Construction of Buildings (up 38%), the Construction sector was 7% larger in 2018 than in 2013. However, Specialised Construction was down by 17%. • Motor and Wholesale trades were up by over 40% since 2013 but Retail was down by 8%. • Both Arts, entertainment & recreation and Transportation & storage were down by one-fifth whilst Architectural and engineering services was down by one-quarter. • Other sectors seeing increases in GVA between 2013 and 2018 included Accommodation and food services (up 5%), Finance & insurance (up 35%), Professional, scientific & technical (up 8%), Administrative & support services (up 11%), Public administration & defence (up 7%) and Other services (up 35%). • Other sectors seeing decreases in GVA between 2013 and 2018 included Education (down 11%), Agriculture, mining, electricity, gas, water and waste (down 11%) and Information & communication (down 2%). Real estate activities GVA was unchanged.

Sub-sectoral GVA Table 5.2 below examines the 17 broad sectors in the above graphs by sub-sector and compares the relative GVA contributions of those sub-sectors to national rates.

Table 5.2. GVA and GVA location quotient (LQ), 2018 GVA (£m) LQ (UK=1) Agriculture, mining, electricity, gas, water and waste 617 1.03 Manufacturing 1,569 1.15 - Manufacture of food, beverages, textiles and clothing 216 0.86 - Manufacture of wood, petroleum, chemicals and minerals 521 1.33 - Manufacture of metals, electrical products and machinery 711 1.17 - Other manufacturing, repair and installation 120 1.07 Construction 891 1.07 - Construction of buildings 191 0.73 - Civil engineering 252 1.56 - Specialised construction activities 448 1.09 Wholesale and retail trade; repair of motor vehicles 1,492 1.02 - Motor trades 333 1.34 - Wholesale trade 383 0.78 - Retail trade 777 1.08 Transportation and storage 540 0.95 - Land, water and air transport 309 1.05 - Warehousing, transport support, postal and courier activities 231 0.85 Accommodation and food service activities 296 0.77 Information and communication 816 0.85 Financial and insurance activities 689 0.71 Real estate activities 1,653 0.91 - Real estate activities, excluding imputed rental 506 0.91 - Owner-occupiers' imputed rental 1,147 0.91 Professional, scientific and technical activities 787 0.73 - Legal and accounting activities 213 0.60 - Head offices and management consultancy 87 0.47 - Architectural and engineering activities 197 1.03 - Other professional, scientific and technical activities 290 0.85 Administrative and support service activities 530 0.72 - Rental and leasing activities 132 0.84 - Employment activities; tourism and security services 215 0.67 - Services to buildings and landscape activities 46 0.55 - Office administration and business support activities 138 0.80 Public administration and defence 878 1.32 Education 849 1.08 Human health and social work activities 1,734 1.66 - Human health and residential care activities 1,384 1.62 - Social work activities 351 1.84 Arts, entertainment and recreation 171 0.77 Other service activities 192 0.87 - Membership organisations; repair of household goods 32 0.43 - Other personal service activities 161 1.09 Activities of households 31 0.76 All sectors 13,735 1.00 Source: ONS

5.6. Sectoral productivity

The majority of Tees Valley’s key sectors have relatively high levels of productivity, with only Health and social care and Creative, Culture & Leisure displaying relatively low productivity rates. Even then, certain sub-sectors within Creative, Culture & Leisure have above average rates.

In total, a majority of key sectors record either above average productivity rates or above average employment concentrations, or both. These sectors are Clean Energy, Low Carbon and Hydrogen, Chemical and Process, Bioscience, Advanced Manufacturing, Construction and Logistics.

Only the Creative, Culture & Leisure sector displays both relatively low productivity and relatively low employment concentration. However, this sector, alongside the Health & Social care and Professional & Business Services sectors is highly job rich, with these three sectors accounting for around one-third of total employment in Tees Valley.

Finally, the Tees Valley Digital sector, whilst highly productive, is still relatively small compared to many other parts of the country. However, the sector is growing rapidly, and projections indicate that this sector will play an important role in generating many jobs in the future. In addition, the cross-cutting nature of the sector will support the development of other sectors, such as with the increasing trend towards manufacturing and industrial digitalisation.

The ten key sectors can be categorised as follows:

Sub-sectoral productivity

The following analysis examines the ten sectors outlined above in more detail. The main sub- sectors, ranked in terms of employment contribution, are identified for each sector. Note that in terms of all sector average productivity, this is estimated at £52,000 for the UK in 2018. Also note that Tees Valley total employment accounts for 1.0% of England’s total employment, so any Tees Valley sub-sector that accounts for more than 1.0% of England’s employment is relatively strong in terms of employment concentration (shaded green in the tables).

The three high productivity sectors are:

Clean Energy, Low Carbon & Hydrogen – key points • High employment concentration across the majority of key sub-sectors, particularly with regards to Remediation activities, Extraction of crude petroleum and Materials recovery. • All sub-sectors display relatively high levels of productivity.

Table 5.3. Clean Energy, Low Carbon & Hydrogen main sub-sectors summary, 2018 Sub-sector SIC codes Tees Valley % of England UK productivity employment employment (£ p.a.) Remediation activities 39 1,300 12.7% £93,000 Extraction of crude petroleum 6.1 200 7.8% £1.2m Materials recovery 38.3 800 4.7% £95,000 Repair of fabricated metal products, 33.1 2,100 2.5% £76,000 machinery and equipment Electric power generation, transmission 35.1 1,100 1.4% £185,000 and distribution Renting and leasing of construction, civil 77.32, 700 1.2% £105,000 engineering and other machinery 77.39 Water and sewerage 36, 37 500 1.0% £191,000 Waste collection, treatment & disposal 38.1, 38.2 800 0.8% £60,000 Clean Energy, Low Carbon & Hydrogen 8,100 1.5% £136,000* Source: ONS, Annual Business Survey (ABS). EMSI. Note: *Tees Valley employment adjusted average productivity of sub- sectors listed.

Chemicals and Process – key points • High employment concentration across all key sub-sectors. • Chemicals manufacture is a high productivity sector and employs a large number of workers. • Plastics is a medium productivity sector and a significant employer.

Table 5.4. Chemicals and Process main sub-sectors summary, 2018 Sub-sector SIC Tees Valley % of England UK productivity codes employment employment (£ p.a.) Manufacture of refined petroleum products 19.2 500 6.9% £186,000 Manufacture of chemicals and chemical 20 3,300 3.8% £94,000 products Manufacture of plastic products 22.2 1,500 1.1% £51,000 Chemicals and Process 5,400 2.2% £91,000* Associated sub-sector: Mining of chemical 8.91 600 94.8% £73,000 and fertiliser minerals** Source: ONS, ABS. EMSI. Note: *Tees Valley employment adjusted average productivity of sub-sectors listed. **Technically not defined as part of the Chemicals & Process sector, ‘Mining of chemical and fertiliser minerals’ is included here as a significant associated sub-sectoral strength in employment terms. Productivity for this sub-sector is proxied as the broader ‘Mining and quarrying n.e.c.’ sub-sector (2017 estimate).

Digital – key points • All sub-sectors display high rates of productivity. • High employment concentration in high value Telecommunications sub-sector. • Relatively lower levels of employment in other Digital sub-sectors.

Table 5.5. Digital main sub-sectors summary, 2018 Sub-sector SIC codes Tees Valley % of England UK productivity employment employment (£ p.a.) Telecommunications** 61 2,500 1.3% £148,000 Computer consultancy activities 62.02 2,600 0.6% £90,000 Computer and peripherals repair 95.11 100 0.5% £79,000 Other IT and computer services 62.09 500 0.4% £101,000 Computer programming activities 62.01 600 0.3% £95,000 Data processing, web portals & related 63.1 100 0.2% £131,000 Digital sector 6,500 0.6% £114,000* Source: ONS, ABS. EMSI. Note: * Tees Valley employment adjusted average productivity of sub-sectors listed. ** Local Contact/Call Centres – technically part of Professional & Business Services (PBS) – are often officially recorded under the parent company’s Telecommunications SIC code. This tendency acts to over-report local level Digital sector employment and under-report local level PBS employment.

The four medium/high productivity sectors are:

Bioscience – key points • Reflecting SIC code issues, high productivity sectors such as Pharmaceuticals are not effectively identified within Tees Valley. • Significant representation of high productivity Chemical and Process sub-sectors support the overall medium/high productivity rate for the sector.

Table 5.6. Bioscience main sub-sectors summary, 2018 Sub-sector SIC codes Tees Valley % of England UK productivity employment employment (£ p.a.) Manufacture of industrial gases, 20.11, 20.14, 2,100 10.1% £118,000 a organic chemicals, nitrogen 20.15, 20.16 compounds and primary plastics Manufacture of other food products 10.89 800 2.7% £64,000 n.e.c. Research and experimental 72.1 2,800 2.5% £30,000 b development on natural science and engineering Technical testing and analysis 71.2 700 1.4% £62,000 Manufacture of plastic packaging 22.22 100 0.6% £52,000 Manufacture of pharmaceutical 21.2 100 0.3% £224,000 preparations Manufacture of soaps and detergents 20.4 100 0.2% £66,000 Bioscience 7,500 1.7% £66,000* Source: ONS, ABS. EMSI Note: * Tees Valley employment adjusted average productivity of sub-sectors listed. a Productivity does not includes the unavailable SIC 20.11 Manufacture of industrial gases. b Productivity only available for broader SIC 72 Scientific R&D sub-sector. Manufacture of bread, fresh pastries and cakes and Manufacture of beer are excluded from the Bioscience sector definition presented here.

Advanced Manufacturing – key points • High employment concentration across the majority of sub-sectors. • Most sub-sectors record Medium/High productivity rates.

Table 5.7. Advanced Manufacturing main sub-sectors summary, 2018 Sub-sector SIC Tees Valley % of England UK productivity codes employment employment (£ p.a.) Manufacture of iron, steel and piping 24.1, 1,100 5.7% £42,000 a 24.2 Manufacture of engines and turbines 28.11 800 4.8% £52,000 Research and experimental development on 72.1 2,800 2.5% £30,000 b natural science and engineering Manufacture of electric motors, cables and 27.11, 400 2.2% £74,000 c electronics 27.32 Manufacture of specialist machinery 28.9 600 1.9% £76,000 Engineering consultancy services 71.12 4,700 1.6% £73,000 Manufacture of motor vehicle parts 29.32 800 1.6% £59,000 Machining, metals treatment, metal structures, 25 4,100 1.5% £52,000 wire products and tools manufacture Technical testing and analysis 71.2 700 1.4% £62,000 Manufacture of instruments and appliances for 26.51 400 0.9% £81,000 measuring and testing Other professional, scientific and technical 74.9 800 0.8% £57,000 activities n.e.c. Manufacture of aircraft, spacecraft and related 30.3 500 0.7% £42,000 machinery Advanced Manufacturing 17,800 1.5% £56,000* Source: ONS, ABS. EMSI. * Tees Valley employment adjusted average productivity of sub-sectors listed. a Productivity only available for SIC 24.1 Manufacture of basic iron and steel. b Productivity only available for broader SIC 72 Scientific R&D sub-sector. c Productivity only available for SIC 27.11 Manufacture of electric motors.

Construction – key points • Overall a broadly average employment concentration than nationally but with a high concentration in the Demolition and site preparation sub-sector and a relatively low concentration in the construction installation and completion of buildings sub-sectors. • Construction is a medium/high productivity sector with the majority of its sub-sectors within or close to this productivity range. However, with self-employment rates in the sector approaching 50%, there may be some under-reporting of total employment and therefore over-stating of productivity level.

Table 5.8. Construction main sub-sectors summary, 2018 Sub-sector SIC Tees Valley % of England UK productivity codes employment employment (£ p.a.) Demolition and site preparation 43.1 500 2.8% £69,000 Construction of roads and motorways 42.11 700 1.5% £63,000 Construction of other civil engineering 42.9 1,600 1.4% £68,000 projects Construction of buildings 41 4,600 1.2% £96,000 Roofing, scaffolding and other specialised 43.9 1,600 1.2% £61,000 construction activities Electrical, plumbing and other construction 43.2 2,300 0.7% £50,000 installation activities Building completion and finishing 43.3 1,000 0.5% £53,000 Construction 12,400 1.0% £73,000* Source: ONS, ABS. EMSI. * Tees Valley employment adjusted average productivity of sub-sectors listed.

Logistics – key points • Overall an average employment concentration but with high concentrations in the high productivity, Water transportation services and Transport via pipelines sub-sectors. • Within Specialised wholesale trade, fuels, metals and chemicals have higher employment concentrations than nationally and together account for around 1,000 jobs.

Table 5.9. Logistics main sub-sectors summary, 2018 Sub-sector SIC codes Tees Valley % of England UK productivity employment employment (£ p.a.) Transport via pipeline 49.5 100 7.0% £241,000 Service activities incidental to water 52.22 1,300 6.5% £131,000 transportation Freight transport by road 49.41 3,500 1.6% £47,000 Freight rail transport 49.2 100 1.5% £86,000 Specialised** and non-specialised 46.7, 46.9 3,700 1.3% £65,000 wholesale trade Warehousing and storage 52.1 3,200 1.1% £42,000 Wholesale of other machinery, 46.6 1,700 1.0% £66,000 equipment and supplies Cargo handling and other 52.24, 52.29 700 1.0% £88,000 transportation support services Postal and courier services 53 1,500 0.8% £44,000 Service activities incidental to air 52.23 300 0.7% £125,000 transportation Wholesale of food, beverages and 46.3 1,100 0.6% £60,000 tobacco Service activities incidental to land 52.21 500 0.6% £72,000 transportation Wholesale of household goods 46.4 1,100 0.5% £69,000 Wholesale of information and 46.5 100 0.2% £101,000 communication equipment Logistics 19,100 1.0% £64,000* Source: ONS, ABS. EMSI. * Tees Valley employment adjusted average productivity of sub-sectors listed. **Specialised wholesale trade includes fuels, metals, construction materials, heating equipment, chemicals and other intermediate products.

The medium productivity sector is:

Professional and Business Services – key points • A significant sector in overall employment terms but with lower employment concentration across a majority of sub-sectors than nationally. • Overall a sector with broadly average rates of productivity but levels differ widely by sub- sector with significant employment numbers across all levels of productivity.

Table 5.10. Professional and Business Services main sub-sectors summary, 2018 Sub-sector SIC Tees Valley % of England UK productivity codes employment employment (£ p.a.) Landscape service activities 81.3 1,600 2.6% £45,000 Call Centres 82.2 1,300 2.1% £31,000 Buildings combined facilities support activities 81.1 2,000 1.3% £38,000 Business support activities n.e.c. 82.9 3,700 1.1% £81,000 Security and investigation activities 80 1,700 1.0% £32,000 Financial and insurance activities 64, 65, 7,000 0.8% n/a 66 Employment agencies and related activities 78 6,300 0.7% £39,000 Legal and accounting activities 69 3,100 0.5% £71,000 Buildings cleaning activities 81.2 1,800 0.5% £15,000 Veterinary activities 75 200 0.4% £45,000 Office administration and support activities 82.1 200 0.4% £59,000 Head offices and business management 70.1, 2,000 0.3% £78,000 consultancies 70.22 Real estate activities 68 200 0.1% £81,000 Professional and Business Services 31,300 0.7% £51,000* Source: ONS, ABS. EMSI. * Tees Valley employment adjusted average productivity of sub-sectors listed. Tees Valley’s two Low productivity sectors are: Creative Culture and Leisure – key points • A wide-ranging sector encompassing both high and low productivity sub-sectors. • Overall employment levels are high but the two largest sub-sectors in terms of number of jobs, Restaurants & event catering and Beverages serving activities are both very low productivity. • With greater employment levels observed in relatively lower-level productivity sub-sectors this impacts negatively on the sector’s overall productivity rate. Table 5.11. Creative, Culture and Leisure main sub-sectors summary, 2018 Sub-sector SIC codes Tees Valley % of England UK productivity employment employment (£ p.a.) Beverage serving activities 56.3 6,600 1.4% £20,000 Gambling and betting 92 1,100 1.3% £63,000 Motion picture projection activities 59.14 200 1.2% £97,000 a Sport and recreation 93 4,200 1.0% £28,000 Retail of sport equipment 47.64 600 1.0% £33,000 Taxis, passenger rail and other land 49.1, 49.32, 1,100 0.8% £56,000 transport 49.39 Newspaper publication 58.13 200 0.8% £99,000 b Restaurants and event catering 56.1, 56.2 7,300 0.7% £19,000 Hotels and similar accommodation 55 2,100 0.6% £36,000 Travel agents and tour operators 79.1 500 0.6% £108,000 Renting and leasing of cars and recreational 77.11, 77.21 200 0.6% £205,000 goods Libraries and museums 91.01, 91.02 300 0.6% £3,000 Photography and specialised design 74.1, 74.2 200 0.4% £69,000 activities Sports and cultural education 85.51, 85.52 100 0.4% £21,000 Creative, arts and entertainment 90 100 0.2% £53,000 Creative, Culture and Leisure 28,300 0.7% £31,000*

Source: ONS, ABS. EMSI. * Tees Valley employment adjusted average productivity of sub-sectors listed. a Productivity only available for broader SIC 59 Motion pictures sub-sector. b Productivity only available for broader SIC 58 Publishing activities sub-sector. 60

Health and Social care – key points • A key sector for Tees Valley in terms of high numbers of employees and high employment concentration. The increasing importance of this sector to the Tees Valley economy has been accelerated by the Coronavirus pandemic. • Hospital activities, Residential care and Social work for the elderly and disabled sub-sectors account for relatively higher levels of employment than nationally. • Reflecting the labour intensive nature of the sector, Health and social care as a whole has low productivity levels with all sub-sectors recording Low productivity rates.

Table 5.12. Health and social care main sub-sectors summary, 2018 Sub-sector SIC codes Tees Valley % of England UK productivity employment employment (£ p.a.) Hospital activities 86.1 22,000 1.7% £20,000 Residential care 87 9,500 1.5% £24,000 Social work activities without 88.1 3,700 1.1% £18,000 accommodation for the elderly & disabled Other social work activities without 88.99 4,000 0.9% £6,000 accommodation n.e.c. Child day care activities 88.91 1,800 0.9% £18,000 Other human health activities 86.9 2,300 0.7% £36,000 Dental practice activities 86.23 600 0.7% £28,000 a General and specialist medical practice 86.21, 1,400 0.6% £28,000 a activities 86.22 Health and social care 45,400 1.1% £20,000* Source: ONS, ABS. EMSI. * Tees Valley employment adjusted average productivity of sub-sectors listed. a Productivity only available for broader SIC 86 Human health activities.

5.7. Total goods trade and export destinations

In 2019, Tees Valley’s goods exports, at £3,313m, were only slightly below its imports of £3,361m, with its trade in goods deficit decreasing slightly from £145m in 2018 to £48m. The area ran a slight trade surplus with EU countries, with exports of £1,709m and imports of £1,598m. This was contrasted by a trade in goods deficit for non-EU countries, as exports of £1,604m were below imports of £1,763m. While total exports were up slightly from 2018, imports fell from £3,423m to £3,361m, meaning that the area’s trade balance (exports divided by imports) increased slightly from 0.96 to 0.99. This is compared to a figure of 0.71 for the whole UK. Of all English regions, the North East had the highest overall trade balance (0.99), the highest EU trade balance (1.07), and the fourth highest non-EU trade balance (0.91).

Tees Valley’s exports contributed 20% to the area’s GDP in 2019, compared to 16.2% for the UK. The area’s exports also made up a large part of total North East exports at nearly one-quarter and constituted 0.95% of the UK’s exports (slightly down from 1.0% in 2018). Given the area’s favourable trading position with the EU, the withdrawal process may have a negative impact on the Tees Valley economy should post-EU Exit trading arrangements harm local businesses’ exporting opportunities.

HMRC’s statistics contain a breakdown of exports by destination at NUTS2 level. In 2019, Tees Valley and Durham’s exports equalled £5,267m, up from £5,130m in 2018. The top 10 exporting destinations with values are provided in the below table, with the top destinations from 2018 for comparison.

Figure 5.8. Top 10 destinations for exports from Tees Valley and Durham, 2019

800 700 600 500 400 300 200 100 -

2019 exports (£ million) 2018 exports (£ million)

Source: HMRC regional trade in goods statistics

Germany remained the top destination despite the value of imports from Tees Valley declining by £29m (-4.1%) compared to 2018; exports to the US, France, Spain and Italy likewise declined, while exports to the Netherlands, China and Ireland increased. FYR Macedonia and Japan displaced Belgium and Turkey in the top 10 destinations as exports to the former two countries increasing from £146m (+43.2%) and £137m (+15.3%) respectively. Exports to the top four countries of Germany, the US, Netherlands and France put together made up the 43.5% of the Tees Valley and Durham total (up from 41.4% in 2018), at £2,292m.

The table below gives exports from Tees Valley and Durham’s to different world regions, as well as the % of the region’s exports going to different areas of the world.

Table 5.13. Destination of Tees Valley and Durham exports by world region

EU/non- Non-EU regions Exports (£ % of total % of total EU million) exports non-EU exports Total 5,265 100.0% - EU 2,767 52.5% -

Non-EU 2,498 47.5% 100% Western Europe (excl. 203 3.9% 8.1% EU) Eastern Europe (excl. EU) 304 5.8% 12.2% Sub-Saharan Africa 56 1.1% 2.2%

North America 773 14.7% 30.9% Latin America and the 78 1.5% 3.1% Caribbean Middle East & North 181 3.4% 7.2% Africa

Asia & Oceania 903 17.1% 36.1% Source: HMRC regional trade in goods statistics

Compared to 2018, exports to non-EU countries increased both in absolute terms and in their share of total exports from Tees Valley and Durham, while the proportion exported to the EU has declined. Exports increased to all non-EU regions excluding Western Europe and the Middle East & North Africa, with most of the increases accounted for by North America and Asia & Oceania. Figure 5.9 below illustrates the main locations that firms in Tees Valley and Durham exported to.

Figure 5.9: Global distribution of Tees Valley and Durham exports, 2019 (by % of total TV exports imported to country)

Source: HMRC regional trade in goods statistics 5.8. Sectoral goods exports

HMRC’s data comes with a broad SITC sectoral breakdown at NUTS2 level (Tees Valley and Durham). In 2019, Chemicals and related products (SITC 5) remained the largest export from the sub-region at £1,857m (35.3% of total exports), though this was a decline from £1,917m in 2018. Machinery and Transport equipment (SITC 7) was the second largest exporting section at £1,723m (32.7%), down from £1,808m in 2018. Put together, these two sectors accounted for over two-thirds of the area’s exports at 68%, and a total of 1,951 exporting businesses. Figure 5.10 below gives the total sectoral breakdown of Tees Valley and Durham exports.

Figure 5.10: Tees Valley and Durham goods exports by SITC sector, 2019 (% of total regional exports)

0 Food and live 2 Crude materials, animals, 1.8% inedible, except fuels, 1.9% 9 Commodities 1 Beverages and 3 Mineral fuels, 8 Miscellaneous and transactions tobacco, 0.1% lubricants and related manufactured not classified materials, 0.3% articles, 6.7% elsewhere in the SITC, 0.0% 4 Animal and vegetable oils, fats and waxes, 0.1%

5 Chemicals and 7 Machinery and related products, transport equipment, n.e.s., 35.3% 32.7%

6 Manufactured goods classified chiefly by material, 21.2%

Source: HMRC regional trade in goods statistics

Consistent with the area’s strengths in chemicals and process, the proportion of total exports from this sector was greater than the rates for the North East and UK (13% and 21% respectively). 5.9. Tees Valley services exports

Tees Valley service exports were estimated at £2,312m in 2018, an increase from the estimate of £1,344m in 2017. In 2018 Tees Valley accounted for around 0.75% of total UK service exports, up from 0.50% the previous year. The region ran a trade in services surplus of £803m, with imports equalling £1,509m. Financial and insurance activities made up most of Tees Valley’s export total at £744m, or 32%, with Manufacturing at £539m (23%) the second highest exporting sector. These two sectors also accounted for a higher proportion of the area’s exports than these sectors contributed nationally, although they were the only industries for which this was the case.

Tees Valley ran a trade in services surplus with both EU and non-EU countries; exports to the EU of £1,123m exceeded imports by £667m, while the surplus for the rest of the world was smaller, with exports at £1,192m only £136m higher than imports. Exports from Tees Valley were roughly split between EU and non-EU countries, with the rest of the world accounting for a slightly higher share at 51%. By contrast, 59% of the UK’s services exports went to non-EU countries, with just 41% going to the EU.

The vast majority of Tees Valley’s service exports came from Hartlepool and Stockton-on-Tees which exported £1,252m, or 54% of the total. South Teesside exported £603m (26%) and Darlington accounted for £457m (20%). However, South Teesside ran a larger trade surplus (£409m) than the other two NUTS3 areas, with Hartlepool & Stockton-on-Tees and Darlington exhibiting surpluses of £202m and £192m respectively.

Figure 5.11. Services exports by functional category, Tees Valley, £ millions, 2018

Non-manufacturing 5

Information and communication 47

Accommodation and food service activities 68

Administrative and support service activities 82

Other service industries 105

Transportation and storage 111

Professional, scientific and technical activities 148

Manufacturing 539

Financial and insurance activities 744

Source: ONS 5.10. Port freight traffic

In 2019, the port of Tees and Hartlepool remained the largest English port in terms of outward tonnage with 16.76m tonnes, almost unchanged on 2018’s figure of 16.80m. The port also ranked 5th for overall tonnage, accounting for 8.5% of the total for English ports. Crude Oil made up 68% of outward freight as shown in the chart below. Tees and Hartlepool port is the main site in England for outwards Crude Oil trade tonnage, exporting over 99% of the UK total. Inward Crude Oil trade, by contrast, was just 23 tonnes, an increase from zero the previous year.

Figure 5.12: Tees and Hartlepool port freight traffic by cargo type, Outwards tonnage (thou’s) Other Ro- General Non-crude oil Ro, Lo-Lo, liquid bulk, Dry Bulk, 812, Cargo, 370, 838, 2282, 14% 1007, 6% 5% 2% 5%

Crude oil, 11446, 68%

Source: DfT Port Freight Statistics

Since 2014, outward tonnage from the port has steadily decreased from 21.6m tonnes, or a fall of 4.8m. This is mainly due to iron and steel tonnage falling by 2.9m, although crude oil also fell by 2.3m tonnes.

In terms of inward tonnage, in 2019 the port of Tees and Hartlepool recorded 11.4m tonnes of inward tonnage ranking it 9th among English ports. Inward tonnage was down from 12m tonnes the year prior, despite total UK inward tonnage increasing over the year. 5.11. Foreign Direct Investment (FDI) projects

From a UK perspective, inward foreign direct investment (FDI) is an investment from a foreign investor into a UK enterprise. DIT collate FDI statistics by region which cover the number of FDI projects, and the new jobs associated with these projects.

While the number of FDI projects to the UK increased by 70 to 1,852 between 2018-19 and 2019-20, (a 3.9% rise year on year), the number of jobs associated with these projects declined from 57,625 to 56,117, a fall of 2.6%. In contrast, the number of FDI projects in the North East rose by 14 to 73, an increase of 23.7%. This was accompanied by 2,979 jobs, 791 more than the previous year’s total (36.2%). The North East therefore outperformed the UK in growth of both FDI projects and jobs associated with these investments.

In terms of FDI share, the North East was the destination of 3.9% of inward FDI projects to the UK, up from 3.3% the previous year. When measured by volume of jobs the North East accounted for 5.3% of the total; again, this was an increase from the previous year’s rate of 3.8%. 5.12. Coronavirus trade impact

While sub-regional figures for 2020 haven’t yet been published, HMRC’s regional trade statistics for the North East provide an indicator of the effects of the Coronavirus pandemic. Exports fell slightly by £113.7m (-3.4%) from 2019 Q4 to 2020 Q1 and then drastically in Q2, down by £1.4bn (-41.5%) from 2019. This is compared to a decline of 32% for the UK between 2019 Q4 and 2020 Q2. This reflects the pandemic’s impact, with supply chain restrictions and falling overseas demand reducing the North East’s exporting capacity.

Imports were also adversely affected, declining by 31.3% from 2019 to 2020 Q2. As imports have fallen by a smaller proportion than exports, the North East’s trade balance (as measured by its export/import ratio) fell from 0.96 in 2019 Q4 to 0.81 in 2020 Q2. This was still above the national export/import ratio of 0.73 for the same period.

Following the easing of lockdown restrictions in June and July, and the uptick in the global economy as a whole, the North East’s exports rebounded significantly in quarter 3; total exports from the region equalled £2.9bn, up from just under £2bn the previous quarter, and were 90.1% of the value of trade in the same quarter of 2019. Imports likewise increased from £2.4bn to £3.1bn, though the rate of increase (30.5%) was lower than that for exports, meaning that the region’s trade balance improved compared to quarter 2. Exports of Machinery and Transport goods was the biggest recovering sector, as exports rose from £661m in Q2 to £1.4bn in Q3 (106.5% increase). Miscellaneous manufactures saw a 53.3% rise in exports, from £180m to £276m between Q2 and Q3. Exports to EU countries increased by £616m to nearly £1.6bn, a greater proportional rise than for non-EU countries, for which exports rose from £979m to £1.3bn, or 36.9% from Q2.

HMRC’s analysis also comes with a breakdown of trade statistics by standard industrial trade classification (SITC) sector. The machinery and transport sector (SITC 7) explains the vast majority of

the regional decline in exports, and in particular the road vehicles sub-sector (SITC 78), which made up 34.4% of North East exports in 2019 Q4 at £1.14bn. Exports in this sub-sector fell by £1.01bn (91.1%) from 2019 Q4 to 2020 Q2, meaning that it accounts for 75.5% of the total fall in NE exports in this time. This will mostly reflect on Sunderland given its sizeable car manufacturing industry. The statistics also show an adverse impact on exports of chemicals and related products (SITC 5), with exports decreasing from £712m to £623.5m. As described above, this sector is crucial to Tees Valley’s trading position, as well as that of the North East, making up 17.7% of total North regional exports in 2019.

The North East’s exports to the EU fell by £58.9m between 2019 Q4 and 2020 Q1, and by over £1bn to 2020 Q2. The fall in trade with EU countries therefore explains most of the impact of the pandemic on exports. Exports to non-EU countries fell by £54.8m (4.1%) in 2020 Q1 and then by £360.4m in 2020 Q2. Imports from EU countries fell by £79.7m (3.8%) in 2020 Q1 and then by £797.6m (38.4%) in Q2. Imports from non-EU countries fell by £6.2m (0.4%) initially and then by £288.2m (20.6%) in Q2. The non-EU trade balance therefore fell by a smaller amount (from 0.96 to 0.88) than the EU trade balance (from 0.96 to 0.76).

Between 2019 Q4 and 2020 Q2, the North East was the most impacted English region in terms of exports to EU countries, and second only to the West Midlands for the proportionate decline in overall exports.

The table below shows the countries for which exports from the North East declined most proportionally between 2019 Q4 to 2020 Q2.

Table 5.14. Top 10 North East export destinations (by % decline in trade from 2019 Q4 to 2020 Q2)

Country 2019 Q4 2020 Q2 % fall in exports exports exports (£000s) (£000s) Spain 285,583 68,142 -76.1% Netherlands 434,812 118,570 -72.7% Finland 27,136 8,338 -69.3% Belgium 200,323 71,855 -64.1% Italy 162,781 64,471 -60.4% Poland 80,749 34,489 -57.3% Estonia 1,768 799 -54.8% Hungary 25,086 12,600 -49.8% Croatia 1,417 716 -49.5% Latvia 2,122 1,121 -47.2% Sweden 91,371 52,711 -42.3% Source: HMRC regional trade in goods statistics

One notable point is that the most affected export destinations are EU member countries; of particular concern are the figures for Spain, the Netherlands and Finland, for whom export values have declined by over two-thirds.

5.13. Economic Growth and Productivity SWOT analysis

Strengths Weaknesses Existing strengths in internationally and nationally Slow overall GDP/GVA growth and an relatively high productivity sectors including Clean increasing GDP/GVA gap (based on Energy, Low Carbon and Hydrogen (including Nuclear) GDP/GVA per capita). and Chemicals & Process. Underlying labour market Particular strengths in the medium/high productivity participation issues are the largest Advanced Manufacturing sub-sector Engineering Services contributor to the area’s low and also Construction’s Civil engineering and specialised GDP/GVA per capita and sluggish construction sub-sectors. economic growth rate.

Strong recent (pre-Coronavirus) GVA trend growth in Over-reliance on a small number of certain higher value broad sectors such as Construction high productivity sectors, often with a and Professional, Scientific and Technical activities. combination of declining output and shrinking employment base and A strong exporting area reflecting Manufacturing GVA relatively restricted new job strength in Chemicals and Metal manufactures goods opportunities. exports in particular. High export concentrations in certain Strong links to non-EU countries in services exports. sectors such as Chemicals increases area’s exposure to exogeneous Nationally leading trade asset in the Port of Tees & shocks, as demonstrated in Hartlepool, particularly for Crude Oil. Coronavirus impact.

Trading surplus in services, with high concentrations in financial & insurance and manufacturing.

Nationally significant services export base in financial and insurance and manufacturing.

Opportunities Threats Potential for significant growth, particularly post Increasing levels of trade Coronavirus and following EU exit, in emerging higher protectionism across the world, productivity sectors e.g. Bioscience and Digital. particularly in key non-EU markets such as USA and China. Significant aggregate GVA growth would flow from only marginal productivity improvement in fast growing A deficit in trade in goods with non- employment rich sectors such as Health & Social Care. EU countries with a need to diversify trade after leaving the EU. Great potential for diversification of supply chains and developing the capacity of firms to increase exports. Continuing uncertainty in the economic environment impacting Growing domestic supply chains to meet national need. negatively on aggregate business investment. Increasing share of exports going to countries outside the EU, creating greater trading opportunities during EU exit Coronavirus-related supply chain transition phase. restrictions reducing Tees Valley firms’ access to global markets.

Loss of manufacturing within the integrated chemical sector as the goods it produced are being sourced from countries within EU E.g. Closure of INEOS chemical plant putting 390 jobs at risk of redundancy

Section 6: Business Growth

Introduction This section details current business growth in each of the Tees Valley’s key economic sectors, business creation, SME levels and prospects for future growth. A thriving and sustainable business sector will increase productivity and create good jobs with long term opportunities that local people can access. The Tees Valley continues to experience comparatively low levels of business density. Building on the previous business support service, Business Compass, Tees Valley Business was established by the Tees Valley Combined Authority in January 2020 to provide easy to access advice, support, grants and loans to help businesses grow. In its first year of operation 886 businesses were supported.

Key messages

• Prior to Coronavirus 89% of Tees Valley business were optimistic about their business growing over the next 12 months (Tees Valley Coronavirus Business Survey, May 2020). • As at May and as a result of Coronavirus, 46% of Tees Valley businesses reported a reduction in demand for their products or services, with 41% reporting a reduction in sales and 37% furloughing staff. • 37% of Tees Valley businesses anticipate opportunities as a result of Coronavirus, with 22% of these businesses anticipating an increase in demand, 18% anticipating digital opportunities, and 16% anticipating less competition. • The North East had the second highest regional rate for firms that were currently trading during the period 29 December 2020 to 10 January 2021 at 89.5% - significantly higher than the UK’s 85.1%. This period coincided with the introduction of England’s third national lockdown on 6 January 2021 and relatively tougher restrictions across much of the south of the country between 29 December 2020 and 5 January 2021. • Mirroring the national picture, the number of North East businesses added to the IDBR (business creations) in the UK in Quarter 3 2020 was slightly higher than in the third quarter of the past three years. North East business creations were a little lower than usual in Q2 2020 but Q1 2020 saw numbers higher than in recent years. • The number of North East businesses deregistered from the IDBR (business closures) in Quarter 3 2020 was slightly lower than in the third quarter of the past three years. North East business closures were around one quarter higher in Q1 2020 than in Q1 2019 but a little lower in Q2 2020. • The observed fluctuations in weekly company incorporations per working day coincide with government instigated lockdown measures and the subsequent easing of them in response to the Coronavirus pandemic. • The composition of business creations is markedly different to previous quarters – the average business is smaller and far more likely to be in industries less affected by the Coronavirus pandemic.

• Reflecting national trends, larger businesses were significantly more likely to continue trading through the pandemic than were small firms. • Arts, entertainment and recreation businesses were the least likely to continue trading through the pandemic. This sector is a major employer, both nationally and locally. • By the end of September almost half of firms still trading experienced lower than normal turnover with just 11% of businesses seeing higher than normal turnover. • Arts, entertainment and recreation and accommodation and food service activities saw the greatest falls in turnover whilst wholesale & retail saw an increase. • Throughout the pandemic, the arts, entertainment and recreation industry and the accommodation and food service activities industry have had the highest proportions of their workforce on partial or full furlough. • The information and communication industry and the professional, scientific and technical activities industry had the highest proportions of their workforce working remotely instead of at their normal place of work. • Across all industries, of businesses not permanently stopped trading, nearly two-thirds of businesses had a low to severe risk of insolvency. • The number of domestic and cross border mergers and acquisitions shows a considerable reduction from April 2020. • While the UK formally left the EU at the end of January 2020, a marked shift toward regionalisation — corporates dividing their operations between Asia-Pacific, the Americas and Europe — was already apparent before Coronavirus struck. This means that — despite EU Exit — the UK will continue to compete primarily in the European market for FDI. • Following Coronavirus, there is a clear indication from FDI investors as to which sectors will drive economic growth in the UK. 50% of investors consider Digital economy to be the top priority sector (up from 26% in 2019), Health care & well-being is second with 36% of investors (up from 15%). Positively, this picture mirrors Tees Valley’s sectoral priorities in these two sectors. • However, the Clean tech & renewables and Energy & utilities sectors – also priority sectors for Tees Valley – are viewed by investors as key sectors in Europe far more so than they are for the UK. In Europe, Clean tech & renewables ranks top sector with 39% of investors (12% UK) and Energy & utilities fourth with 20% (5% UK). Digital economy and Health, care & well-being sectors also rank highly in Europe. • The pandemic has hastened the ongoing reorganisation of supply chains towards local and regional solutions. Two-thirds of investors (including 72% of large corporates) now plan to remodel their supply chains – a big opportunity for Tees Valley to boost FDI. 32% of manufacturers are looking to reshore to the UK, 30% to reduce the dependence on single/dominant source countries and 28% are moving to near-shoring closer to the customer.

Tees Valley detail

• During the year to mid-March 2020, just before the full UK national lockdown announced on 23 March 2020, the total number of Tees Valley business enterprises fell by 155 to stand at 17,610 (of which 17,520 are SMEs). This represents an annual decrease of 0.9%, contrasting with a national increase of 1.2%. However, the difficult global economic conditions of early 2020 were already impacting negatively on the UK before the lockdown.

• Enterprise losses were largely confined to the Engineering design and technical services elements of the Advanced Manufacturing sector (down 120), continuing and reflecting a downward trend observed both locally and nationally since 2017, and the Office administration and business support services elements of the Professional and Business Services sector (down 295). • Enterprise increases were observed across the majority of other sectors with Construction (up 120) and Creative, Culture & Leisure (up 75) showing the greatest rises. Clean Energy, Low Carbon & Hydrogen, Digital, Logistics and Health & Social Care all recorded small uplifts with a combined increase of 50 firms. • Tees Valley had the lowest business density rate of any English LEP area in 2020 at just 324 enterprises per 10,000 adult population, 63.7% of the UK rate. This represents an enterprise gap of a little over 10,000 businesses i.e. the number of additional firms required for Tees Valley to match the UK business density rate of 508. • There were 225 Tees Valley scale-up firms in 2018. In addition, there were 120 ‘pipeline’ scaleups with growth rates only slightly below the scaleup threshold of 20% growth. However, and mirroring the aggregate business density ranking, Tees Valley has the lowest scaleup and pipeline firm density rates in the country.

6.1. Businesses and business density

There were 17,610 business enterprises in Tees Valley in 2020, down by 155 on 2019 (17,765). This decrease in enterprises (down 0.9%) contrasted with a 1.2% increase nationally. Despite the number of Tees Valley businesses increasing by 1,110 or 6.7% since 2015, the business gap with the UK has increased. From a business density rate (business per 10,000 adult population) of 306 in 2015 (65.5% of the UK rate) to a rate of 324 in 2020 (63.7% of the UK rate), the business gap has increased by 2,300 from 7,700 to 10,000 over this time.

6.2. Sectoral Composition

Table 6.1 examines how the number of enterprises has changed between mid-March 2019 and mid- March 2020 in sectoral terms i.e. pre-lockdown. Enterprise losses were largely confined to the Engineering design and technical services elements of the Advanced Manufacturing sector (down 120) and the Office administration and business support services elements of the Professional and Business Services sector (down 295). However, enterprise increases were observed across the majority of other sectors with Construction (up 120) and Creative, Culture & Leisure (up 75) showing the greatest rises. Clean Energy, Low Carbon & Hydrogen, Digital, Logistics and Health & Social Care all recorded small uplifts with a combined increase of 50 firms.

Reflecting challenging global trading conditions and declining business investment, the Advanced Manufacturing sector also saw declines nationally. The graphic below summarises the interconnectivity of Tees Valley’s Chemical & Process, Advanced Manufacturing and Bioscience sectors. Despite recent stagnation and decline in aggregate business numbers, they remain key sectoral strengths and are highly concentrated within Tees Valley as detailed in the following section.

Note that independent research from Teesside University, ‘Opportunities for the Tees Valley Bioscience Sector, April 2019’, applied a broad sector definition for the Bioscience sector that

included parts of our existing sectors, Advanced Manufacturing, Chemical & Process and all of Biologics.

The relationship between the Chemical and Process, Advanced Manufacturing and BioScience sectors.

Table 6.1. Number of enterprises by sector, Tees Valley and UK, March 2019 and March 2020 Tees Valley UK 2019 2020 Change %change 2019 2020 %change Advanced 2,755 2,635 -120 -4.4% 171,565 169,930 -1.0% Manufacturing Biologics 25 20 -5 -20.0% 3,885 3,990 2.7% Chemical and 75 75 0 0% 8,705 8,650 -0.6% Process Clean Energy, 405 420 15 3.7% 48,935 49,790 1.7% Low C & H Construction 2,285 2,405 120 5.3% 342,835 350,265 2.2% Creative, Culture 2,575 2,650 75 2.9% 439,485 448,515 2.1% & Leisure Digital 645 660 15 2.3% 188,580 187,230 -0.7% Health and Social 795 805 10 1.3% 102,000 103,265 1.2% Care Logistics 985 995 10 1.0% 196,080 205,715 4.9% Professional and 3,190 2,895 -295 -9.2% 567,180 572,820 1.0% Business Services Raw Materials & 475 475 0 0% 150,645 149,960 -0.5% Agriculture Other 435 420 -15 -3.4% 69,110 69,175 0.1% Manufacturing Other Private 2,795 2,815 20 0.7% 382,720 383,440 0.2% Services Other Public 325 335 10 3.1% 46,700 46,950 0.5% Services All sectors 17,765 17,610 -155 -0.9% 2,718,435 2,749,700 1.2% Bioscience 380 340 -40 -10.5% 21,400 21,505 0.5% Source: ONS, NOMIS, UK Business Counts – enterprises. Estimates are rounded to the nearest 5. Totals may not sum due to rounding. Position as at mid-March.

However, it is worth noting that for smaller geographies such as for the Tees Valley, these sectoral estimates in particular should be viewed with caution because of large volatility around considerations such as multiple businesses registered at a single address, umbrella companies and virtual offices. Indeed, the sector classification and location of individual businesses reflect the management company / virtual offices’ rather than that of the individual business itself.

6.3. Sectoral firm concentration

The Tees Valley business base has relatively more firms concentrated in certain sectors than the national sectoral business distribution might suggest. This is shown in Figure 6.1 below where the sectors have a location quotient (LQ) or more than one. Those sectors where the Tees Valley has an under-representation of businesses compared to the UK have an LQ of less than one.

Despite the decline in the number of Tees Valley Advanced Manufacturing and Bioscience enterprises, these highly integrated sectors still have by far the highest concentration of firms in the country – almost two and half times that of the UK average.

Figure 6.1. Business enterprises – Tees Valley Location Quotients

Key findings

▪ Tees Valley has relatively more enterprises than the UK in the following sectors: o Bioscience o Advanced Manufacturing o Chemical and Process o Clean Energy, Low C & H o Health and Social Care o Other public services o Other private services o Construction

Source: ONS, NOMIS, UK Business Counts – enterprises

6.4. Scale of enterprises

Whilst the Tees Valley business base broadly reflects the national picture in terms of size measured by number of employees, there are some slight sectoral differences as shown in Table 6.2 below. Of particular note are the Chemical and Process and the Other Public Services sectors where large companies (250+ employees) are relatively more prevalent in Tees Valley than nationally.

Table 6.2. Tees Valley sectors by employee size, 2020 band, 2019 Tees Valley SME share of Micro share Total total of total enterprises enterprises enterprises in (%) (%) Tees Valley SMEs Micro TV UK TV UK (Under 250 (Under 10 employees) employees) Advanced Manufacturing 2,630 2,510 99.8 99.7 95.3 90.3 2,635 Biologics 20 15 100 97.9 75.0 75.8 20 Chemical and Process 65 40 86.7 97.9 53.3 62.9 75 Clean Energy, Low C & H 420 365 100 99.5 86.9 87.5 420 Construction 2,405 2,255 100 99.9 93.8 94.4 2,405 Creative, Culture & Leisure 2,645 2,220 99.8 99.6 83.8 86.0 2,650 Digital 660 620 100 99.8 93.9 94.5 660 Health and Social Care 795 515 98.8 98.9 64.0 68.5 805 Logistics 985 825 99.0 99.6 82.9 87.7 995 Professional and Business 2,885 2,645 99.7 99.7 91.4 92.4 2,895 Services Raw Materials & 475 460 100 99.9 96.8 96.7 475 Agriculture Other Manufacturing 415 330 98.8 99.1 78.6 79.6 420 Other Private Services 2,810 2,520 99.8 99.8 89.5 90.8 2,815 Other Public Services 310 235 92.5 95.9 70.1 73.8 335 All sectors 17,520 15,555 99.5 99.6 88.3 89.6 17,610 Bioscience 335 305 98.5 98.4 89.7 78.7 340 Source: ONS, NOMIS, UK Business Counts – enterprises. Estimates are rounded to the nearest 5. Totals may not sum due to rounding. Position as at mid-March. Note: SMEs employ fewer than 250 employees. Micro enterprises are a subset of SMEs and employ fewer than 10 employees.

In terms of firm size measured by turnover, Tees Valley has relatively more of those micro firms with levels of annual turnover between £50,000 and £200,000 per annum but fewer of the very smallest firms with turnover below £50,000. It also has fewer firms with turnover of above £200,000 per annum. This distribution of enterprises means the average annual turnover of a Tees Valley SME is around 6% lower than UK rates.

Figure 6.2. Distribution of registered business enterprises by turnover band, Tees Valley, 2020

Key findings

▪ Tees Valley has relatively high numbers (61.9% v 55.4% in UK) of registered smaller businesses with annual turnover of between £50,000 and £200,000. ▪ There are fewer of the smallest micro-enterprises (under £50k) in Tees Valley (10.9% v 15.0% in UK) and also slightly fewer firms with turnover of £200k plus (27.2% v 29.6% in UK).

Figure 6.3. Percentage contributions of different sized businesses to total stock (registered and unregistered), employment and turnover, North East of England, as at start of 2020

Key findings

▪ Including unregistered businesses, SMEs make up 99.9% of all firms in the North East, account for 64.1% of total employment and 55.9% of aggregate turnover. ▪ BEIS & ONS estimate that regionally there are more unregistered firms without employees (58% of total) than registered employers

(25%) or registered firms without employees (17%).

6.5. Scaleup/High Growth enterprises

Scaleup Insights 2020

Drivers of scaleup growth – Qualitative analysis

In collaboration with ARUP, the Scaleup Institute has interviewed local LEP leaders across the country to help determine the key drivers of scaleup growth as summarised below.

Knowledge sharing – where individuals, businesses and institutions build informal networks which enable knowledge, skills and experience to be spread more widely

• Active network of peers • Strong local supply chains with links between small and large firms • Access to qualified non-executive board members

Active University Engagement

• Providing relevant training • Research collaboration • Interaction between scaleups and graduates

Local Ambitions

• A strong sense of local identity and ambition • Support and goodwill from the wider group of local stakeholders

Drivers of scaleup growth – Quantitative analysis

Building on the findings from the qualitative analysis, the institute found three key factors drove scaleup growth:

• Equity finance • Skills (particularly degree level qualifications in the Under 25s) and, up to a certain point of saturation:

• Sectoral clustering

A number of other factors were also considered but found to have no clear relationship with scaleup growth. These factors were SME bank lending rates, proportion of large firms, start-up density, start-up survival rate and public transport provision.

Tees Valley metrics

Scaleups are defined here using the OECD high-growth (scaleup) definition of firms growing their employment numbers and/or turnover by more than 20% a year over a period of three years, with at least ten employees at the start of the period.

The latest Scaleup analysis from the Scaleup Institute records Tees Valley as the LEP/devolved nation with the smallest number of scaleups per 100,000 population in 2018 (33.4) and also the area with slowest growth rate between 2015 and 2018 (-0.8).

London recorded the highest scaleup rate (79.3) and Gloucestershire the highest scaleup growth rate of 3.8.

The institute has, for the first time, also looked at ‘pipeline’ enterprises i.e. those businesses that are not yet at scaleup growth rates but are growing either or both of turnover and employment at 15- 19.99% annually between 2015-18.

Scaleup and pipeline businesses in 2018, Tees Valley

• Total pipeline scaling businesses (15% to 19.99%): 120 • Total scaleups (20%+): 225 • Pipeline scaling businesses per 100,000 population): 17.8 • Scaleups per 100,000 population: 33.4

Key point summary

• Tees Valley has the lowest numbers and rates of any part of the UK for both the pipeline scaling businesses and the scaleups measures

6.6. Scaleups by sector

The Scaleup Institute, with Beauhurst, has also produced analysis which has identified certain ‘visible’ scaleups in Tees Valley which can be categorised by detailed sector as shown below.

Key points

• Reflecting Tees Valley’s strength in Advanced Manufacturing, over one fifth of scaleup firms were in this sector. • However, scaleups can be present in any sector.

These visible scaleups (59 firms) are listed in the Scaleup Index 2020 as below.

6.7. Business Birth and Deaths

Official ONS Business Demography statistics are based on the number of enterprises active at any point during the year in question. This differs from point in time datasets such as UK Business Counts – enterprises, which records numbers each year in March (see Tables 6.1 and 6.2). Therefore, the Business Demography birth and death rates observed across one year (e.g. 2019) will be closely correlated with the headline business enterprise estimates the following year (e.g. March 2020).

Key points – business birth and death rates

• 2019 saw a modest decrease in the Tees Valley business enterprise birth rate and a slight increase in the death rate. • The Tees Valley business enterprise birth rate was 13.1% in 2019, marginally

above the UK rate of 13.0% but down from 13.6% in 2018. • The Tees Valley business enterprise death rate was 11.7% in 2019, a little higher than the UK rate of 11.2% but up from 11.2% in 2018.

Figure 6.4. Business birth and death rates, UK and Tees Valley, 2015 to 2019

Source: ONS Business Demography Statistics

Whilst official business birth and death rates (ONS Business Demography in the figure above) are very broadly in line with national rates, these rates are calculated using the existing business stock as the denominator.

If, as for business density, the resident adult population is used as the denominator, then birth and death rates, as for business density, come in at only around two-thirds of UK rates.

This, combined with business survival generally around national rates, indicates that the Tees Valley has relatively low levels of business churn and a stagnant business base.

Key findings – business survival rates

▪ The very gradual deterioration in business survival rates observed up to 2016 has eased both nationally and in Tees Valley over the past couple of years. ▪ Business survival rates in Tees Valley compare favourably to the UK for the first couple of years. However, longer term survival rates (4 and 5 years in particular) in Tees Valley have performed less well.

Figure 6.5. Business survival rates, UK and Tees Valley, business births from 2014 to 2018

6.8. Business Growth SWOT analysis

Strengths Weaknesses With the pandemic more likely to result in smaller The Creative, Culture & Leisure business closure, relatively high concentrations of larger sector, second only to Professional & organisations, both public and private, in Tees Valley has Business Services in terms of size of acted to protect the local business base, alongside a business stock across Tees Valley, has focus of support on sustainable businesses with growth seen some of the greatest negative potential. impact from the pandemic.

Significant strength in both existing and emerging sectors Persistently low aggregate business such as Advanced Manufacturing and Bioscience together density and relatively fewer firms with strengths in particularly high productivity sectors demonstrating productivity such as Chemical & Process and Clean Energy and Low improvement. Carbon & Hydrogen. Mirroring the broader business Tees Valley has a greater number of sector strengths environment, Tees Valley has the across non-service sectors that have been more resilient lowest number and rate of faster to the impact of Coronavirus. These include Chemical & growing enterprises. Process and Clean Energy and Low Carbon & Hydrogen. Opportunities Threats With the pandemic accelerating the ongoing Greater prevalence of relatively low reorganisation of global supply chains towards the local value enterprises combined with a and regional, Tees Valley is well placed to benefit from lack of business churn. This impacts the increasing trend towards reshoring in areas such as negatively on productivity, creates manufacturing and bio-processing. barriers to entry and constrains market opportunity for new start-up Sectors exhibiting some of the strongest sectoral start-up firms. rates reflect the increasing trend towards digital ways of working and shopping with transport and storage, Declining business survival rates including courier services, showing the highest rates of impacting negatively on business business start-up even before the pandemic. density.

Opportunity to grow the Tees Valley business base by Exacerbated by Coronavirus, cashflow meeting increased demand in Health and Social Care and debt are increasing concerns for through business growth and start-up support. many businesses and their growth aspirations going forwards. The Tees Valley Culture Programme provides £16.5m over the next five years to strengthen regional cultural Continuing uncertainty over EU Exit is and leisure businesses by supporting festivals and events a commonly cited obstacle to growth and boosting the Tees Valley’s profile as a visitor for local businesses. Additional destination. uncertainty around the persistence of Coronavirus restrictions may inhibit Improved digital infrastructure delivered through the new business formation. Digital Programme will assist with attract leading firms and investment to the Tees Valley as well as enhancing opportunities for digital innovation and industrial digitisation, improved productivity and increased digital access to employment, learning and training.

Section 7: Education, Employment & Skills This section covers educational quality and attainment at all tiers of the educational system in Tees Valley as well as skills supply through apprenticeships and higher education, graduate outcomes and identified workforce skills demands and gaps. It also covers the employment landscape in the Tees Valley and seeks to provide analysis to inform our understanding of the local labour market, which will help shape our priorities and interventions in order to increase local labour market activity, support productivity gains and meet any challenges and opportunities which may arise. Education, Employment and Skills are key drivers in the local economy. They have an important role to play in improving workforce productivity and boosting earning power for all. Access to an appropriately skilled and qualified workforce is essential if we are to meet the growth needs of existing businesses and is an important factor for businesses considering where to invest. Having the right skills mix also helps to boost levels of economic activity and ensures that residents are able to access local employment opportunities. There is also a need for businesses to sustain current activities through improved workforce planning and skills development. The Coronavirus pandemic has created unprecedented levels of uncertainty and unemployment both nationally and locally, unemployment has risen significantly as a result of Coronavirus, particularly amongst men, the young and those working in certain industry sectors such as accommodation and food, manufacturing, retail, tourism and culture. This exacerbates a situation in which unemployment levels in the Tees Valley were already much higher than national. The closure of schools during lockdown has been linked to a negative impact on disadvantaged children, in particular those without the digital infrastructure and equipment in place to support home- schooling. The Tees Valley contains some of the most deprived areas in the country according to the Index of Multiple Deprivation with a large percentage of students on Free School Meals. However, there will also be employment opportunities created by the Coronavirus pandemic. Increases in demand are likely to expand the already sizable Tees Valley health and social care sector in Tees Valley. Local authorities will remain significant employers. Digitalisation, both within businesses and households, may create new opportunities and a shift to ecommerce has also resulted in an increased demand for logistics. The impact of the EU-Exit in January 2021 is still to be felt on the workforce. Access to skilled EU workers is important for key industry sectors in the Tees Valley, including Construction, Logistics and Advanced Manufacturing. Key messages • In response to the Coronavirus pandemic, the Department for Education has cancelled the 2019/20 national curriculum assessments and associated data collections. Therefore, there is no updated data available on primary and secondary attainment. The data available last year showed that Tees Valley primary schools achieve above average Key Stage 2 results across all subject areas, with females consistently outperforming males. The quality of Tees Valley Primary schools is high with consistently above average Ofsted results. The quality and attainment levels of Tees Valley secondary schools are below the national average, with females continuing to outperform males. Tees Valley is below national average for secondary achievement in English Baccalaureate subjects.

• Tees Valley continues to have good quality Post 16 skills provision with overall achievement and pass rates for 16-18-year olds higher than national levels. • Participation in Higher Education remains above national average, with just under half of HE students remaining in the Tees Valley to study and achievement rates continuing to be slightly below average. The Coronavirus pandemic has placed significant pressures on the Health care system with a requirement for skilled staff, and for Tees Valley HE students Health Care accounted for the second largest percentage of qualifications (30%), however, the Health Care sector has seen the largest fall (11%) in qualifications in 2018/19 compared to the previous year, with 235 fewer passes. This fall may be reflective of the removal of the nursing bursary in 2017, after which nursing enrolments dropped and consequently qualifications in nursing are now reflecting this drop. • The percentage of Tees Valley graduates in employment 15 months after graduating matches the national rate, however the percentage of graduates in non-graduate level jobs is higher than national and less than half of graduates found employment in Tees Valley. The sharp rise in unemployment linked to the Coronavirus pandemic will also create a high level of competition for any available graduate level roles. • The percentage of working age residents with higher level skills is below the national average with a further drop being seen over the past year, compared to a rise nationally. The percentage of working age residents with no qualifications is higher than nationally, and despite a slight fall over the past year, the percentage remains higher than 5 years ago, compared to a fall nationally. • Whilst the percentage of 16-34-year olds starting an apprenticeship remains higher than the national level, apprenticeship starts have fallen by 23% over the last year compared to an 18% drop nationally, with the Covid-pandemic impacting heavily on apprenticeships. Apprenticeship achievement rates are consistently higher than the national average. • Tees Valley consistently has a lower than average job density (number of jobs per population) with a higher than average number of resident’s unemployed and seeking work. The Coronavirus pandemic has resulted in further high levels of unemployment, with an extra 13,000 residents claiming unemployment benefits compared to last year. Men, the young and those working in certain industry sectors such as accommodation and food, manufacturing, retail, tourism and culture have been particular impacted by the pandemic. • Youth unemployment is an issue with a higher than average number of 16-24-year olds unemployed and claiming benefits. The area also has a high number of 16-17-year olds NEET (Not in Education, Employment or Training). • Tees Valley has a high number of people classed as economically inactive (neither "employed" nor "unemployed", for example those who are long-term sick, students or retired). In particular, it has high numbers of those both long term and temporarily sick. • Employment is high in Health and Social Care, Education, Retail, Creative, Culture and Leisure and Professional and Business Services. Tees Valley also has sectoral strengths in: Chemical and Process; Health and Social Care; Public Services; Advanced Manufacturing and Clean Energy and Low Carbon. • The largest number of job vacancies in Tees Valley in 2020 were for Nurses, Care Workers, Teachers, Sales and Customer Service staff, Social Workers and IT staff, with increased demand in 2020 reflecting the impact of Coronavirus on the Health Care sector in particular. • Pre-Coronavirus projections predicted that there may be around 100,000 jobs that may need filling by 2027, including 6,000 new jobs and 90,000 replacement jobs, with almost three quarters

requiring high level skills. There will still be high demand for intermediate and lower level skills, particularly in replacement jobs. • The percentage of Tees Valley employers reporting skills shortages has dropped since 2017, however pockets of skills shortages remain and have risen in some key sectors, including Logistics and Construction. • Wages are lower than national average. Although this is attractive to investors, it can discourage workers from remaining in the area and the amount of disposable income available to households in Tees Valley is much lower than national.

7.1. Educational Attainment and Quality In response to the Coronavirus pandemic, the Department for Education has cancelled the 2019/20 national curriculum assessments and associated data collections. Therefore, there is no updated data available on primary and secondary attainment. The section below has been included from the previous Economic Assessment for information and reflects the position of primary and secondary school attainment in 2019. a. Primary School Attainment There are currently 204 state funded primary schools in Tees Valley. Primary school deprivation is above average with 22% of pupils eligible for and claiming free school meals in 2019 compared to 16% nationally.

Key stage 1 Attainment at Key Stage 1 is slightly below national average with 75% of Key Stage 1 students reaching the expected standard in reading, writing, maths and science in 2019, compared to 76% nationally. 19% are working at a greater depth compared to 21% nationally. Data is not comparable across years for Key Stage 1 due to changes in the TA frameworks.

Figure 7.1. % reaching expected standard in Key Stage 1 for reading, writing, maths and science 2019

Key Findings:

• English Writing is the only subject area in which Tees Valley outperforms the national figure in Key Stage 1, with 70% of students reaching an expected standard compared to 69% nationally.

Source: Department for Education Figure 7.2 shows that females outperform males in all areas in Key Stage 1, with a higher percentage of females reaching the expected standard for reading, writing, maths and science.

Figure 7.2. % reaching expected standard in Key Stage 1 for reading, writing, maths and science by gender 2019 Key Findings:

• 78% of females reached the expected standard in writing in 2019 compared to 63% of males. • 79% of females reached the expected standard in reading compared to 69% of males. • 87% of females reached the expected standard in Science compared to 77% of males. • 77% of females reached the expected standard in Maths compared to 73% of males.

Source: Department for Education

Key stage 2

Figures 7.3 and 7.4 illustrate that Tees Valley primary schools are above the national average for Key Stage 2 expected attainment and match the national average for the percentage reaching a higher standard.

Figure 7.3. % reaching expected standard in Key Stage 2 for reading, writing and maths 2019 Key Findings:

• 67% of Key Stage 2 students are reaching an expected standard in reading, writing and maths in 2019 compared to 65% nationally. • This has risen 13% since 2016 compared to an 11% rise both nationally and across the North of England. • However the past year has seen a 1% fall both in Tees Valley and across the North of England

whilst nationally figures remained the same. Figure 7.4. % reaching higher standard in Key Stage 2 for reading, writing and maths 2019 • 10% of Key Stage 2 students are reaching an higher standard in reading, writing and maths in 2019, which matches the national figure. • This has risen 4.4% since 2016 compared to an 5% rise both nationally and across the North of England. • The past year has seen a 1% rise both in Tees Valley and across the North of England whilst nationally figures remained the same.

Source: Department for Education

Figure 7.5 shows that Tees Valley outperformed the national in all subject areas for the percentage reaching the expected standard in Key Stage 2 in 2019.

Figure 7.5. % reaching expected standard in Key Stage 2 by subject - 2019 Key Findings:

• 74% of students reached the expected standard for Reading, compared to 73% nationally. • 79% reached the expected standard for Grammar, punctuation and spelling, compared to 78% nationally. • 81% reached the expected standard for maths, compared to 79% nationally.

Source: Department for Education

Figure 7.6 shows that girls consistently outperform boys in Key Stage 2 with a higher percentage of girls reaching the expected standard for reading, writing and maths.

Figure 7.6. % reaching expected standard in Key Stage 2 for reading, writing and maths by gender Key Findings:

• Girls consistently outperform boys with 72% of girls reaching the expected standard for reading, writing and maths in 2019, compared to 63% for boys. This compares to 70% and 60% nationally. • Over the past year girls performance has seen a 1% rise both locally and nationally, whilst boys have seen a 1% fall both locally and nationally. Source: Department for Education

51% of Key Stage 2 students who were eligible for Free School Meals (FSM) achieved the expected standard in reading, writing and maths in 2018, compared to 72% for those who are not eligible for FSMs. However, Tees Valley still outperforms the national with 46% of key stage 2 students who were eligible for FSM nationally achieving the expected standard in 2018, compared to 68% for those not eligible.

b. Secondary attainment There are currently 43 secondary schools in Tees Valley. Secondary school deprivation is above average with 21% of pupils eligible for and claiming free school meals in 2019 compared to 14% nationally. Figures 7.7 and 7.8 show that attainment in Key Stage 4 is below the national average4 for headline accountability measures.

Figure 7.7. Average Attainment 8 score per pupil 56 Key Findings:

5 • The average Attainment 8 score per pupil in 2019 was 44.1 compared to 46.5 nationally. This varies from 41.4 in Middlesbrough to 46.4 in Darlington.

• Average Attainment 8 scores have fallen by 2.5 points over the last 4 years from 46.6 in 2015 to 44.1 in 2019. Nationally figures have dropped by 2.1 points from 48.6 to 46.5.

• 39.6% of Tees Valley secondary pupils achieved a 9-5 pass in English and Source: Department for Education Maths in 2019, compared to 43%

nationally. This has fallen by 2.1 Figure 7.8. Percentage achieving 9-5 pass in English and Maths percentage points over the last year whilst nationally levels have fallen by 0.5. 6 • The average Progress 8 score for Tees Valley secondary school pupils in 2019 was -0.29 compared to -0.15 for the North of England.

Source: Department for Education

4 National figures are for state funded schools only as local authority data is for state funded schools only. 5 Attainment 8 is a measure of a pupil's average grade across a set suite of eight subjects. Once calculated, this Attainment 8 score is compared to the average Attainment 8 score of all pupils nationally with the same prior attainment at KS2 in order to calculate a pupils Progress 8 score.

6 Progress 8 measures a student's progress between Key Stage 2 and Key Stage 4 across eight key subjects. The average Progress 8 score of all secondary schools nationally is 0. Schools with a Progress 8 score of below -0.5 are not achieving the minimum standard expected by the government. A score of +0.5 of above shows that pupils in that school are making well above the expected level of progress.

The average attainment 8 score per pupil eligible for free school meals was 32.4 in 2018, compared to 46.6 for those not eligible. Figures 7.9 and 7.10 show that females continue to outperform males throughout secondary school. Figure 7.9. Average Attainment 8 score per pupil - Gender Key Findings:

• The average Attainment 8 score for Females in 2019 was 46.4, compared to 41.9 for males.

• Nationally the Attainment 8 score for Females is 49.3, compared to 43.9 for males.

• The gap between Tees Valley and national is larger for females, with the Tees Valley average female attainment 8 score 2.9 points below the national average, compared to 2 points below for males.

Source: Department for Education 2019 • 42.3% of females achieved a 9-5 pass in English and Maths in 2019, Figure 7.10. % achieving 9-5 pass in English and Maths compared to 36.9% of males. Nationally 46.4% of females achieved a 9-5 pass in English and Maths, compared to 39.7 of males.

• Again, the gap between Tees Valley and national is larger for females, with the percentage of females achieving a 9-5 pass in English and Maths 4.1% lower than national, compared to 2.8% lower for males.

Source: Department for Education 2019

Participation and achievement in English Baccalaureate (EBacc) components 29% of Tees Valley pupils entered the EBacc in 2018/19, compared to 40% nationally7. This is down 2% from 31% in 2017/18 compared to a 1.5% rise nationally. This is due to a 1.4% drop in entries to Languages (0.5% rise nationally), with entries to English, Maths, Science and Humanities each seeing a small increase over the past year. Figure 7.11. Percentage entered for the Ebacc by component – 2018/19 Key Findings:

• Tees Valley has lower than national percentage of pupils entered for all components of Ebacc: o 95.6% were entered for English, compared to 95.8% nationally. o 96.6% were entered for Maths, compared to 97.3% nationally. o 94.5% were entered for Science, compared to 95.6% nationally. o 76.8% were entered for Humanities subjects, compared to 80.6% nationally. o 34.8% were entered for Languages, Source: Department for Education compared to 46.6% nationally.

11% of Tees Valley pupils achieved the Ebacc (grades 5 or above in English and maths, A*-C in unreformed subjects), compared to 17% nationally. This is down 1.3% from 12.3% in 2017-18 compared to 0.2% rise nationally. This is due to a 1.3% drop in English and a 1.5% drop in Maths achievements (0.2% and 0.6% drop nationally), with achievements in Science and Humanities seeing a 1.5% and 10.6% rise respectively8 (2.3% and 10.8% rise nationally). Figure 7.12. Percentage achieving grade 5 or above in Ebacc by component – 2018/19 Key Findings:

• Tees Valley pupils are below the national average for the percentage of pupils achieving grade 5 or above in all components: o 57.3% of pupils achieved in English, compared to 60.4% nationally. o 45.6% of pupils achieved in Maths, compared to 48.9% nationally. o 39.1% of pupils achieved in Science, compared to 46.6% nationally. o 46.3% of pupils achieved in Humanities, Source: Department for Education compared to 49.9% nationally.

o 47.2% of pupils achieved in Languages,

compared to 54.2% nationally.

7 National data reported is for State Funded Schools only as Local Authority data covers state funded schools only.

8 Unable to report the change in Languages due to data issues.

c. Quality 92% of Tees Valley primary schools are rated as good or outstanding by Ofsted compared to 88% nationally, with the Tees Valley average remaining above the national for the last 5 years. However only 53% of Tees Valley secondary schools are rated as good or outstanding by Ofsted, compared to 76% nationally. Almost half are rated as “requires improvement” or “inadequate” by Ofsted.

Figure 7.13. Primary Ofsted Results – March 2020 Key Findings:

• Tees Valley has a higher percentage of primary school rated as both outstanding (17%) and good (75%) by Ofsted than national (17% and 71%)

• 8% of primary schools require improvement compared to 9% nationally, and no schools are inadequate, compared to 3% nationally.

• The quality of Tees Valley primary Figure 7.14. Secondary Ofsted Results – March 2020 school has remained fairly steady over the past 5 years, taking a slight dip in 2018 before recovering in 2019.

• However, 47% of Tees Valley secondary schools require improvement or are inadequate, compared to 24% nationally.

• The percentage of Tees Valley secondary schools rated as outstanding or good has fallen consistently over the past 2 years,

from a high of 59% in 2016 to the Figure 7.15. Percentage of education providers rated as outstanding current 53% in 2020, a drop of 6 or good by Ofsted percentage points compared to little change nationally.

Source: Ofsted d. Post 16 Education Tees Valley has five general Further Education Colleges situated in each of the towns of Darlington, Hartlepool, Middlesbrough, Redcar and Stockton (Stockton and Redcar are part of the Education Training Collective), as well as one specialist college (The Northern School of Art), all of which are rated as either Good or Outstanding by Ofsted. There are also five sixth form colleges along with a number of schools that contain a sixth form college. These colleges offer a range of education and training courses, including apprenticeships and full-time and part-time provision.

Participation

91.7% of 16-17 years olds in Tees Valley were in Education or Training in 2020 compared to 92.6% nationally. This has fallen by 1.1 percentage points over the last year, compared to an increase of 0.1 nationally.

Figure 7.16. Participation in Education and Training by type – 2019/20 Key Findings: • 79.7% of 16-17-year olds were in full time education and training in 2019/20, compared to 85.4% nationally. • 5.7% were in an apprenticeship, compared to 5.1% nationally. • 4.7% were taking part in work-based learning, compared to 1.1% nationally. • 1.4% were in employment combined with study, compared to 0.7% nationally. Source: Department for Education • 0.1% were in some other form of education and training, compared to 0.3% nationally.

Figure 7.17 illustrates that Tees Valley has a higher than average number of 16-17 years olds known as NEET (Not in Education, Employment or Training).

Figure 7.17. Percentage of 16-17-year olds known to be NEET Key Findings:

• 4.1% of 16-17-year olds are known to be NEET in Tees Valley in 2019/20, compared to 2.7% nationally.

• The percentage has fallen slightly by 0.2 percentage points over the last year, compared to a fall of 0.1 fall nationally. • This has fallen 0.2 percentage points over the past 3 years from 4.3% in 2016/17, compared to a 0.1 drop nationally.

Source: Department for Education

Attainment

Figure 7.18. Overall Achievement Rates for 16-18-year olds Key Findings:

• The overall achievement rate for 16-18- year-old education and training delivered in Tees Valley was above national average at 85.1% in 2018/19, compared to 82.6% nationally.

• This has risen by 2.3 percentage points compared to 2017/18, whilst nationally the rate improved by 0.5 percentage points.

Source: Department for Education

Figure 7.19. Pass Rates for 16-18-year olds Key Findings:

• The pass rate for 16-18-year-old education and training delivered in Tees Valley was above national average at 95.2% in 2018/19, compared to 92.5% nationally.

• This has risen by 1.3 percentage points compared to 2017/18, whilst nationally the rate improved by 0.9 percentage points.

Source: Department for Education

Figure 7.20. Retention Rates for 16-18-year olds Key Findings:

• The retention rate for 16-18-year-old education and training delivered in Tees Valley was very similar to national at 89.4%, compared to 89.3% nationally.

• This has risen by 1.5 percentage points compared to 2017/18, whilst nationally the rate fell by 0.2 percentage points.

Source: Department for Education e. Higher Education

Higher education provision in Tees Valley is focused on Teesside University and the University of Durham (Queens Campus), with FE colleges also offering HE courses.

Teesside University is described as the UK’s leading higher education institution for working with business and received the Queen’s Anniversary Prize for work at world-class level in the field of enterprise and business engagement.

The University of Durham, Middlesbrough College and The Northern School of Art were awarded a Gold standard Teaching Excellence Framework after a rigorous review of higher education standards judged that they provide teaching of the highest quality in the UK.

The figures below cover higher education level students registered directly with a HE provider. If a HE provider has a franchise / collaborative agreement with a Further Education college these students will be included in this analysis. However, if a student is registered directly with the FE college their data is not included.

Participation Tees Valley has higher rates of participation in HE across all age groups as shown in Figure 7.21. Figure 7.21. Percentage of residents participating in Higher Education by age group 2018/19

Overall, 10.9% of 18-39-year-old Tees Valley residents were in higher education in 2018/19, compared to 10% nationally. This has dropped from 13.3% in 2010/11, a drop of 2.4 percentage points compared to 1.2 drop nationally. However, the percentage of 18-39-year-old Tees Valley residents in full-time higher education has increased from 6.8% in 2010/11 to 7.8% in 2018/19, a rise of 1 percentage point compared to a rise of 0.5 nationally. The percentage of 18-39-year-old Tees Valley residents in part-time higher education has fallen from 6.5% in 2010/11 to 3.1% in 2018/19, a drop of 3.4 percentage points compared to a drop of 1.7 nationally.

Figure 7.22. Percentage of 18-39 years olds participating in Higher Education by mode of study Key Findings: • Participation in full time Higher Education is slightly higher in Tees Valley than nationally. • Participation in part time Higher Education has continued to fall both locally and nationally since 2010/11.

Source: Higher Education Statistics Agency (HESA)

Attainment 3.7% of Tees Valley Higher Education students9 aged 20-39 obtained an undergraduate or postgraduate qualification in 2018/19, compared to 4.6% nationally.

Figure 7.23. Percentage of 20-39-year olds gaining undergraduate or postgraduate qualifications Key Findings: • Since 2017/18 there has been a very slight fall of 0.1 percentage point (250 fewer qualifications) compared to a rise of 0.1 percentage point nationally. • The Tees Valley rate has risen 0.2 percentage points from a low of 3.5% in 2014/15, (480 extra qualifications) which matches the rise seen nationally.

Source: HESA

48% of Tees Valley Higher Education students gained their undergraduate or postgraduate qualification at Teesside University, down 3.8 percentage points from 2017/18. 17% of qualifications gained by Tees Valley Higher Education students were obtained at Russell Group universities. This rises to 27% for those gaining postgraduate qualifications and falls to 14% for those gaining undergraduate qualifications, whilst qualifications gained at non-Russell group universities are more evenly split at 86% undergraduate and 73% postgraduate.

Nationally the percentage of 20-39-year olds obtaining a postgraduate qualification is almost double the Tees Valley figure with 0.9% obtaining a postgraduate qualification in 2018/19 compared to 1.7% nationally.

9 Students whose permanent residence prior to starting study was within Tees Valley

Figure 7.24. Undergraduate and Postgraduate qualification by Key Sector 2018-19 10

Key Findings: • Qualifications gained in the ‘Other Services’9 key sector accounted for the largest percentage of qualifications gained in 2018/19 (30.3%). • The second largest sector for take up of qualifications is the Health Care sector with 30% of all passes.

Source: HESA Figure 7.25 shows the number of undergraduate and postgraduate qualifications gained in 2017/18 compared to 2018/19 alongside the percentage change over the last year by key sector. Figure 7.25. Change in undergraduate and postgraduate passes by key sector over last year

Key Findings: • The Advanced Manufacturing sector has seen the largest percentage increase in qualifications over the last year, with a 4% increase and 25 extra passes, with a particular increase in Mathematics and Mechanical Engineering. • This is followed by a 3% increase in Business and Professional Services qualifications (20 extra passes), with a

particular increase in Politics, Economics and Business Studies. • The Culture and Leisure sector has seen a 4% fall in undergraduate and postgraduate qualifications over the last year with 10 fewer passes. • This is followed by a 5% decrease in qualifications in the Digital and Creative sector (30 fewer passes) and a 6% decrease in qualifications gained in the Chemical Process and Energy sector (15 fewer passes). • The Health Care sector has seen the largest fall (11%) in undergraduate and postgraduate qualifications over the last year with 235 fewer passes and a particular drop in Pre-clinical Medicine, Anatomy, Physiology & Pathology and Nursing. This fall may be reflective of the removal of the nursing bursary in 2017, after which nursing enrolments dropped and consequently qualifications in nursing are now reflecting this drop.

9 The Other Services sector includes qualifications gained in Education, Social Studies, Languages, Historical and philosophical studies, Architecture, Building & Planning, Forensic & Archaeological Sciences and Astronomy and Agriculture. Education qualifications make up over half of Other Services qualifications

f. Graduate Outcomes The Graduate Outcomes survey is taken by graduates 15 months after qualifying from their higher education qualification. This survey replaced the previous Destination of Leavers from Higher Education Leavers survey (DLHE) which was taken by graduates 6 months after qualifying from their higher education qualification. Data is available for the 2017/18 cohort, taken 15 months after the 2017/18 cohort had graduated and was published in 2020. Results cannot be compared to the previous DHLE survey.11 The results of this survey predate the Coronavirus pandemic and therefore any effects of the pandemic on graduate employment are not yet reflected in the data. National and local research on the impact of Coronavirus indicates that although job vacancies levels dropped during the first lockdown, the number of job vacancies reported in October 2020 was 38% higher than the same period in 2019, with a third of these jobs advertised at a graduate level. However, with over 13,000 extra people claiming unemployment benefits, graduates can expect high levels of competition for these roles 84% of Tees Valley graduates who obtained a higher education qualification in 2017/18 were in some form of employment or due to start employment 15 months after graduating, which matches the national figure. 41% of graduates found employment within Tees Valley with 49% finding employment within the North East region. Of the 41% finding employment within Tees Valley, 38% had studied their HE qualification outside of the Tees Valley, returning to the Tees Valley to find employment.

Figure 7.26. Graduate employment 15 months after graduating in 2017/18 by TVCA sector Key Findings: 10 • The Other Public Services sector employed the most Tees Valley graduates 27% of graduates finding employment in this sector 15 months after graduating in 2017/18, followed by the Health and Social Care sector which employed 24% of Tees Valley graduates. These sectors accounted for over half of all Tees Valley graduate employment. • 75% of in the Other Public Services sector is in the Education sub sector. • Graduate employment was higher in the Health and Social Care sector for Tees Valley graduates with 24% employed compared to 21% nationally

Source: HESA

11 Other Public Services includes education, public admin, public defence and social security.

Of the 84% of graduates who were in some form of employment or due to start employment 15 months after graduating 72% were in professional employment12. Over a quarter (28%) were in non- professional roles (assumed non-graduate) 15 months after graduating, compared to 24% nationally. This rises to 31% for those who found employment specifically within Tees Valley, suggesting there are fewer graduate level jobs available in Tees Valley. Figure 7.27 shows that the proportion of Tees Valley graduates in professional and non-professional roles by TVCA sector.

Figure 7.27. Professional employment by TVCA key industry sector of employment - 15 months after graduating in 2017/1813

Key Findings: • 100% of Tees Valley graduates employed in the Biologics sector were in professional employment followed by 93% of graduates employed in the Digital sector and 87% of graduates employed in the Health and Social Care sector.

Source: HESA Figure 7.28 illustrates the mismatch between graduate supply and demand. Tees Valley contains a number of easily accessible employment sectors, such as Retail and Food with graduate underemployment linked to sector demand. Graduates who gained qualifications in sectors with current low demand often end up filling this gap, it is no reflection of the quantity or quality of available higher education subjects.

12 Professional employment includes the SOC codes 1 – Managers, directors and senior officials, 2 – Professional Occupations and 3- Associate professional and technical occupations 13 The number of graduates employed within raw materials and agriculture was too low to report.

Figure 7.28. Tees Valley Graduate Underemployment

Source: HESA

7.2. Apprenticeships 4,870 people living in Tees Valley started an apprenticeship in 2019/20.

There has been a 23% fall in the number of Tees Valley residents starting an apprenticeship over the last year, compared to a 18% fall nationally, with the Covid-pandemic impacting heavily on apprenticeships. However, figure 7.29 shows that Tees Valley consistently has a higher percentage of 16-35-year olds starting an apprenticeship than nationally and regionally.

Figure 7.29. Percentage of 16-35-year olds starting an apprenticeship Key Findings: • 3% of 16-35-year olds started an apprenticeship in 2019/20 compared to 2.3% nationally. • The number of apprenticeships starts remains well below the high of 9,920 in 2015/16. • Apprenticeship starts are almost half what they were three years ago (47% lower) compared to a 35% drop nationally.

Source: Education Skills Funding Agency (ESFA) – rates calculated using ONS Mid-Year population estimates

The majority (54%) of apprenticeships over the last year were started by Tees Valley residents aged under 25, compared to 53% nationally. This can be broken down into: • 16-18 – 25% compared to 24% nationally. • 19-24 – 28% compared to 30% nationally. • 25+ - 46% compared to 47% nationally.

Figure 7.30. Percentage Change by Age 2018/19 to 2019/20 Key Findings: • Over the last year there has been a 24% drop in the number of apprenticeships started by those aged 19-24, compared to an 18% fall nationally. • There has been a 21% drop in the number of residents aged 25+ year olds starting an apprenticeship, compared to a 16% fall nationally. • The percentage change for 16- 18-year olds is closer to the national with a 23% fall compared to a 22% fall nationally. Source: ESFA

48% of apprenticeships started by Tees Valley residents in 2019/20 were intermediate level apprenticeships compared to 31% nationally. 20% were advanced level apprenticeships compared to 44% nationally and 31% were higher level apprenticeships compared to 26% nationally.

Figure 7.31. Percentage Change by Level 2018/19 to 2019/20

Key Findings: • Over the last year there has been an 10% drop in Tees Valley residents starting Intermediate apprenticeships, compared to a 31% drop nationally. • Advanced level apprenticeships have fallen by 63%, compared to a 19% fall nationally. • Higher apprenticeship have risen by 51% compared to a 10% rise nationally.

Source: ESFA 78% of Tees Valley residents started an apprenticeship which was delivered in Tees Valley14, with a further 11% delivered in the North East.

14 Delivered in Tees Valley by providers who may or may not be based in Tees Valley.

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Figures 7.32 and 7.33 uses the generic Framework Sector Subject Areas used by ESFA to compare apprenticeship starts against national figures:

Figure 7.32. Percentage of apprenticeships starts by Framework Sector Subject Area 2019/20 Key Findings: • The largest percentage of apprenticeships started by Tees Valley residents are in Business, Admin and Law with 30% of all starts (29% nationally). • Tees Valley has a higher percentage of apprenticeship starts than national in: o Construction, Planning and the Built Environment; o Engineering and Manufacturing Technologies; and o Business, Administration and Law

Source: ESFA

Figure 7.33. Percentage change by Framework Sector Subject Area 2018/19 to 2019/20 Key Findings: • Over the last year there has been a 12% rise in starts in Education and Training, compared to a 11% rise nationally, however this only equates to 10 extra starts. • There has also been a 11% rise in starts in Construction, Planning and the Built Environment, with 50 extra starts, compared to a 3% fall nationally. • The largest percentage fall in apprenticeship starts has been in Arts, Media and Publishing, with a 55% fall, compared to a 24% rise nationally, however this only equates to 10 fewer starts. Source: ESFA • There has been a 44% drop in Retail and Commercial Enterprise starts, with 330 fewer starts, compared to a 35% fall nationally.

• There has also been a 35% fall in starts in Health, Public Services and 101 Care, with 610 fewer starts, compared to a 16% fall nationally.

Apprenticeship achievement rates Tees Valley residents had an overall apprenticeship achievement rate of 68% in 2018/19, compared to 65% nationally. This has consistently been higher than the national figure for the past 6 years, although the rate has fallen from a high of 74% in 2012/13 (matching the drop seen nationally).

Figure 7.34. Apprenticeship Achievement rate Key Findings: • There has been a fall of 1.6 percentage points in the apprenticeship achievement rate of Tees Valley residents between 2017/18 and 2018/19, compared to fall of 2.6 nationally. • Over the past 6 years the Tees Valley rate has fallen from a high of 74% in 2012/13, a drop of 5.9% compared to a 7.6% drop nationally.

Source: ESFA Figure 7.35. Apprenticeship Achievement rate by age of learner 2018/19 Key Findings: • 16-18-year-old Tees Valley residents achieve the highest achievement rates at 72%, compared to 68% nationally. • This falls to 71% for 19-23-year olds, compared to 68% nationally. • This falls further to 64% compared to 60% for those aged 24+.

Source: ESFA Figure 7.36. Apprenticeship Achievement rate level of apprenticeship 2018/19

Key Findings: • Tees Valley residents have the best achievement rates when undertaking advanced level apprenticeships at 69% compared to 66% nationally. • This falls to 68% for Intermediate level apprenticeships, compared to 64% nationally. • Tees Valley achievement rates for Higher Apprenticeships are slightly higher than national at 60.1% compared to 59.7%. This is a rise from Source: ESFA the 58% in Tees Valley compared to 64% nationally reported in 2017/18.

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7.3. National Qualification Framework (NQF) Skills Levels Over the last year there has been a slight fall in the percentage of working age population with level 3 and 4 qualifications, whist the percentage with a level 2 and 1 qualification rose slightly. Figures 7.37 to 7.39 illustrate the change over the last 5 years. Key Findings: Figure 7.37. Percentage of working age population qualified to NQF Level 4 and 3 • 29.6% of the Tees Valley working age population were qualified to at least a level 4 in 2019, compared to 40.3% nationally. This has fallen by 1 percentage point over the last year compared to a rise of 1 nationally. Over the last 5 years the Tees Valley percentage has increased by 1.5 percentage points, compared to a rise of 4.3 percentage points nationally.

• 50.1% are qualified to at least a level 3 compared to 58.5% nationally. This has fallen by 0.7 percentage points over the last year Source: ONS, Annual Population Survey compared to a rise of 0.7 nationally. Over the

last 5 years this has fallen by 0.6 percentage Figure 7.38. Percentage of working age population qualified to points compared to a 3.5 increase nationally. NQF Level 2 and 1 • 70.5% are qualified to at least a level 2 compared to 75.6% nationally. This has risen by 1.5 percentage points over the last year compared to an increase of 0.7 nationally. Over the last 5 years the percentage has fallen by 0.9 percentage points compared to an increase of 2.3 nationally.

• 82.5% are qualified to at least a level 1 compared to 85.6% nationally. This has risen

Source: ONS, Annual Population Survey by 2.2 percentage points over the last year compared to 0.2 nationally. Over the last 5 Figure 7.39. Percentage of working age population with other years the percentage has fallen by 1 qualifications or no qualifications percentage point compared to an increase of 0.6 nationally.

• 11% of the Tees Valley working age population had no qualifications in 2019, compared to 7.7% nationally. This has fallen by 1 percentage point over the last year compared to a 0.1 rise nationally. Over the last 5 years the percentage has risen by 0.4 percentage points compared to a drop of 1.1 nationally.

• 6.5% of the Tees Valley working age Source: ONS, Annual Population Survey population had ‘other’ qualifications in 2019,

compared to 6.7% nationally. Over the last

year this has fallen by 1.2 percentage points compared to a fall of 0.1 nationally. Over the last 5 years this has increased by 0.6 percentage points, compared to a rise of 0.5 nationally. 103

7.4. Travel to learn 86% of learning undertaken by Tees Valley residents in 2019/20 was undertaken within Tees Valley. This varies from 89% for Middlesbrough residents to 81% for Hartlepool residents.

The majority of learners started a learning aim which was based in their home district. This varies from 71% in Darlington to 42% in Redcar and Cleveland.

Table 7.1. Percentage of learning aims started in 2019/20 Home Local Authority Location of Learning Darlington Hartlepool Middlesbrough Redcar and Cleveland Stockton on Tees Tees Valley Darlington 71% 1% 1% 1% 4% 12% Hartlepool 1% 66% 1% 1% 4% 12% Middlesbrough 6% 6% 67% 37% 22% 30% Redcar and Cleveland 1% 1% 9% 42% 3% 11% Stockton on Tees 3% 7% 11% 6% 54% 20% Tees Valley 82% 81% 89% 88% 86% 86% Rest of North East 8% 9% 3% 2% 5% 5% Other England 10% 10% 8% 10% 10% 10% Source: ESFA

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7.5. Workforce demand There were estimated to be around 31,530 job vacancies advertised online in Tees Valley between January 2020 and December 202015.

Key Findings:

• This is a 15% rise when compared to the same period in 2019 (4,020 extra vacancies), in comparison to a 6% rise across the North of England and an 8% drop nationally.

Figure 7.40. Tees Valley Job Vacancies

Source: Burning Glass Labour Insight

Key Findings: • The impact of the Coronavirus pandemic can be observed in the fall in vacancies experienced between March and April in the initial national lockdown, with a 40% reduction in vacancies from March to April, compared to a 51% drop nationally. • From April vacancies have recovered with numbers in December 5% higher than they were in February 2020 (140 extra vacancies), compared to a 14% drop nationally.

Figure 7.41. shows the number of job vacancies in Tees Valley in 2020 by broad occupation group compared to 2019.

15 Source: Burning Glass Labour Insight. A fall in job vacancies does not necessarily indicate fewer jobs, it may be an indication of increased job stability or lower staff turnover.

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Figure 7.41. Tees Valley Job Vacancies by Broad Occupation Group

Source: Burning Glass Labour Insight

Key Findings:

• The largest rise in job vacancies when compared to 2019 was for Health Professionals, with a 49% rise and vacancies increasing from 2,340 to 3,500. There

was an increase in Nurses, Physiotherapists, Pharmacists and Occupational Therapists, reflecting the demand on the Health Care sector due to the Coronavirus pandemic.

• The largest fall in job vacancies when compared to

2019 has been for Textiles, Printing and Other Skilled Trades with a 17% fall and vacancies dropping from 490 to 410. In particular, there was a fall in vacancies for Chefs and Catering and bar managers which come under ‘Other Skilled Trades’ and reflects the effects of the Coronavirus pandemic on the hospitality sector.

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Figure 7.42 shows that if we break this down further 4-digit occupational code we can see that the largest number of job vacancies in Tees Valley in 2020 were for Nurses, Carers, Admin staff, Teachers, Sales staff, Social Workers and IT staff, with a large rise in Nurses and Care workers compared to 2019.

Figure 7.42. Top 10 Tees Valley Job Vacancies by 4-digit SOC

Source: Burning Glass Labour Insight

Key Findings: • Nurses was the occupation with the highest number of vacancies in 2020 at 2,089, a rise of 67% from 1,253 in 2019 (836 extra vacancies). This is followed by Care workers

and home carers at 1,763, a rise of 66% year-on-year (704 extra vacancies). • Social Workers saw a significant increase in the number of job vacancies over the last year with numbers rising 53% from 405 in 2019 to 620 in 2020 (215 extra vacancies).

• There was also an 41% increase in vacancies for Programmers and software development professionals over the last year from 434 in 2019 to 612 in 2020 (178 extra vacancies), reflecting the increased need for IT solutions to support home working and increased online services during the Coronavirus pandemic.

• There was a 7% fall in vacancies for Sales related occupations from 865 in 2019 to 808 in 2020 (57 fewer vacancies).

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7.6. Skills Shortage Vacancies The 2019 DfE Employer Skills Survey reported that 4% of Tees Valley employers reported a skills shortage vacancy (SSV), compared to 6% nationally. 23% of all vacancies in the Tees Valley are classed as skills shortage vacancies, compared to 25% nationally. However, this has dropped from a high of 29% in 2015, a drop of 6 percentage points compared to a rise of 2 percentage points nationally. Figures 7.43 and 7.44 highlight the percentage of establishments reporting skills shortage vacancies and the percentage of all vacancies which are skills shortage vacancies. Figure 7.43. Percentage of establishments with a Skills Shortage Vacancy by industry sector Key Findings: • 8% of Transport and Storage establishments reported a SSV, compared to 6% nationally. This has risen from just 2% of Tees Valley establishments in 2017, a rise of 6% compared to no change nationally. • Just 1% of Tees Valley education establishments reported a SSV in 2019, compared to 15% in 2017, this drop of 14 percentage points compares to a drop of 1 nationally. This compares to 8% of education establishments nationally (7% in 2017).

Source: Department for Education (DfE) Employer Skills Survey

Figure 7.44. Percentage of all job vacancies which are skills shortage vacancies by industry sector Key Findings: • 71% of all Transport and Storage vacancies in Tees Valley were SSV’s, compared to 23% nationally. This has risen in Tees Valley from 27% in 2017, a rise of 44 percentage points compared to a drop of 4 nationally. • Compared to 2017 SSV’s have dropped significantly in Education, Construction and Manufacturing, with Education dropping from 43% of vacancies in 2017 to 4% in 2019, Construction dropping from 64% to 39% and Manufacturing dropping from 38% to 16%. Source: DfE Employer Skills Survey

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Figure 7.45 provides a breakdown of the incidence of skill-shortage vacancies by occupation.

Figure 7.45. Skills shortage vacancies by broad occupation Group Key Findings: • Of those employers reporting a SSV, 36% of Tees Valley employers reported SSV’s in skilled trade occupations, compared to 26% nationally. • 17% reported SSV’s in Associate professional roles, compared to 16% nationally, whilst 15% reported SSV’s in Caring, leisure and other services staff, compared to 13% nationally. • Tees Valley had a much lower prevalence of SSV’s in Elementary staff than nationally, at 1% in Tees Valley compared to 12% nationally.

Source: DfE Employer Skills Survey

Figure 7.46. Skills shortage vacancies - skills difficult to obtain from applicants

Key Findings:

• 87% of Tees Valley employers found technical or practical skills difficult to obtain, compared to 89% nationally. • The two type of skills which appear more difficult to obtain in Tees Valley than nationally are basic skills and digital skills, with 44% of Tees Valley employers stating they found basic skills difficult to obtain, compared to 36% nationally and 36% of Tees Valley employers stating they found digital skills difficult to obtain compared to 32% nationally.

Source: DfE Employer Skills Survey

While the findings of the 2019 Employer Skills Survey provide an important source of labour market intelligence, the Coronavirus outbreak in early 2020 means that the economic landscape has changed significantly since survey fieldwork was conducted. National and local research on the impact of Coronavirus has indicated that certain sectors are likely to experience an increase in demand as a result of Coronavirus. The rise in health issues, both physical and mental, could provide an opportunity to expand the already sizable Tees Valley health and social care sector, meeting local and national needs through the local skillset. Digitalisation, both within businesses and households, can create new opportunities. New technologies can boost productivity, create jobs and encourage innovation and idea sharing and with the underlying digital skills and infrastructure in place, the Tees Valley could benefit from this shift. A shift to ecommerce has also resulted in an increased demand

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for logistics companies to provide warehouse and delivery services, with requirements for shorter delivery times resulting in a rise in demand for local logistics warehouses. There could be significant opportunities if the workforce is able to meet these demands.

In May 2020 in partnership with Teesside University, the Combined Authority undertook a business survey to understand in detail the effects of the Coronavirus pandemic. On average 66% of businesses stated that they anticipate having no training or recruitment requirements as a result of Coronavirus over the next 12 months, with 29% stating they anticipate needing to train existing staff, and 8% anticipate the need to recruit new staff. Figure 7.47 shows this broken down by skills type. Figure 7.47: Training and recruitment requirements by skill type

Source: TVCA/Teesside University Coronavirus Business Survey

Other specific training requirements listed by businesses included digital skills, mental health and training in social distancing.

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7.7. Future Job Demand

Prior to the Coronavirus pandemic the nationally developed Working Futures model prepared by the Institute for Employment Research (IER) and Cambridge Econometrics (CE) on behalf of the Department for Education predicted that Tees Valley will have 100,000 jobs that will need filling by 202716. This is made up of 6,000 new jobs and 95,000 replacement jobs17. Figure 7.48 and 7.49 illustrate the breakdown of new and replacement jobs by industry sector and skills requirement. Figure 7.48. Future Job Demand by Industry Sector 2017 - 2027 Key Findings: • Driven largely by replacement demand, the Health and Social work industry is projected to have the largest amount of job openings, followed by Wholesale and retail trade. These projected increases in Health and social work are likely to be even greater, given the anticipated increase in demand we have seen as a result of the Coronavirus pandemic. In comparison the projected increase in Wholesale and retail trade is likely to be lower given the impact of Coronavirus on the retail sector. • Growth is projected to be driven by higher Source: Working Futures female full-time employment and both higher male and female part-time Figure 7.49. Total Skills Requirement 2017 -2027 employment. • Total female employment in Tees Valley is projected to overtake total male employment by 2027. • There is an increasing need for higher level skills with 74% of all job opportunities projected to require a Level 4 (HE below degree level) qualification or above and 43% a level 6 (first degree) qualification. • In comparison only 30% of the working age population in Tees Valley is estimated to currently have at least a level 4 qualification (40% nationally). • However, there will still be a need for intermediate and lower level skills, particularly in replacement jobs, with over Source: Working Futures half (53%) of all replacement job opportunities projected to require a level 3 or below qualification, with 31% projected to require a level 2 or lower.

16 The projections should be regarded as indicative of likely developments for the economy and the labour market, rather than precise forecasts. The projections were derived pre-Coronavirus and therefore the impacts resulting from the unfolding Coronavirus pandemic are not reflected in these projections 17 Numbers may not add due to rounding

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Figure 7.50 shows the skills levels projected to be required by sector grouping. Figure 7.50. Percentage Skills required 2017 - 2027 by sector group and qualification level

Source: Working Futures

• All the new jobs projected in the Business and other services sector group are projected to require a level 4 (HE below degree) or above qualification. • Similarly, all the new Manufacturing jobs are projected to require at least a level 4 or above qualification. • The majority of new jobs within Non-marketed services are projected to require a level 6 (first degree) or above qualification, with a smaller number projected to require a level 3 (A- level and equivalent) qualification. • All the new jobs within the remaining sector groupings are projected to require at least a level 3 (A-Level and equivalent) or above qualification. • There is projected to be no new jobs available which will require less than a level 3 qualification.

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7.8. Current Employment a) Overall resident employment 286,100 Tees Valley residents aged 16-64 were employed in the 12 months to June 2020, 70.1% of the working age population compared to 76.5% nationally. Figure 7.51 illustrates the trends in employment rate over the last 5 years. It’s worth noting that this data does not yet reflect the Coronavirus pandemic. Figure 7.51. Employment Rate (resident employment) Key Findings: • At 70.1% in June 2020, the Tees Valley employment rate is the highest it’s been over the last 5 years, with a dip being seen in 2018 and 2019, whilst nationally and regionally the rate rises steadily each year. • Over the last year the Tees Valley rate has risen by 1.5 percentage points, with an extra 5,000 residents in employment. This compares to a rise of 0.7 nationally and 1 percentage point rises across the North of England. Source: ONS Annual Population Survey (APS) – 12 months to June b) Jobs by Sector Tees Valley has an estimated 261,500 jobs across a range of industries as shown in Table 7.2.

Comparisons are made to 2014 which is the Tees Valley Strategic Economic Plan baseline year.

Table 7.2. Industry sector breakdown

% Change Tees Valley Change % Change Industry Sector nationally LQ Jobs (2020) 2014-20 2014-20 2014-2020

Chemical and Process 5,500 -190 -3.4% 2.1% 2.3 Health and Social Care 43,850 -6,670 -13.2% 7.0% 1.3 Other Public Services 39,340 -760 -1.9% 1.6% 1.2 Advanced Manufacturing 14,200 -5,740 -28.8% 8.4% 1.2 Clean Energy Low Carbon 6,370 -60 -1.0% 17.7% 1.1 Other Private Services 37,140 -1,770 -4.5% 2.9% 1.1 Construction 12,760 -680 -5.1% 15.1% 1.0 Other Manufacturing 10,700 3,450 47.5% 3.7% 1.0 Logistics 18,760 1,420 8.2% 14.2% 1.0 Creative, Culture and Leisure 32,930 7,180 27.9% 13.9% 0.9 Digital 7,010 1,960 38.9% 19.3% 0.8 Raw Materials and Agriculture 1,440 -1,090 -43.0% -21.5% 0.7 Professional and Business Services 31,270 2,150 7.4% 10.8% 0.7 Biologics 230 90 57.4% 3.7% 0.3 Source: Emsi 2020.1

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Key Findings:

• The top 5 sectors for jobs in Tees Valley are Health and Social Care, Other Public Services (mainly Education), Other Private Services (mainly Retail), Creative, Culture and Leisure and Professional and Business Services.

• 36% of workers in Tees Valley are estimated to be key workers, compared to 33% nationally. • Tees Valley has a sectoral strength in Chemical and Process with a Location Quotient of 2.3. However, this sector has seen a fall in jobs over the last five years compared to a rise nationally. • Raw Materials and Agriculture, Advanced Manufacturing and Health and Social Care have all seen significant falls in job numbers compared to 5 years ago. Whilst Raw Materials and Agriculture has also seen a fall nationally, both Advanced Manufacturing and Health and Social Care have risen nationally.

• Compared to 2014 large percentage increases in jobs have been seen in Other Manufacturing, Digital and Creative, Culture and Leisure, with rises much higher than the national. Whilst the Biologics sector has also seen a large percentage increase in jobs, actual job numbers remain low.

Tees Valley has a number of key sectors which contain a higher number of jobs than national. Figures 7.52 and 7.53 show the distribution of jobs by industry and occupation compared to national in 2020.

Figure 7.52. Distribution of Jobs by Industry in 2020

Key Findings:

• Tees Valley has a larger percentage than national employed in: o Health and Social Care o Other Public Services o Chemical and Process o Other Private Services o Advanced Manufacturing o Clean Energy Low Carbon o Construction • Tees Valley has fewer than national employed in: o Professional and Business

Source: Emsi 2020.1 Services o Creative, Culture and Leisure o Digital o Logistics o Raw Materials and Agriculture o Biologics

o Other Manufacturing

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Figure 7.53. Distribution of Jobs by Occupation in 2020 Key Findings: • 17.7% of jobs in Tees Valley are in Professional occupations (18.7% nationally) • 14.7% of jobs are in Elementary occupations (13.9% nationally). • Tees Valley has above the national average jobs in: o Process, Plant and Machine Operatives; o Caring, Leisure and Other Service Occupations; o Sales and Customer Service Occupations; o Elementary Occupations; and o Skilled Trades Occupations • And fewer the national average jobs in: o Source: Emsi 2020.1 Associate Professional and Technical occupations; o Managers, Directors and Senior officials; o Professional Occupations; and

o Administrative and Secretarial

occupations

c) Public/Private Sector and Self-Employment The majority (75%) of Tees Valley employees are employed in the private sector, with 25% employed in the public sector, compared to 78.7% and 21.3% nationally.

Figure 7.54. Percentage in employment working in the private sector Key Findings:

• There was a fall in private sector employment in 2016 from 75.5% in 2015 to 73.9% in 2016. This may in part be due to the closure of the SSI Steelworks in October 2015 which resulted in the loss of around 2,200 local private sector jobs. • Private sector employment then rose to a high of 76.4% in 2018 before dropping by 1.5 percentage points over the past 2 years. This compares to a drop of 0.6 nationally and 0.4 Source: ONS APS – 12 months to June across the North of England.

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Figure 7.55 illustrates that 11.1% of Tees Valley working age residents in employment were self- employed in 2020, compared to 14.4% nationally.

Figure 7.55. Percentage of working age population self-employed Key Findings: • Self-employment in Tees Valley has fluctuated slightly over the past five years with a rise of 1.1 percentage points over the past two years, whilst nationally the percentage has remained the same, and small rise of 0.4 percentage points has been seen across the North of England.

Source: ONS APS – 12 months to June d) Full-Time/Part-Time Employment

Figures 7.56 and 7.57 illustrate that Tees Valley had a lower percentage in employment working full- time and a higher percentage working part-time in 2020 than nationally.

Figure 7.55. Percentage in employment working full-time Figure 7.57 Percentage in employment working part-time

Source: ONS APS – 12 months to June Source: ONS APS – 12 months to June

Key Findings:

• 72.2% of those in employment in Tees Valley are in full-time employment compared to 75.4% nationally. 27.7% of those in employment in Tees Valley are in part-time employment compared to 24.5% nationally. • There has been a slight fall in full-time employment over the last year, falling from 73.9% in 2018 to 72.2% in 2020, a drop of 1.7 percentage points compared to no change both nationally and across the North of England. Whilst consequently there has been a slight rise in part-time employment over the last year, rising from 25.9% in 2019 to 27.7% in 2020.

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Males have historically dominated full-time employment, and this continues to be the case. Female employment is more evenly distributed between full and part-time.

Figure 7.58. Male and Female split 2018/19 Key Findings: • 86.2% of males resident in Tees Valley were employed full-time in 2020 compared to 57.4% of females (89% of males and 60.5% of females nationally). • Male full-time employment has fallen steadily over the past five years from 89% in 2015, a drop of 2.8 percentage points, compared to a rise of 0.6 nationally. • Female full-time employment has risen very slightly over the past 5 years, from 56.8% in 2015 to 57.4% in 2020, a rise of 0.6 Source: ONS APS – 12 months to June percentage points compared to

a rise of 2.5 nationally.

e) Zero hour and Non-Permanent contracts

Figure 7.59 shows that 4.8% of those in employment in 2020 in Tees Valley were employed in non- permanent employment, compared to 4.4% nationally.

Figure 7.59. Percentage of all employment in non-permanent employment Key Findings: • The percentage of those in non- permanent employment in Tees Valley appeared to peak in 2016 at 6.8%, and has since fallen to 4.8% in 2020, a drop of 2 percentage points, compared to a drop of 0.7 nationally.

Source: ONS APS – 12 months to June

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7.9. Economically Inactive The economically inactive population comprises all persons who are neither "employed" nor "unemployed", for example those who are long-term sick, students or retired. 25.4% of the working age population in Tees Valley were economically inactive in June 2020, compared to 20.3% nationally. Figure 7.60. Economically inactive over time Key Findings: • The percentage of the working age population who are economically inactive has fallen from a high of 27% in 2018 to 25.4% in 2020, a drop of 1.6 percentage points compared to a drop of 1.1 nationally. • The rate has fallen by 0.6 percentage points over the last year, matching the drop seen nationally and across the north of England.

Source: ONS APS

Figure 7.61 shows that the economically inactive cohort is made up of the following:

Figure 7.61. Economically inactive Breakdown Key Findings: • 27% of the inactive population are long-term sick compared to 23% nationally. • 24% of the inactive population are looking after family/home, compared to 22% nationally. • Tees Valley has fewer students than nationally at 22% compared to 26%. • A lower percentage are retired at 12% compared to 13% nationally.

Source: ONS APS June 2020 • A higher percentage are temporarily sick at 3.1%

compared to 1.8% nationally.

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The majority of the economically inactive in Tees Valley do not want a job at 76% compared to 78% nationally. Figure 7.62 shows that 24% of the economically inactive in Tees Valley do want a job, compared to 21.6% nationally and 20.5% across the North of England.

Figure 7.62. Percentage of those Economically Inactive who want a job Key Findings: • The percentage of those economically inactive who do want a job has risen sharply over the past year from 14% in 2019 to 24% in 2020, a rise of 10 percentage points compared to a rise of 0.9 nationally.

Source: ONS APS June

Figure 7.63. Age split of economically inactive Key Findings: • 58% of 16-19-year olds are economically inactive, compared to 56% nationally. This has fallen 4.5 percentage points from a high of 62% in 2018, compared to a rise of 0.1 percentage point nationally. • 29% of 20-24-year olds are economically inactive, compared to 25% nationally. This has risen by 9 percentage points over the last 5 years, compared to a drop of 0.4 nationally.

Source: ONS APS June 2020 • 19% of 25-34-year olds are inactive compared to 12% nationally.

• 94% of those aged 65+ are

economically inactive, compared to 89% nationally. •

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7.10. Economically Active The economically active population comprises all persons who are either "employed" or "unemployed and actively seeking employment". 304,500 people aged 16-64 (74.6% of the working age population in Tees Valley) were economically active in June 2020, compared to 79.7% nationally, this comprised of: • 94% in employment (96% nationally). • 6% unemployed (4% nationally). Figure 7.64 shows the percentage of economically active claiming to be unemployed. Figure 7.64. Percentage of economically active claiming to be unemployed Key Findings: • The percentage of economically active claiming to be unemployed has fallen by 2.7 percentage points over the past five years, falling from 8.7% in 2015 to 6% in 2020, compared to a fall of 1.7 percentage points nationally. • Following a rise to 7.2% 2019, unemployment has dropped back down to 6% in 2020, a fall of 1.2 percentage points over the last year, compared to a drop of 0.1 Source: ONS APS June nationally.

Figure 7.65 shows that Tees Valley has a higher percentage unemployed across all age ranges than national.

Figure 7.65. Percentage of age specific population claiming to be unemployed Key Findings: • 30% of 16-19 year olds in Tees Valley are claiming to be unemployed compared to 19% nationally. • 14% of 20-24 year olds are claiming to be unemployed compared to 9% nationally. • 4.9% of 25-34 year olds are claiming to be unemployed compared to 3.4% nationally.

Source: ONS APS June 2020

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Figure 7.66. Percentage of age specific population claiming to be unemployed over time Key Findings: • The percentage of 16-19-year olds claiming to be unemployed has risen from a low of 21% in 2017 to a new high of 30% in 2020, a rise of 9 percentage points over the last 3 years, compared to a drop of 1.8 nationally. • Over the last year the percentage of 16-19-year olds claiming to be unemployed has risen by 2 percentage points, from 28% in 2019 to 30% in 2020, compared to Source: ONS APS a rise of 1.7 nationally.

Impact of Coronavirus on Unemployment In October 2020 there were an extra 13,220 Tees Valley residents claiming Universal Credit than October 2019, with the unemployment rate rising from 3.9% in October 2019 to 7.1% in October 2020. This is a rise of 3.2 percentage points which matched the national rise and can be attributed to the effects of Coronavirus pandemic with unprecedented levels of demand for Universal Credit.

Figure 7.67. Percentage of 16-64-year olds claiming Universal Credit over the last year

Source: HMRC Universal Credit statistics

Figure 7.68 shows that men have been affected more disproportionately than women during the pandemic in terms of Universal Credit claimants. Not only was the rate of Universal Credit claimants in October higher for men than women at 9% and 5.2% respectively, but the rate of increase for men since February of 3.6 percentage points was also greater than that for women (2 percentage points).

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Figure 7.68: % of working age population on Universal Credit and searching for work in Tees Valley, by gender

Source: DWP Universal Credit Statistics

Analysis undertaken May 2020 estimated that between 5,800 and 15,000 of the currently furloughed workers in the Tees Valley were expected to be made redundant by the end of 2020. This was against a baseline of those who were in employment in March 2020. This is relative to the 40,700 Tees Valley workers who are estimated to have already been made redundant. These job losses will be felt across various industry sectors, in particular: • Accommodation, leisure, food and retail used the furlough scheme intensively and made a high number of initial redundancies, with further job losses expected. • Transport, manufacturing and construction also used the scheme, and major further job losses could occur if these sectors don’t have cash flows and investments to protect them through the crisis. The impacts will be disproportionately felt among: • The young, who are frequently employed in the retail and leisure sectors • Those in low wage jobs who often work in retail, leisure, and food and accommodation sectors. Those with limited existing financial resources are more vulnerable to income shocks • Men, who are exposed to job risks in manufacturing and construction. These workers are often older, and retraining is harder. The previously unemployed, economically inactive, or newly unemployed, have fewer opportunities going forward, posing longer term economic risks

7.11. ONS Alternative Claimant Count Universal Credit is designed so that a broader span of claimants is required to look for work than under Job Seekers Allowance. Therefore, the ONS alternative claimant count models what the count would have been if Universal Credit had been fully rolled out since 2013 (when Universal Credit began), with the broader span of people this covers.18 In August 2020 8.3% of 16-64-year-old Tees Valley residents were claiming either Job Seekers Allowance or Universal Credit (and required to seek work), compared to 6.7% nationally. This rises

18 Universal Credit has been rolled out to all new claimants in stages across Tees Valley in the following order: Hartlepool - December 2016, Darlington - June 2018, Stockton - July 2018, Middlesbrough - October 2018 and Redcar & Cleveland - November 2018. It is expected that DWP will begin moving all remaining existing benefit claimants to the Universal Credit full service between July 2019 and December 2023.

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to 10.4% for 16-24-year-old residents, compared to 7.4% nationally. Compared to August 2019 the number of people claiming unemployment benefits has risen by 13,239 people, with the rate increasing by 3.2 percentage point from 5.1% in August 2019, compared to a rise of 3.6 nationally. This rise can be attributed to the effects of Coronavirus pandemic with unprecedented levels of demand for unemployment benefits. Figure 7.69. Gender split of claimant count Key Findings: • Tees Valley has a higher percentage of males claiming unemployment benefits than national at 62% compared to 58%. • 38% of females were claiming unemployment benefits in August 2020 compared to 42% nationally.

Source: ONS Alternative Claimant Count August 2020

Figure 7.70. Age split of claimant count Key Findings: • The largest gap between the Tees Valley and national age groups is the 20-24 age group, in which 13.1% are claiming in Tees Valley, compared to 9.5% nationally. • After the 20-24 age group the gap between the national figures closes as the age range increases.

Source: ONS Claimant Count August 2020

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7.12. Job density Figure 7.71 shows that Tees Valley consistently has a lower jobs density that nationally with 0.72 jobs for every working age resident in 2019 compared to 0.87 jobs in England as a whole. Figure 7.71. Job Density Key Findings: • Jobs density in Tees Valley has increased year on year from 0.66 in 2011 to a high of 0.72 in 2015, drifting lower to 0.70 in 2018 before recovering to 0.72 in 2019.

Source: ONS Jobs Density 7.13. Wages and disposable income a) Median full-time earnings Tees Valley historically has a low percentage of residents employed in high value occupations19 compared to the national average; 37.4% employed in high value occupations in 2020 compared to 41.7% nationally. Tees Valley is 4.3% below the national average compared to 2.8% five years ago. For workers living in Tees Valley the median gross annual full-time wage in 2019 was £28,080 compared to £31,770 nationally and £28,820 across the North of England. Figure 7.72 shows how this has changed over time:

Figure 7.72. Median gross annual full-time earnings Key Findings: • The median gross annual full-time salary for Tees Valley residents has increased by 11% (£2,690) over the last 5 years, however this compares to a rise of 14% both nationally and across the North of England.

Source: ONS – Annual Survey of Hours and Earnings

19 High value occupations are defined as Managers, Directors or Senior Officials, Professional occupations or Associate Professional and Technical occupations.

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Figure 7.73 Median gross weekly full-time earnings20 by resident local authority 2020 Key Findings: • Stockton-on-Tees residents currently have the highest weekly full-time earnings in the Tees Valley at £560 per week, followed by Hartlepool with £550. Darlington residents have the lowest weekly earnings at £490 per week, followed by Redcar and Cleveland residents at £500 per week. Middlesbrough residents earn on average £520 per week.

Source: ONS – Annual Survey of Hours and Earnings In October 2015 the SSI Steelworks in Redcar and Cleveland closed resulting in the loss of over 2,000 jobs, with many of these highly paid. The impact of this closure on weekly earning in Redcar and Cleveland can be seen in figure 7.74. Figure 7.74. Median gross weekly full-time earnings by resident local authority over time Key Findings: • The median gross full-time weekly wage for Darlington and Stockton residents has fallen over the last year, with a 9% drop for Darlington residents and a 4% drop for Stockton residents. • There has been a 3% rise in the median gross full-time weekly wage for Middlesbrough residents over the last year.

Source: ONS – Annual Survey of Hours and Earnings

20 Weekly wages have been used instead of annual wages for the local authority breakdown as confidence internals for annual wages at a local authority level made the data unreliable.

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b) Median household income – Gender Males continue to earn a higher median gross weekly full-time wage than females, both within Tees Valley and nationally, with a weekly difference of around £70 in Tees Valley and £80 nationally. Figure 7.75. Median gross weekly full-time earnings Key Findings:

• Tees Valley male residents earn on average £560 per week for full-time work, compared to £630 nationally.

• Tees Valley female residents earn on average £495 per week for full time work compared to £545 nationally.

Source: ONS – Annual Survey of Hours and Earnings 2020 c) Gross Disposable Household Income Gross disposable household income (GDHI) is the amount of money that all of the individuals in a household have available for spending or saving after they have paid direct and indirect taxes and received any direct benefits. In 2018 GDHI per head in Tees Valley was £16,619, compared to £21,609 nationally and £17,674 across the North of England. Figure 7.76. GDHI per head Key Findings:

• Over the last 5 years GDHI has risen by 14% in Tees Valley from £14,623 in 2013 to £16,619 in 2018, compared to a 17% rise nationally and a 15% increase across the North of England.

Source: ONS GDHI

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Figure 7.77 Growth in GDHI per head (%) Key Findings:

• Of all the Combined Authorities Tees Valley saw the lowest rise in the percentage of GDHI per head over the last year, with a 3% rise (£488 per head). This is in contract to last year in which Tees Valley experienced the largest rise.

Source: ONS GDHI

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7.14. Education, Employment and Skills SWOT analysis Strengths Weaknesses Most Tees Valley primary schools are above the The quality and performance of Tees Valley national average with high quality schools and Secondary schools are below national average. above average Key Stage 2 results in all subject School performance at a local level varies between areas. Local Authorities with pockets of under-achievement in both primary and secondary. Tees Valley has good quality Post 16 skills provision with overall achievement and pass rates for 16-18- Higher Education postgraduate participation and year olds at Tees Valley FE+ colleges higher than achievement are lower than national. national. Labour market performance is below average with Participation in higher education is above average high unemployment and lower than average job with a higher percentage of 18-39-year olds in density (number of jobs per population). Whilst higher education than national, and top subjects there are many high-skilled jobs in the area, there for participation supporting key sector strengths in are also a relatively high proportion of low skilled Tees Valley. jobs with a low percentage of residents employed in high value occupations compared to the national Teesside University is described as the UK’s leading average, impacting on the area’s productivity. higher education institution for working with business and received the Queen’s Anniversary Youth unemployment is an issue with a higher than Prize for work at world-class level in the field of average number of 16-24-year olds unemployed and enterprise and business engagement. claiming benefits. In addition, a high number of 16- 17-year olds are NEET (Not in Education, The University of Durham, Middlesbrough College Employment or Training). and The Northern School of Art have been awarded a Gold standard Teaching Excellence The amount of disposable income available to Tees Framework after a rigorous review of higher Valley households is much lower than national education standards judged that they provide despite the recent rise. teaching of the highest quality in the UK. The number of residents with higher level skills is Tees Valley has a higher percentage of 16-34-year- below average and Tees Valley has a higher than old residents starting an apprenticeship than average number of residents with no qualifications, nationally and apprenticeship achievement rates which although has seen a drop over the last year, are consistently higher than the national average. has risen in general over the past 5 years. Tees Valley has sectoral strengths in several key Whilst the percentage of 16-34-year olds starting an sectors including Chemical and Process, Health and apprenticeship is higher than national, Social Care, Advanced Manufacturing and Clean apprenticeship starts have fallen by 23% over the Energy Low Carbon, with graduate qualifications last year compared to a 18% drop nationally, with supporting these key sectors. the Covid-pandemic impacting heavily on apprenticeships. Despite the recent rise in unemployment due to the Coronavirus pandemic, unemployment has Deprivation is high (Tees Valley is the second most fallen by more than the national average over the deprived LEP in England, as ranked by the 2019 past 5 years. Index of Multiple Deprivation) with lower levels of attainment at both primary and secondary level for The percentage of employers reporting skills students eligible for Free School Meals, in shortage vacancies is lower than national and has comparison to those not eligible. dropped since 2017, with a particular drop within the education industry sector.

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Wages are lower than average, which attracts investors to the region. Cost of living is also low in the Tees Valley which improves quality of life.

Strong levels of successful partnership working across local authorities helping to deliver large scale employability programmes such as Youth Employment Initiative and Routes to Work. Opportunities Threats Tees Valley is home to the UK’s largest industrial The Coronavirus pandemic has created development zone, Teesworks, providing the unprecedented levels of unemployment, and opportunity for businesses to access global although the number of job vacancies appears to markets through high quality physical and digital have recovered, the competition for these roles will infrastructure. There is also the potential for Tees be high. Valley to contain one of the UK’s first freeports. An ageing workforce is contributing towards Following the initial impact of the Coronavirus potential skills shortages, and gaps that employers pandemic on the job market, the number of job cannot fill, particularly in key sectors. The 18-29- vacancies advertised in Tees Valley appears to year-old population in Tees Valley is projected to have recovered, with the number of vacancies continue its decrease until 2026, potentially reported in October 2020 was 38% higher than the resulting in a smaller higher education cohort. same period in 2019, with a third of these jobs Despite the recent fall, 23% of all vacancies in Tees advertised at a graduate level. Valle were classed as skills shortage vacancies in 2019. The percentage of graduates in employment 15 months after graduating matches the national, Graduate retention is an issue, with only 41% of Tees with the opportunity to increase the number of Valley graduates finding employment within the graduate high value jobs. Tees Valley 15 months after graduating. Over a quarter of graduates (28%) were working in non- There has been large job demand in 2020 for graduate roles, potentially displacing those with Nurses, Care Workers, Teachers, Sales and lower level skills into unemployment. Customer Service Staff, Social Workers and IT staff, with increased demand in 2020 reflecting the The Coronavirus pandemic has resulted in an impact of Coronavirus on the Health Care sector in increased requirement for health care workers; particular. however, the Health Care sector have seen the largest fall in graduate qualifications over the past Prior to the Coronavirus pandemic there were year. This fall may be reflective of the removal of the predicted to be 100,000 jobs that may need filling nursing bursary in 2017. by 2027, including 6,000 new jobs and 95,000 replacement jobs, with 74% requiring high level Private sector employment has dropped by more skills. Demand for intermediate and lower level than national for the last 2 years, with overall skills was projected to remain high, particularly in employment in a number of Tees Valley’s key replacement jobs. sectors falling over the last year, including Chemical and Process, Health and Social Care, Advanced There will be opportunities to be made from the Manufacturing and Clean Energy Low Carbon. Coronavirus pandemic. The rise in health issues, both physical and mental, could provide an There has been a large rise in skills shortage opportunity to expand the already sizable Tees vacancies within the Transport and Storage sector in Valley health and social care sector, meeting local Tees Valley. This is coupled with an increased and national needs through the local skillset. demand for logistics to feed rising e-commerce as a Digitalisation, both within businesses and result of the Coronavirus pandemic. households, may create new opportunities and a Tees Valley has a higher than average number of shift to ecommerce has also resulted in an residents who are Economically Inactive, in increased demand for logistics. There could be particular those who are long term sick. This can be

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significant opportunities if the workforce is able to a key barrier to improving education, employment meet these demands. Lessons learned from and skills. previous economic shocks such as the SSI closure Wages are lower than average, which discourages and taskforce can help inform this. workers from remaining in the area. Automation and robotics is likely to impact disproportionally on lower skilled work, potentially leading to relatively more unemployment in the short-run but also acting as a driver of productivity increase and economic growth via a rebalancing of paid work into intermediate and higher skilled new jobs in the longer-term. Employment in a number of Tees Valley key sectors has risen since the SEP baseline of 2014, including Biologics, Digital, Logistics, Creative, Culture and Leisure and Professional and Business Services. There is an opportunity to improve perceptions of Tees Valley, along with certain industry sectors, to better reflect reality.

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Section 8: Research and Development, Innovation & Energy Introduction

This section summarises the Tees Valley’s performance in various significant metrics measuring levels of research and development, innovation and energy compared to other regions. It also details statistics relating to the region’s clean energy agenda.

Tees Valley is home to globally competitive industries and innovation assets. Maintaining this competitiveness and growing our economy is dependent upon innovation, but only 20% of firms are currently engaged in innovation collaboration or developing new products.

Targeted interventions in green energy, offshore technology and Carbon, Capture, Utilisation and Storage could have a significant impact upon local productivity and prosperity and the Combined Authority has allocated £20m in its Investment Plan to supporting research, development and innovation.

Tees Valley innovation ecosystem

The inclusion of Energy within this section, reflects the region’s ambition, and progress to establish the area as a global lead for Clean Energy, Low Carbon and Hydrogen, through an innovation-led agenda.

The Tees Valley economy has key strengths in the chemicals and process industries, offshore engineering and advanced manufacturing, where we compete in global markets. Innovation, in its various forms, is fundamental to ensuring that these industries remain competitive – whilst also helping to move all of our sectors up the value chain to drive productivity growth.

The area benefits from a strong network of established innovation assets, which reflect our current and emerging sector strengths, including:

➢ Centre for Process Innovation: the National Catapult Centre for the UK Chemical and Bioscience sectors and a member of the High Value Manufacturing Catapult;

➢ The Materials Processing Institute: an internationally recognised research facility focussing on the development of materials and the commercialisation of technologies for industrial processes; and

➢ TWI: a global leader in materials research and engineering processes, with Hydrogen supply chain expertise.

Teesside University is well integrated into the regional innovation system, particularly in relation to the digital and bioscience sectors (through DigitalCity and the National Horizons Centre respectively) and more generally through academic-business knowledge exchange.

Significant recent investment has strengthened our innovation capabilities in biosciences. This will create a platform from which to accelerate the growth of this emerging sector specialism moving forwards and includes the delivery of:

➢ The Centre for Process Innovation’s National Biologics Manufacturing Centre: supporting the growth and development of the UK bioscience industry and supply chain, with a focus on the commercialisation of emerging technologies; and

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➢ Teesside University’s National Horizons Centre: a state-of-the art education, training, research and innovation facility based on partnership with the Centre for Process Innovation and FUJIFILM Diosynth Biotechnologies.

Research, Development, Innovation and Energy is one of the six growth themes in the Tees Valley SEP and is central to a more diversified economy. Firms that innovate are more productive and resilient, and this priority is particularly important in Tees Valley, to support business growth in the context of the challenges identified in Section 6.

Research and development assets are also critical to the transition to a high value low carbon economy, maintaining Tees Valley’s high value jobs and helping to introduce new processes and operational practices which reduce the carbon footprint of all industrial sectors.

The government is aiming to increase expenditure on R&D to 2.4% economic output by 2027. Our Investment Plan allocates £20m over the ten-year period 2019 – 2029 for Research, Development and Innovation. This investment in R&D and innovation will increase Tees Valley’s contribution to national economic growth and locally it will improve the productivity of the local economy, by helping to move businesses up the value chain.

Innovation is central to the future growth and competitiveness of the Tees Valley economy and sits at the core of our productivity ambitions. While the Tees Valley economy provides a strong platform for growth, a number of economic challenges exist and despite the presence of leading innovation and research organisations, and high levels of Innovate UK funding awards, levels of R&D activity among the local business base remain low.

Coronavirus impact

While Coronavirus’s effect on innovation activity isn’t yet reflected in national data, some work has been done indicating trends in innovation during economic downturns. A broad literature review by Roper & Turner (2020) suggests that R&D is subject to steep declines during a recession due to tighter credit conditions reducing access to funds for innovation, particularly for less liquid small enterprises. ERC’s ‘R&D and innovation after Coronavirus’, a study of the impacts of the 2008-09 financial crisis on innovation, finds that the proportion of firms undertaking R&D fell by a half during the recession, and post-crisis activity only recovered gradually. The North East was acutely affected, with R&D activity failing to fully recover in the years following the downturn. The report further highlights that the recovery is likely to be highly skewed by sector, with larger firms and those in services more likely to bounce back.

A recent nationwide survey by ERC of Innovate UK award holders shows that, between June and July, 1 in 9 firms stopped all R&D activities; 65% stopped some or reprioritised certain R&D activities, and a further 1 in 9 firms decreased their R&D activities. This trend looks set to persist: most firms saw the pandemic a having a negative effect on future investment plans and around a third of firms reported as planning to reduce future R&D and innovation investment by over 50%. Only 10% of firms planned to increase R&D. For micro businesses, disruption to revenues was cited as the main reason for reducing R&D activities. The survey also noted reductions in collaborative R&D activities due to the pandemic, and lack of access to joint research facilities was a major factor in this. Furthermore, one-third of firms working with universities said they reduced levels of collaboration. There were some areas where the pandemic generated collaboration opportunities, though, such as in production of ventilators.

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On this theme, several industry publications have identified innovation opportunities arising from the pandemic. A recent report from the Life Sciences Coronavirus response group, for instance, highlighted diagnostic and treatment equipment and digital health as areas where the pandemic has created the need for innovative solutions. This trend is already manifesting itself in the NHS infrastructure, through new practices such as remote GP consultations (Nuffield Trust report). Businesses in the health sector are acutely aware of opportunities emerging in the current climate; according to recent polling from GovGrant, 86% of SMEs in health-related sectors stated that innovation is important to them in their recovery from the pandemic. The Tees Valley area is host to several nationally and internationally significant pharmaceutical firms, notably Fujifilm Diosynth Technologies, and so is well-positioned to capitalise on key growth areas. Indeed, the Billingham Fujifilm site is due to start production of the Novavax Coronavirus vaccine in February 2021. However, the report also highlights that for many firms the cost of innovation is a prohibitive factor and may reduce their ability to capitalise on emerging market segments. 8.1. Innovation in Tees Valley

The Enterprise Research Centre (ERC) innovation benchmarking report, published in June 2019, analyses the innovation performance of all LEP areas against nine different metrics. Its indicators are directly comparable with those in the previous edition (published May 2017) of the report. The latest report analyses data from the 2017 UK Innovation Survey which relates to firms’ innovation activity during the three-year period from 2014 to 2016. The 2017 report examined the UK Innovation Survey of 2015 and covered the period between 2012 and 2014.

Table 8.1. Tees Valley Innovation Scores, 2017 and 2019 Lowest LEP Median LEP Highest LEP Tees Valley score score score score 2017 2019 2017 2019 2017 2019 2017 2019 Organisational and Marketing Innovation strand New business practices 17% 12% 28% 24% 38% 39% 23% 20% New methods of work 11% 13% 21% 19% 28% 29% 21% 19% organisation Marketing innovation 11% 9% 17% 14% 27% 23% 20% n/a Structure and Approach to Innovation strand Engaged in R&D 12% 13% 19% 22% 31% 40% 17% n/a Design investment 8% 6% 13% 13% 20% 20% 11% n/a Collaboration 17% 21% 25% 31% 39% 48% 29% 21% Outcomes/Success of Innovation strand Product and service 14% 21% 22% 25% 34% 38% 18% 21% innovation Sales of innovative 9% 18% 31% 37% 45% 50% 32% 42% products/services Process innovation 8% 13% 16% 18% 26% 29% 17% 13% Source: Enterprise Research Centre. Percentages indicate proportion of firms engaged in identified innovation activity. n/a – estimate not available.

The table shows that Tees Valley firms generally score below the LEP average on the majority of indicators. However, a notable exception is the ‘Sales of innovative products / services’ indicator where Tees Valley firms rank well above the national average. In addition, the proportion of local firms undertaking this form of innovation has increased significantly. It is also worth noting that ERC states that the ‘Outcomes / Success of Innovation’ strand of the analysis – which includes sales of

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innovative products / services – is arguably the most important of the three strands as it reflects the success and commercialisation of innovation activity.

A number of other sources highlight that levels of innovation activity in the region fall below levels of activity and investment seen in other parts of the country. Data from the 2020 UK Innovation Survey show that the commercialisation of new innovations also has room for improvement: just 7% of turnover was from new too market innovations (compared to a UK median of 9.6%) and 12.5% of turnover was from new to business innovations (UK median of 12.9%). The BEIS LEP outlook report 2019 provides some further indicators of innovation and research capacity for each LEP area, as well as comparisons between LEPs. The below table shows indicators for Tees Valley as well as three-year growth rates and comparison to England as a whole:

Figure 8.1. Tees Valley innovation indicators

Source: BEIS LEP outlook reports 2019

Amounts of grant funding from international bodies, UKRI and Innovate UK were the only metrics where Tees Valley experienced an increase and on the whole the area has suffered from a decline in innovation assets. The area also ranks lowly relative to other LEP regions, although the number of local spin-off firms does compare favourably, ranking 15th among LEPs in this regard. 8.2. R&D Tax Credits

R&D tax credits are a tax relief designed to encourage greater R&D spending and so their take-up is an indicator of innovation activity. HMRC’s R&D tax credit statistics for 2018-19 show that North East firms made 2,000 claims (3.4% of UK total) to the scheme, at a total cost of £110m (2.1% of UK total).

The additional local authority analysis for 2017-18 show that the five Tees Valley LAs made 300 claims to the scheme, or 15% of the North East total; firms in Stockton constituted the bulk of this with 120 claims. The regional sector breakdown shows that most claims in the North East were

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made by firms in either manufacturing (30.4%) or professional, scientific and technical activities (20.8%).

The below table shows that the value and number of claims is concentrated mainly in the East and South East of England, particularly London. Note that the figures are liable to upward revision in future editions of this dataset.

Figure 8.2. R&D tax credits claims by UK regions (2018-19)

Channel Islands / Isle of Man Northern Ireland Wales North East Scotland East Midlands Yorkshire and The Humber South West West Midlands East of England North West South East London 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

% of total UK amounts % of total UK claims

Source: HMRC R&D tax credits statistics

There is a wealth of evidence which suggests systemic R&D funding imbalances between the Tees Valley area and LEPs in more prosperous parts of the UK. For instance, in 2017 Tees Valley received £2.9m in research and innovation funding, while the Greater Cambridge and Greater Peterborough LEP area received £524m (BEIS LEP Outlook Report, 2019). The same LEP received over £1bn in UKRI grants in 2014-2018, while Tees Valley received just £8.3m over the same time period (UKRI, 2019). Between 2007 and 2016, London and the South East received a total of £779.8m of capital investment from the government for science projects; by contrast the North East received just £20m (Nesta, 2020; NAO, 2016). 8.3. Business Expenditure on Research & Development (BERD)

Regionally, 2019 estimates are now available through ONS. North East BERD fell slightly from £443m in 2018 to £411m, or a decline of 7.2, in contrast to the UK where R&D rose slightly by £900m to £25.9bn for 2019. The North East figures run counter to prior trends, as the region had experienced two years of strong growth in 2017 and 2018. Regional BERD nonetheless remained 36% above the 2016 baseline.

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In terms of BERD per FTE, the North East figure of £373 was 43% of the national rate (£865 per FTE for England); this disparity has widened since 2018, falling from just under half of the English average. Applying the North East rate to the number of Tees Valley FTEs gives an R&D total of £101.1m for the area. Chart 8.3 below summarises North East BERD spend by broad product grouping.

Key points - BERD

• Manufacturing activities account for most regional R&D at £246m or 60% of the total. The three largest sub-groups were Services (£152m), Chemicals (£107m) and Mechanical Engineering (£48m). • These three groups, as well as Other manufacturing (9% of regional total) all accounted for higher proportions of total BERD than was the case nationally.

Figure 8.3. North East BERD by broad product group, £m, 2019

Construction, 5

Chemicals, 107

Services, 152

Mechanical engineering, 48

Other Electrical manufacturing, machinery, 15 Aerospace, 3 38 Transport , 35 Source: ONS Research and Development in UK Businesses, 2019

8.4. Research and Business Interaction in Innovation

Higher education start-ups

Graduate start-ups are businesses set up by university graduates typically generating innovative products or processes and linking research specialisms and business opportunities. For 2018-19, Teesside University had a total of 146 start-up enterprises surviving 3 years or more, ranking 11th out of UK higher education providers in this respect.

Knowledge transfer partnerships

Knowledge Transfer Partnerships (KTPs) are an aspect of Innovate UK funding that provide an indicator of collaboration between business and the higher education sector. Between 2014 and 2018, Teesside University undertook 25 KTPs, 18 of these being with firms in the North East, for a

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total of £2.1m in grant funding. In the same time period, 79 companies based in the North East started projects with a total of £6.8m in grant funding. Teesside University is currently engaged in 8 KTPs, and there are 27 partnerships currently being undertaken by firms in the North East. 8.5. Innovate UK grants

Innovate UK grants since 2004

The below table gives a breakdown of Innovate UK grants to Tees Valley firms by sector, as well as amounts proportionate to the LEP average:

Table 8.2. Tees Valley Innovate UK grants, 2004 to November 1st 2020

Sector Grants to Tees Tees Valley Valley grants proportion of LEP average Manufacturing, Materials & Mobility £113,426,028 2.51 Ageing Society, Health & Nutrition £16,770,621 1.07 Global £946,111 0.51 Responsive £3,834,060 0.37 Clean Growth & Infrastructure £2,698,870 0.20 Connect £308,147 0.18 AI & Data Economy £46,842 0.01 Source: Innovate UK funded project data

Consistent with the region’s industrial strengths, grants in manufacturing, materials & mobility and ageing society, health and nutrition were above the average for all LEPs.

Figures show that UK Research and Innovation awarded grants of £230.1m over the last five years (2014-2018) within Tees Valley, however £221.8m of the total was allocated to the Catapult. The remaining £8.3m accounted for 4% of the total grants awarded to Tees Valley over the period and was the second lowest of all LEPs.

Figure 8.4. Percentage of Total Research and Innovation Grants allocated to Catapults

Source: UK Research and Innovation

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8.6. Absorptive capacity

Higher absorptive capacity i.e. the ability to internalise external knowledge and thus benefit from knowledge spill-overs, increases the likelihood of firms’ innovating as well as having more general positive effects on productivity and competitiveness, as firms assimilate knowledge from the external environment in which they operate. Absorptive capacity is very important in determining whether a firm undertakes productivity-enhancing activities such as investing in R&D, exporting and/or innovating. Moreover, if firms are not able to learn, and hence gather and make effective use of information from outside the firm, then industrial strategies designed to help firms become more productive are likely to have only a limited impact. As per Harris and Yan (2019), absorptive capacity is a difficult construct to measure directly, but can be proxied by variables relating to firm knowledge, co-operation and innovation activity as reported in the UK Innovation Survey. Compared to other UK regions, the North East performs reasonably well on levels of interaction with external knowledge sources, but poorly in terms of sourcing knowledge from specialised institutions and more general innovation metrics. One discernible trend is that North East firms are more prone to collaboration with higher education institutes, and less prone to collaboration with other firms in the same industry. Overall, the results would suggest that absorptive capacity is lacking compared to other areas of the UK. 8.7. Net Zero Teesside & Carbon Capture

Carbon capture, utilisation and storage technologies (CCUS) are an emerging opportunity set to be deployed at commercial scale. The UK government has demonstrated an appetite for growing the sector, evidenced in its target of net zero emissions by 2050, as well as the announcement of £800m in funding to develop CCUS technology in the 2020 budget. The recently published Local Infrastructure Strategy also outlines a vision of several ‘carbon capture clusters’ around the UK. Given Tees Valley’s pre-existing strengths in engineering, construction and the robust local oil, gas and chemical sectors, it is well suited to capitalise on this growing market and become host to a world-leading net-zero emissions industrial cluster.

Targeted supply chain interventions in the local area could catalyse take-up of the technology and see the UK capture a substantial part of the global market. Estimated direct benefits from such an intervention include £370m in local GVA and 4,500 jobs annually from 2024-2028. Indirect and induced benefits due to supply chain effects include £750m in GVA and 13,500 jobs a year. The project would also safeguard existing manufacturing jobs in Teesside and upskill the labour force to ensure that the full economic benefits are realised (Source: Vivid NZT report).

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8.8. Research and Development, Innovation & Energy SWOT analysis

Strengths Weaknesses Nationally recognised regional vision and ambition to Relatively low levels of business expenditure on establish Tees Valley as a global leader in clean Research & Development and commercialisation energy, low carbon and Hydrogen. A strong role for of new innovations. Tees Valley working with Northern LEPs in leading the agenda at a pan-Northern level. Branch plant economy impacting negatively on the capacity to take forward innovation within The Tees Valley is home to the North East, Yorkshire Tees Valley. and Humber Energy Hub, one of only five BEIS funded Local Energy Hubs in England, bringing financial and Relatively poor performance across many technical support capacity to the region, and innovation metrics suggests significant scope for accelerating the number, quality and scale of local further investment across all aspects of the Tees energy projects being delivered. Valley innovation ecosystem.

Strong innovation assets including centres of Closely correlated to the area’s generally less well excellence and innovation centres such as CPI, MPI skilled workforce, Tees Valley SMEs demonstrate and TWI. relatively low levels of absorptive capacity.

Nationally recognised, wide-ranging strength across Year-on-year decline in North East R&D spending, Clean Energy, Low Carbon & Hydrogen sub-sectors in tandem with large regional imbalances in R&D including Energy from Waste, Biomass and Biofuels. financing.

Up-to-date technical expertise across existing workforce and through local technical training provision.

Good and improving firm level record in the commercialisation of innovative products and services.

Favourable number of higher education spin-offs. Opportunities Threats The South Tees Development Corporation - Teesworks Lack of critical SME business mass in many site will pose an additional opportunity to attract sectors associated with significant constraints on innovative high value manufacturing, along with firms’ innovation absorptive capacity. existing industrial sites such as Teesside Advanced Manufacturing Park. Erosion of skills base may hamper the region’s future innovation potential. Geography and geology allied with existing industrial infrastructure places the Tees Valley as the ideal Present political uncertainty impacting on FDI and location for the development of low carbon international collaborative working on Science generation, offshore wind and CCUS, allowing and Innovation, particularly with recent increases retraining for qualified offshore personnel to change in grant funding from international sources. career path into renewables industries and technologies. Lack of certainty regarding possible future clean air zones across the region for both transport and Strong local graduate business start-up culture with business emissions, and the financial impact this potential to deliver products and services to the may have.

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developing Clean Energy, Low Carbon and Hydrogen sector. Lack of well-advertised funding streams for SME’s looking to lower their energy use and emissions National funding opportunities resulting from outputs. government target of 2.4% of economic output to be spent of R&D 2027. The Tees Valley’s relatively weaker innovation infrastructure, ongoing lockdown restrictions and Business spread across a small physical region has cost constraints may reduce the capacity of Tees resulted in a close community that discusses, shares Valley firms to capitalise on the emerging market and cooperates well across many platforms and opportunities created by the pandemic. These disciplines. Local knowledge sharing is well developed, factors may also inhibit the prospects for highly- reinforced by several ongoing Knowledge Transfer innovative SMEs in the area and deter market Partnerships. entry in some cases.

Development opportunities in energy including Short-term funding opportunities for local energy carbon capture, storage and utilisation cluster as well delivery and tackling fuel poverty, as well as as Hydrogen transport hub. uncertainty on future standards and compliance requirements, places significant challenges on the Upscaling public sector local energy delivery and supply chain and its ability to deliver at scale in tackling fuel poverty through significant funding the absence of longer-term certainty. opportunities in 2021 and beyond as part of the Green Recovery Plan, such as Green Homes Grant, Social Housing Decarbonisation Fund, Homes Upgrade Grant, and public sector decarbonisation funds.

The Coronavirus pandemic has generated new innovation opportunities in some market segments, particularly relating to medical products, technologies and bio-manufacturing. The Fujifilm Diosynth Biotechnologies site in Billingham is due to start producing 60 million doses of a Coronavirus vaccine, Novavax in February 2021.

Collaboration in innovation, as demonstrated by Knowledge Transfer Partnerships, provide a platform for future R&D, supported by ERDF and TVCA funding.

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Section 9: Transport and Digital Infrastructure Introduction

This section details how people and goods move into, out of and around the Tees Valley by road, rail, sea and air. It also summarises digital connectivity around the region. Note that port freight is examined in Section 5 alongside international trade.

Physical and digital connectivity is vital in allowing residents to access employment, training and social opportunities has a significant impact on wellbeing and economic outcomes for deprived communities. They are also critical in allowing local businesses to remain and become nationally and internationally competitive.

Tees Valley Combined Authority is the local transport authority for Tees Valley and has published the first Strategic Transport Plan (STP) for the region, for the period up to 2030. This plan was developed by the Combined Authority in collaboration with the five constituent Local Authorities, Darlington, Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-on-Tees. The STP focuses on delivering improvements across the transport system for local people and businesses ensuring integration between different modes.

The TVCA Investment Plan 2019 – 2029 identifies £256.7m to transform transport across Tees Valley, aiming to unlock 2,600 jobs and generate an additional £472m GVA within the economy. This investment will be guided by the STP and will deliver a high quality, quick, affordable, reliable, low carbon and safe transport network for people and goods move in, out and around the Tees Valley. It will improve access to employment, education, health & social care, culture, leisure and retail opportunities while supporting job creation, reducing carbon emissions, improving air quality and reducing enhancing and protecting the natural environment.

Tees Valley connectivity

Physical and digital connectivity are central to a diversified, high value, low carbon economy, providing the links for people and goods to connect to the wider economy. They also support an inclusive economy where local people can access employment opportunities across the region. In the post-Coronavirus era, digital connectivity will be increasingly vital to businesses survival and success and so it is imperative that our digital infrastructure remains fit for purpose into the future.

As one of the Tees Valley Strategic Economic Plan’s priority areas for growth, the aim for transport and infrastructure is to improve connectivity within Tees Valley, across the Northern Powerhouse, the UK and the world and ensure comprehensive access to superfast broadband.

Unlocking the growth potential of Tees Valley requires resilient and reliable connections across the area. This includes into and out of the area by air, road, rail, bus, micro transport e.g. Tees Valley is a pilot region for electric scooters, foot and bicycle, as well as an increasing reliance on digital connections that connect the region nationally and internationally. Tees Valley firms must be supported to access UK and European supply chains, particularly in the Northern Powerhouse, which in turn will enable Tees Valley residents to benefit fully from emerging job opportunities.

The Tees Valley has a number of locally and nationally significant transport assets, which underpin economic activity and also offer economic growth opportunities in their own right. These include:

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• Major highways: The A1(M), A689, A66, A19, A171 and the A1053 provide fast communications within the sub-region as well as to the North East region and the rest of the country. • Rail connections: Darlington acts as a critical rail ‘gateway’ into and out of the Tees Valley and is the main interchange hub for national and inter-regional rails connections. Transport plans for Tees Valley take account of Transport for the North activities, as well as the need for efficient freight and passenger transport corridors running both north and south and east to west.

National restrictions put in place during the pandemic have limited transport connectivity both internally and also to other regions of the UK. In terms of intra-regional travel, local public transport operators have been especially hard hit as patronage numbers have declined precipitously.

From a Digital perspective, Tees Valley is evolving into one of the most vibrant digital hubs in the UK with a successful and self-sustaining digital media, technology and creative supercluster developing a worldwide reputation for creativity, imagination and vision. Whilst the region has the second highest proportion of premises with superfast broadband coverage in the country, pockets of poor broadband provision still exist, and there is a below average level of digital skills. The pandemic has shone a light on some of these issues with large swathes of those in employment required to work from home and a shift to remote learning for many in education. Maximising digital access for Tees Valley residents is essential going forward to ensure inclusion and sustain productivity.

Coronavirus impact on transport

ONS’s faster indicators data contains daily counts of different types of road traffic as measured traffic cameras. The data for the North East are presented below (note: data for cars are measured on the right-hand axis).

Figure 9.1. Daily road traffic counts in the North East, seasonally adjusted (1st March to 1st November)

8000 70000 7000 60000 6000 50000 5000 40000 4000 3000 30000 2000 20000 1000 10000 0 0

Motorbikes Buses Trucks Vans Pedestrians & cyclists Cars

Source: ONS faster indicators: traffic camera data. All data series are measured against the left-hand axis, except for cars.

In March there was a sharp drop across all different traffic types, in particular for cars, vans, pedestrians and cyclists, reflecting the initial wave of social distancing and travel restrictions that came into force at this time. Over the course of the year, the numbers of buses, trucks and vans largely settled to pre-pandemic levels, although a slight dip during November reflects the second national lockdown coming into force on the 5th.

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Patronage rates have declined precipitously, demonstrating the heavy impact of the pandemic on local public transport services due to social distancing constraints. The new government Coronavirus restrictions forbid travel within the UK or overseas except for essential purposes such as work, education and care requirements. It can therefore be expected that, as with the first lockdown, Tees Valley’s constrained regional and national connectivity will be reflected in continued falling travel figures in the coming months.

Key Messages

Coronavirus impact • The initial phases of the pandemic were characterised by a marked decline in transport activities. Although traffic levels have recovered since, further restrictions are likely to cause another slump. • Core bus and rail services have been retained across Tees Valley to ensure the needs of key workers and others can be met as much as possible. • Evidence from Tees Valley rail stations, where patronage numbers have declined by more than two-thirds, suggests public transport services have witnessed a particularly heavy toll. • The Tees Valley maintains an advantage in terms of its digital infrastructure, with above average rates of broadband connection. However, the area is lacking somewhat in the level of digital skills and digital inclusion. • The pandemic has caused an increase in levels of homeworking, highlighting the need for robust digital infrastructure to support structural economic changes. Underlying picture • Before the pandemic, Teesside International Airport was seeing significant increases in passengers, well above national rate rises. The continuing growth of the Airport is a key priority within the Combined Authority’s new ten year Investment Plan. • Boardings and alightings at rail stations in Tees Valley for 2019/20 were up from the prior year. Tees Valley also has rapid East Coast Mainline rail connections with Darlington to London in 2½ hours. Direct trains are also available from Hartlepool to London in under 3¼ hours. • Tees Valley is a relatively compact (300 square miles), functional economic area with close to 9 in 10 of working residents employed in the region. Commuting is broadly balanced between in and out commuters, which results in little overall impact on aggregate Tees Valley productivity rates, with most people travelling to work in a car or van. • Average road speeds are significantly quicker than other built up areas in England. • Increasing levels of road traffic contrast with falling levels of bus usage. • Tees Valley accounts for no fewer than four out of the top six UK local authorities for median download speed of broadband users’ connections (Stockton-on-Tees, Hartlepool, Middlesbrough and Redcar & Cleveland), with Darlington 12th out of 379 Local Authorities.

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9.1. National Connectivity

Tees Valley is well connected nationally and beyond including an international airport, major roads, East Coast mainline rail and port facilities.

Air passenger numbers

After seeing passenger numbers fall for a number of years to just 128,000 in 2017, passenger numbers at Teesside International Airport, up to the start of the pandemic in March 2020, have increased significantly.

Table 9.1. Terminal passenger numbers by airport, Teesside International and all UK airports, 2017 to 2019 2017 2018 2019 Teesside International 128,000 140,000 148,000 All UK airports 284,570,000 292,245,000 296,489,000 Source: UK CAA Key points

• Passenger numbers at Teesside International Airport grew by 20,000 or 15.6% between 2017 and 2019, over three times the rate of increase observed nationally (4.2%). • The pandemic has had a significant impact on passenger numbers during 2020 across the country. There were 2,000 terminal passengers through Teesside International Airport in October 2020, down by 84% on the same month last year. This rate of fall in passenger numbers mirrors that observed nationally.

9.2. Local Connectivity

Travel to work patterns Commuting in Tees Valley is relatively self-contained (one definition of a functional economic area) when compared to many other areas. Around 247,700 people (87% of working residents) live and work in Tees Valley with 38,100 residents commuting to surrounding areas - particularly County Durham, North Yorkshire and Tyne & Wear - and 34,700 residents of surrounding areas choosing to work within Tees Valley. Reflecting the area’s relatively self-contained economic nature, travel-to- work distances are fairly low, with a majority (60.6%) of the working population enjoying commuting distances of 10km or less. The below provides a breakdown of the means of travel to work used in Tees Valley; the overwhelming majority (63.5%) of those in employment drive a car or van, although a substantial proportion (10.3%) also walk to work.

Figure 9.2. Means of travelling to work in Tees Valley (by % of working age population in employment)

Mainly work at or from home Train, underground, metro, light rail, tram Bus; minibus or coach Driving a car or van Passenger in car or van Bicycle Source: Census 2011

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Travel to work flows for each Tees Valley local authority area are detailed in Table 9.2 below.

Table 9.2. Tees Valley travel to work flow summary Within Outflow Inflow Net inflow (-ve=outflow) LA TV Other TV Other TV Other Darlington 33,900 5,000 15,400 4,200 18,500 -900 3,000 Hartlepool 26,000 6,400 11,900 4,400 8,400 -2,000 -3,600 Middlesbrough 33,000 16,000 21,700 24,200 30,100 8,200 8,400 Redcar & Cleveland 33,300 17,200 23,300 9,800 12,800 -7,400 -10,500 Stockton-on-Tees 56,600 20,300 30,800 21,200 30,000 800 -800 Tees Valley 247,700 - 38,100 - 34,700 - -3,300 Source: Census 2011

In terms of average travel to work time, Tees Valley commuters enjoy the shortest time spent getting to work of any North of England LEP area outside of Lancashire. In 2016, the typical commuting journey time for Tees Valley was 25 minutes compared to the LEP average of around 27 minutes.

Tees Valley road usage

Department for Transport’s average A road speed statistics provide an indicator of ease of travel within the Tees Valley. With an average A road speed of 30.4 miles per hour, the Tees Valley performs favourably compared to the North East and the wider North of England. Road speeds are also significantly faster than the English average of 25.3 mph. Figure 9.3. Average speed on local A roads (miles per hour) by geographical area, 2019

35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 Tees Yorkshire North Valley LA North East and England West average Humber 2019 30.4 29.3 23.0 26.1 25.3

Source: DfT Average speed on local ‘A’ Roads by local authority in England

The below table shows total road traffic as measured by vehicle miles from 2015 to 2019. There has been a steady increase across all local authorities in the past five years, reflecting increasing numbers of people travelling to work as well as growing rates of car ownership.

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Table 9.3. Total road traffic in million vehicle miles (Tees Valley local authorities, 2015-2019)

2015 2016 2017 2018 2019 Darlington 527 523 527 546 566 Hartlepool 404 410 415 432 444 Middlesbrough 776 769 795 827 858 Redcar and 577 591 604 635 659 Cleveland Stockton-on-Tees 950 964 971 983 1,058 Tees Valley 3,234 3,257 3,312 3,423 3,585 Source: DfT Road traffic statistics by local authority

Parallel to this there has been a decline in bus patronage figures over the past five years, with 3.1m fewer journeys made in 2018/19 compared to 2014/15. The most recent data for Tees Valley represents a ninth consecutive year of decline, although the rate of decrease was slightly less drastic compared to that of last year. This is in line with the broader regional and national trend towards lower bus usage.

Table 9.4. Passenger journeys on local bus services (millions), Tees Valley LA, North East and England figures

Local Authority 2014/15 2015/16 2016/17 2017/18 2018/19 Darlington 6.5 6.2 6.3 6.0 5.7 Hartlepool 4.7 4.7 4.4 4.3 4.4 Middlesbrough 8.4 8.3 7.9 7.3 7.4 Redcar and Cleveland 4.1 3.9 3.9 3.8 3.6 Stockton-on-Tees 8.7 8.5 8.3 8.2 8.2 Tees Valley 32.4 31.8 30.8 29.6 29.3 North East 184.9 179.8 176.7 169.2 172.0 England 4,627.1 4,507.6 4,437.8 4,347.7 4,318.3 Source: DfT bus passenger journeys by local authority in England

Tees Valley rail network usage

In terms of aggregate Tees Valley rail station usage, boardings and alightings totalled 6.72m across all stations during 2019/20, an increase from 6.57m in 2018/19.

The five busiest stations in the Tees Valley – Darlington, Middlesbrough, Hartlepool, Thornaby and Redcar Central accounted for 5.29m boardings and alightings in 2019/20. While this was up from 5.22m in 2018/19, its share in aggregate Tees Valley station usage declined slightly from 80% to 79%.

Across Tees Valley, the East Coast Mainline station (Darlington), had the highest station usage in terms of total boardings and alightings with 2.4m in 2019/20. Middlesbrough was second with 1.3m, Hartlepool third with 631,000 and Thornaby fourth with 588,000. Redcar Central was fifth busiest with 339,000 boardings and alightings. Around 1.33m rail journeys were made through other Tees Valley stations. Of the other stations, Saltburn was the busiest with 258,000 boardings and alightings (an increase from the previous year’s figure of 241,000), the Teesside Airport station had just 71 boardings and alightings.

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Figures 9.4-9.8. Most common journeys to/from Tees Valley stations, 2019/20

Darlington Station Thornaby station 500000 70000 400000 60000 50000 300000 40000 200000 30000 20000 100000 10000 0 0

Middlesbrough station Redcar station

140000 140000 120000 120000 100000 100000 80000 80000 60000 60000 40000 40000 20000 20000 0 0

Hartlepool station Key findings: 180000 • Newcastle was the most popular journey 160000 140000 to/from both Darlington and Hartlepool 120000 100000 stations. 80000 60000 • Darlington saw more journeys to 40000 20000 destinations outside Tees Valley. 0 • By contrast, Middlesbrough, Thornaby and Redcar’s journeys were mainly to other stations within Tees Valley, the North East and Yorkshire.

9.3: Digital connectivity

Alongside transport infrastructure, the extent of an area’s digital access is the foundation on which its residents are able to connect with one another, maintain their personal wellbeing and access economic opportunities. One measure of this is broadband speeds, with take-up of faster services

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indicating that residents are more conveniently able to access the internet and therefore enjoy the opportunities it offers. Tees Valley has very high rates of ultrafast broadband connectivity when compared to the wider North East and the UK, with Darlington the only Tees Valley local authority for which superfast broadband connectivity rates are below the national average. Connectivity has increased across the board compared to figures for the previous year.

Table 9.5. Local, regional & national broadband coverage (% of residential and business premises covered)

Superfast EU (>=30 Mbps) Ultrafast (>100 Mbps) Darlington 95.91% 87.58% Hartlepool 97.94% 92.33% Middlesbrough 97.63% 93.72% Redcar and Cleveland 98.01% 90.40% Stockton 97.65% 91.41% Tees Valley avg. 97.43% 91.09% North East 97.75% 61.02% UK 96.50% 63.19% Source: thinkbroadband.com

The North East has high rates of superfast connectivity compared to other English regions and is third only to the East Midlands and South East in connectivity rates; this means connectivity in the North East is higher than in London and the other Northern regions.

Figure 9.9. Superfast connectivity (>24 Mbps) by English regions 98.50% 98.00% 97.50% 97.00% 96.50% 96.00% 95.50% 95.00% 94.50%

Source: thinkbroadband.com

The map below gives a snapshot of broadband speed in Tees Valley, which are generally reasonable despite the rural areas surrounding Darlington and Redcar and Cleveland displaying slightly lower speeds.

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Figure 9.10. Tees Valley broadband speeds by area (Mbps)

Source: thinkbroadband.com

Data released by Ofcom in December 2020 showed that Tees Valley accounts for no fewer than four out of the top six UK local authorities for median download speed of broadband users’ connections (Stockton-on-Tees, Hartlepool, Middlesbrough and Redcar & Cleveland), with Darlington 12th out of 379 Local Authorities.

Table 9.6. Median download speeds (Mbit/s) Median download Local Authority speed (Mbit/s) West Dunbartonshire 107.0 North East Lincolnshire 107.0 Stockton-On-Tees 107.0 Hartlepool 107.0 Middlesbrough 107.0 Redcar And Cleveland 80.0 Cambridge 79.8 Stevenage 79.7 Luton 79.7 Nottingham 79.7 Bristol, City Of 79.7 Darlington 78.1 Source: Ofcom

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Digital connectivity and Coronavirus

Even prior to the pandemic, digital connectivity had been growing in importance: between 2015 and 2019, the % of employees in the North East who reported as requiring a telephone and computer in homeworking (of those who already used both for work) increased from 88.2% to 94.4% (ONS, Exploring the UK’s Digital Divide). The pandemic has accelerated these trends, with large numbers of those in employment switching to remote working; a survey conducted in April found that nearly half (49.1%) of respondents in the North East had done some form of home working, with most people citing the pandemic as the main factor in this (ONS, Technology Intensity and Homeworking in the UK).

Concurrent with this trend to remote employment has been use of a greater variety of digital services in working practices, as demonstrated for instance by the phenomenon of online conference applications, like Zoom and Microsoft Teams, which are now witnessing unprecedented use in many professional and service sectors. It has therefore never been more important that people have both digital access and the requisite skills so that they are able to maintain productivity rates while making the move to primarily online working. Despite the area’s strong digital infrastructure as outlined above, there is evidence that the North East’s digital skills and inclusion are subpar. ONS’s report ‘Exploring the UK’s Digital Divide’ found that, although the proportion of internet non-users in the North East has declined between 2012 and 2018, the North East still has a higher rate of non-internet users than all other English regions. Furthermore, just 71% of the North East population is trained in basic digital skills, compared to a UK average of 79%, and the proportion of the population with zero basic digital skills is higher than that of all other English regions. The relative lack of digital skills and higher rates of digital exclusion in the North East may pose a challenge going forward should home working methods become entrenched in everyday employment for certain sectors.

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9.4. Transport & Digital Infrastructure SWOT analysis

Strengths Weaknesses Low levels of congestion together with some of best digital Limited east west rail connectivity. connectivity in the country providing an investment ready environment with minimal growth constraints. Existing River Tees crossing points acting as bottlenecks. Excellent superfast broadband coverage in key urban centres. Tees Valley accounts for no fewer than four out of Poor connectivity between dispersed and the top six UK local authorities for median download speed multiple concentrations of housing and of broadband users’ connections. industry.

Busy East Coast Main Line railway station and rail gateway Broadband coverage patchy in some rural hub at Darlington – 2hrs 30 minute journey time to London. areas.

Relatively little road congestion and fast commuting times. Below average basic digital skills and rates of internet usage. A wide range of sectoral training provision e.g. Stockton Riverside College’s Logistics Academy.

Major logistics investments e.g. Amazon in Darlington and strategic infrastructure projects such as Middlesbrough’s Centre Square office development, Teesside Advanced Manufacturing Park (TeesAMP) and the digital and creative hub, Boho Zone.

Polycentric nature of Tees Valley area creates numerous benefits e.g. shorter commute times, promoting sustainable transport forms.

Active travel hubs helping local people to walk and cycle more often. Opportunities Threats An established international airport with the potential for Lack of investment in transport and digital rapid expansion supporting wider economic growth, infrastructures may lead to a deterioration including the development of a new logistics park. in Tees Valley’s presently relatively strong position under this theme. Train fleet change replacing our ageing local rail rolling stock. Pockets of poor digital connectivity e.g. in many rural areas across Darlington and in Ideal compact and low-lying valley geography for the some major commercial areas such as development of a complementary programme of cycling, Middlesbrough. These digital access walking and other sustainable transport measures, inequalities impact negatively on aggregate development which has been accelerated in response to the productivity. Coronavirus pandemic. Renewed lockdown restrictions may harm Potential productivity improvements from investing in the area’s intra- and inter-regional improving all forms of connectivity between settlements and connectivity. employment centres including a new Tees crossing, the

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Portrack Relief Road, A19 road widening and A689 Coronavirus pandemic and greater home improvements. working might pose productivity challenges for residents forced to work from home As a significant employer with existing sub-sectoral strength, given pre-existing lower level of digital road and rail freight is playing an increasing important role skills. in facilitating the movement of goods beyond Tees Valley’s borders. Large declines in patronage on public transport services due to pandemic pose Freeport proposals could lead to a Freeport in Tees Valley by liquidity problems to local operators. the end of 2021, increasing investment potential in the area. Changing behaviour especially relating to Strengths in Advanced Manufacturing, Chemical & Process public transport resulting from the and Energy & Circular Economy provides potential for pandemic and viral spread. greater than average returns to investment in industrial digitalisation. Reduced capacity constraints due to social distancing will limit usage. Potential supply chain opportunities for electric and self- driving vehicles.

Increasing use of alternative transport forms of transport as exemplified in the Tees Flex demand responsive transport scheme.

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Section 10: Place and Culture

Introduction

This section details statistics relating to Tees Valley’s built environment offer, covering residential and business premises and including house prices, rents and affordability, barriers to housing and fuel poverty, rateable values, the nature of business premises occupancy and take-up. It examines the area’s natural assets and related environmental issues including CO2 emissions and flood risk. It then details Tees Valley’s cultural and visitor offer and concludes with regional health and wellbeing statistics.

In November 2020 the Tees Valley Combined Authority Cabinet approved a £16.5m Growth Programme for the Creative and Visitor economies, which will support the growth and resilience of cultural industries to increase reach, relevance and impact for local communities; support high- growth potential indigenous festivals; attract new events to the region; strengthen Tees Valley’s destination offer and grow its regional, national and international profile. The Growth Programme will build on the £1m Cultural Industries and Visitor Economy Recovery package.

Tees Valley has a strong and distinctive sense of place. It reflects our industrial heritage, our geographical location and natural assets. Each of our five boroughs and main towns has distinct economic assets and opportunities and it is essential that we can unlock these in a way that benefits all of our residents.

Successful and sustainable economies are underpinned by both the built environment – housing and business premises – and the area’s underlying social and environmental characteristics. The health and well-being of the people goes hand in hand with the natural environment and the success of the economy.

Tees Valley place and culture offer

Place and Culture are growth themes in the Strategic Economic Plan 2016. They are central to the creation of a diversified and inclusive economy and they are the building blocks providing the everyday social and economic infrastructure which attracts people and investment to the region.

Ensuring a high-quality environment where people and business thrive is a critical enabler to our Local Industrial Strategy and one in which the region has long invested in, not only upgrading town centres but also in remediating former industrial sites, protecting and enhancing natural assets.

The culture sector offers a dynamic economic opportunity in and of itself and is a vital component of the wider creative industries which, before the pandemic, were growing at five times the rate of the UK economy and providing 1 in 11 jobs. As well as this, it contributes to diversifying the economy, providing new and varied employment opportunities many of which will be available to young people and is the base for valuable transferrable skills. Boosting the visitor economy and changing external perceptions of potential inward investors and skilled workers therefore helps to ensure new investment linked to growth sectors and the low carbon economy.

The ambitions for Place and Culture in the SEP are:

Place: To implement growth and renewal plans to ensure Tees Valley is a place where people want to live, work and play; where health and well-being flourishes and where businesses want to invest.

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Culture: To change external perceptions of Tees Valley through the arts, culture and leisure offer to create places that attract and retains businesses and business leaders and make the area more attractive to investors, workers and visitors.

To support these ambitions, we will invest in Tees Valley the ‘place’ to ensure that we continue to attract and retain the businesses and people we need.

The ‘place’ offer of Tees Valley – and the culture, leisure and tourism sectors in particular – make an important contribution to our economy, both directly and indirectly. Over 20m people visited the area in 2019, with tourism contributing over £1bn to our economy and supporting 12,000 jobs. It is estimated that the cultural sector supports 2,500 jobs, although there is likely to be some overlap with the tourism data. The SEP also highlights the linkages between the Culture, Leisure, Digital and Creative sectors. These sectors combined accounted for around 19% of the total business base in mid-March 2020, making it the area’s largest business cluster.

In the more immediate term, the Coronavirus pandemic has had a heavy toll on the cultural sector, reversing its growth prior to the pandemic. A £1m Recovery Programme has already provided support to over 300 businesses in the cultural and visitor economy sectors, and further targeted recovery support is needed to ensure that it remains viable in the short-term, so that in the long term the full economic and societal benefits as outlined above are realised and continue to contribute to Tees Valley’s competitive cultural offer. The Growth Programme described above is the next step in this process.

The development and effective promotion of a strong sense of place is also critical to raising the Tees Valley’s profile and enhancing perceptions of the quality of life available. In turn, this shapes our ability to attract and retain the workforce and inward investment needed to drive future growth. Within this context, Tees Valley’s broader sense of place is also characterised by its cost competitiveness and the availability of a plentiful supply of land for employment development.

Key points

• Affordable house prices throughout Tees Valley with out of city locations seeing the largest increases in house sales volumes during the pandemic. • Broadly average rates of fuel poverty across Tees Valley overall but with pockets of need in urban areas. • Tees Valley has an attractive and competitive offer for doing business. This includes the availability and cost of floorspace. • Tees Valley has some of the lowest office and industrial unit operating costs in the country with rents, rates and terms significantly lower than all other major UK cities. • It is possible that, depending on the persistence of current remote working paradigms, the nature of demand for commercial property will fundamentally shift. • Tees Valley has a wide range of cultural and visitor attractions. However, due to the social distancing measures introduced during the pandemic, these customer-facing sectors have seen some the greatest negative impacts of any part of the economy. • Modelling (STEAM) points to a potential near halving of Tees Valley visitor economy GVA in 2020, from over £1bn in 2019 to £525m in 2020. • Tees Valley Natural Capital accounts detail both the monetisable and non-monetisable benefits that flow from our natural assets and related ecosystem services. In Tees Valley, monetised annual benefits include:

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o Recreational visits - £100m p.a. (Capital asset value £3.3bn) o Clean air - £7m p.a. (Capital asset value £235m) o Fisheries/aquaculture - £360,000 p.a. (Capital asset value £12m) The most significant non-monetised benefits in Tees Valley flow from: water abstraction, flood protection, biodiversity, physical and mental health. Estimated annual social cost of carbon emission of £5m (Capital asset cost £450m).

• Driven by a sharp fall in the ‘large industrial installations’ category, Tees Valley CO2 emissions have fallen sharply in recent years, from 17,744.1 kt in 2005 to 7,022.3 kt in 2018. • The ONS health indices for all five Tees Valley local authorities are below the national average and have deteriorated since 2015. • However, there is a clear distinction to be made between the health of the people and the lives they lead, where Tees Valley scores relatively poorly, as compared with the health of the Tees Valley itself as a place, where it scores relatively highly. • Well-being indicators are closely correlated to the deprivation measures observed in the Indices of Deprivation, where Middlesbrough and Hartlepool both lie amongst the ten most deprived local authority areas in the country. • Lack of freedom and independence, inability to make plans and disruption of personal travel plans are the most common ways in which people’s lives have been affected by Coronavirus pandemic (ONS Coronavirus Review). • Nationally, 40% of adults reported worries about being able to access groceries, medication and essentials during the first few weeks of the national lockdown; in mid-May, 28% said they struggled to get access to health care for non-Coronavirus-related issues. • One in eight British households had no access to a garden during the first Coronavirus lockdown; in England, Black people are nearly four times as likely as White people to have no access to outdoor space at home. o Those in less-skilled occupations or unemployment are almost three times as likely as those in managerial, administrative or professional occupations to be without a garden. • There are 620 functional green spaces in the built-up areas of Tees Valley of which 368 are publicly accessible. The built-up areas of Tees Valley cover 19,586 hectares (approx. 76 square miles) representing a quarter of Tees Valley’s total geographic area. In terms of population, these built-up areas account for 98% of the total Tees Valley population.

The below is a list of key findings from the TVCA Business Survey for the tourism and hospitality/creative and culture sectors:21

• Prior the pandemic, 94% of businesses in tourism and hospitality/creative and culture were optimistic about business growth over the next 12 months. • In the sample period, 44% reported a threat to future company viability (28% for all sectors), and 22% stated they had ceased trading (14% for all sectors). • Lack of ability to adapt is a challenge for the sector; 41% of businesses stated they were concerned about lack of remote working/impact of social distancing, compared to 32% for all sectors. • 50% of businesses stated a need to find new/alternative customers or markets. • A quarter of businesses planned on making redundancies. • 85% of businesses anticipated an impact of on future business finance.

21 Based on survey responses of 1,108 businesses received between 5th May to 22nd May 2020

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10.1. Housing

2020 key trends

• House prices have surged since the onset of the pandemic. Boosted by the temporary cut in Stamp Duty Land Tax, mortgage lenders report national house prices up by around 5-7% on the year to September 2020. • Whilst house sale volumes are up across the country, the increase has been far sharper in out of city locations including country villages and small towns such as Yarm. According to Rightmove, the number of house sales in Yarm more than doubled by 164% in September 2020 compared to September 2019 – one of the highest rate increases in the country.

Historical picture

The average (median) house price paid in Tees Valley for the year ending 2019 was £139,000, less than 60% of the English median of £243,950.

Since the dip following the 2008/09 recession, Tees Valley house prices, driven by increases in detached house prices, have increased by around one fifth. The price of flats/maisonettes in Tees Valley remains well below that seen a decade ago.

Figure 10.1. Median price paid by house type, Tees Valley, 2009-2019

Source: ONS, House Price Statistics for Small Areas

It is more affordable to purchase a house in Tees Valley than in other areas of England. The Tees Valley median house price is only five times that of the median annual salary, whereas it is 7.7 times that in England.

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Table 10.1. Median pay and house price ratio, Tees Valley districts, North East of England and England Median annual gross Median house Ratio of house full-time pay (£ p.a.) price (£) price to salary Darlington 27,087 142,227 5.3 Hartlepool 28,954 127,000 4.4 Middlesbrough 25,849 135,000 5.2 Redcar & Cleveland 26,912 132,000 4.9 Stockton-on-Tees 29,495 148,500 5.0 Tees Valley 28,077 139,000 5.0 North East 27,971 142,000 5.1 England 31,766 243,950 7.7 Source: ONS, House Price Statistics for Small Areas and ONS, ASHE 2020 estimates

Tees Valley also has very low rents in comparison to median pay, meaning rents are more affordable than in other areas. In Tees Valley, only 30% of take-home pay would be spent on renting a two bedroom home whereas it would be 47% of pay in England.

Table 10.2. Take home pay, average rents and ratios, Tees Valley, North East and England Median Mean rent Mean rent % of take % of take monthly net for one for two home pay on home pay on take home pay bedroom (£) bedrooms one bed rent two bed rent (£) (£) Tees Valley 1,894 390 465 21 25 North East 1,888 426 489 23 26 England 2,103 731 800 35 38 Source: Valuation Office Agency, 12 months to March 2019. ASHE 2020 and reed.co.uk

The English Indices of Multiple Deprivation includes the domain Barriers to Housing & Services, which brings together geographical barriers (distance to services) with wider barriers covering household overcrowding, homelessness and housing affordability. Whilst Tees Valley scores as relatively less deprived on this domain across the majority of its geography, it does include some relatively deprived areas, particularly in the more rural parts of Tees Valley. This is shown in the figure below.

Figure 10.2. Barriers to Housing and Services domain, Tees Valley LSOAs, 2019

Source: MHCLG. English Indices of Deprivation 2019

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As the Barriers to Housing and Services domain is a broad measure encompassing a number of indicators, it does not reflect the relatively high levels of local deprivation relating to fuel poverty in some more urban areas, particularly in Middlesbrough, as detailed below.

Fuel Poverty BEIS publish statistics on levels of fuel poverty in England at various geographical levels, with the most recent data covering 2018. A household is defined as ‘fuel poor’ if its required fuel costs are above the national median, and spending on fuel would leave it below the official poverty line.

The North East ranked relatively low for fuel poverty in 2018: just 9.5% of houses were fuel poor, making it the 4th-lowest among 9 English regions in this regard. Tees Valley had a total of 29,627 households in fuel poverty. The proportion of all households classed as fuel poor, at 10%, was above the North East average, though slightly below the English rate of 10.2%. The Tees Valley accounted for 26.3% of the number of fuel poor houses in the North East, and 1.2% of the English total. Of the five local authorities, Stockton and Darlington had the lowest proportion of fuel poor households at 9% each, while Middlesbrough had the highest proportion of fuel poor households at 11.9%.

Table 10.3. Fuel poverty by Tees Valley local authorities (2018)

Tees Valley LA No. of fuel poor Proportion of households households (%) Hartlepool 4,274 10.1 Middlesbrough 7,092 11.9 Redcar and Cleveland 6,385 10.3 Stockton-on-Tees 7,474 9.0 Darlington 4,402 9.0

Source: BEIS Sub-regional Fuel Poverty England statistics

BEIS’s figures also come with analysis at LSOA level; the table below lists the top 10 most fuel poor LSOAs in the Tees Valley.

Table 10.4. Top 10 Tees Valley LSOAs by % of households in fuel poverty (2018)

LSOA Locality Number of Number of Proportion of households households in households fuel fuel poverty poor (%) Middlesbrough 003D Gresham 649 177 27.3 Middlesbrough 001E Southfield 740 196 26.5 Middlesbrough 001D Southfield 654 168 25.7 Middlesbrough 001A Town centre 838 210 25.1 Middlesbrough 003A Gresham 637 158 24.8 Middlesbrough 003E Gresham 655 136 20.8 Stockton-on-Tees 014G Town centre 1,191 246 20.7 Middlesbrough 005A Linthorpe 683 138 20.2 Middlesbrough 001F Southfield 988 183 18.5 Redcar and Cleveland 001A Coatham 918 165 18.0 Source: BEIS Sub-regional Fuel Poverty England statistics

With 8 out of 10 of the top 10 fuel poor LSOAs in the Tees Valley, Middlesbrough was particularly over-represented in this respect.

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10.2. Business Floorspace

Tees Valley has an attractive and competitive offer for doing business. This includes the availability and cost of floorspace.

There is estimated to be over 7m square metres of business floorspace in Tees Valley as of 2018-19. Stockton accounts for the highest proportion of floorspace with 2.m square metres, or one third of the Tees Valley total. On average, Industrial floorspace accounts for 4.0m or 56% of total Tees Valley business floorspace but for Middlesbrough this proportion is somewhat lower at just 46%. These figures are summarised in Figure 10.3 below.

Figure 10.3. Non-domestic rating: Tees Valley business floorspace (sq. m.) in 2019-20

Source: VOA. Notes: This analysis excludes properties without a floorspace valuation – this Excluded category accounting for almost one fifth of all properties. Other floorspace includes a wide variety of establishments e.g. Restaurants, Wine Bars, Libraries and Sporting grounds.

Rateable value per metre squared

Rateable values in Tees Valley are considerably lower than in many other parts of the country across all forms of property types.

Key points

• Redcar and Cleveland has the lowest office space rateable values of any local authority area in the country at £39/m2. This is just 22% of England’s rate of £177/m2. • Hartlepool has the second lowest industrial space rateable values in the country at £19/m2. This is less than half the national rate of £40/m2. • Retail space rateable values exhibit less variation and are closer to national averages than industrial and office space in particular.

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Figure 10.4. Tees Valley business floorspace. Rateable value per square metre (£/m2) in 2019-20

Source: VOA

Business floorspace in Tees Valley is most concentrated in and around the centres of Middlesbrough, Darlington, Stockton and Hartlepool. Retail and Office floorspace is concentrated in Town Centres and some specialist out of centre locations whilst Industrial floorspace is concentrated at various industrial estates throughout the Tees Valley. Clusters of Industrial floorspace occur to the East and North West of Darlington, aside the lower stretches of the River Tees and running North to South along the coast of Hartlepool Borough.

Significant levels of Industrial floorspace at Seal Sands, the port of Tees and Wilton without a floorspace valuation are excluded from this analysis, and it should be noted that these areas are key locations of specialist employment land for the Process & Chemicals and Advanced Manufacturing industries.

10.3. Office and industrial unit occupancy costs Tees Valley has some of the lowest operating costs in the country with rents, rates and terms significantly lower than all other major UK cities and a fraction of those in and around London. Average rents indicate that Middlesbrough in Tees Valley provides the most affordable rents in the UK, including for Grade A office space as shown in the table below.

Table 10.5. Office, industrial and logistics rents and land value estimations Location Office Rents 2019 Industrial & Logistics Rents, H2 2020 Big Sheds Small Sheds Grade Grade Prime Secondary Land Prime Secondary Land A B Values Values Middlesbrough £13.00 £8.50 £5.00 £4.00 £175k £5.00 £4.50 £175k Newcastle upon £24.00 £16.50 £5.50 £4.75 £250k £6.50 £5.50 £250k Tyne Leeds £30.00 £24.00 £6.25 £5.00 £650k £7.25 £6.00 £600k Manchester £37.50 £28.50 £6.75 £5.50 £700k £7.50 £6.50 £750k Heathrow £23.00 £18.00 £16.00 £13.00 £3.75m £16.50 £13.50 £4m Source: Colliers. Notes: Rents are achievable open market rents for units (£ per sq ft) in prime locations. Grade A/Prime rents apply to new accommodation whilst Grade B/Secondary rents apply to second-hand units built in the 1990s. Office rents apply to units of 10,000 sq ft taken for a 10 year term whilst Big Shed Industrial rents apply to units of 100,000+ sq ft and Small Shed rents apply to units between 10,000 and 30,000 sq ft. Land values are based on prime locations only and relate to 10+ acres for Big Sheds and up to 5 acres for Small Sheds.

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Industrial take-up and vacancy rates

Table 4.1 below shows that the take-up for industrial in Redcar and Cleveland is relatively small, this is because historically most of their industrial activity here has taken place on the STDC. The evidence shows that Middlesbrough market is small in floorspace terms, but there remains a healthy take-up of units. In comparison, Stockton-on-Tees has seen the largest take-up in terms of both floorspace and number of units, which emphasises the large nature of the industrial offer here. In recent years Darlington has seen the number of units taken-up fall but the annual floorspace has been rising, which reflects large units being taken-up here in recent years. Hartlepool in recent years has seen take-up fall significantly, again this is a sign of the lack of suitable stock available here to meet requirements rather than a lack of demand for space.

Table 4-2 below shows the take-up by size of unit broken down by each local authority area. Middlesbrough sees the most take-up under 2,500 sqft of any local authority area with 72% under 2,500 sqft. Both Hartlepool and Darlington also have a high proportion of take-up for small units with 63% and 50% under 2,500 sqft respectively. Both Stockton-on-Tees and Redcar and Cleveland have seen the most take-up for medium sized units with Darlington having 54% of take-up for units sized 2,500 – 25,000 sqft Stockton-on-Tees having 61% of take-up for the same size range. Only Darlington and Hartlepool have seen any take-up of units over 100,000 sqft since 2014.

Table 4-3 below shows the total stock and current vacancy for the Tees Valley region and each individual local authority. The Tees Valley as a whole currently has 535,000 sqft of vacant industrial property against a total stock of 30.2m sqft – this equates to a vacancy rate of 1.8%. When

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compared against the annual average take-up rate for the region of 1.020m sqft, shown in Table 4-1 the current vacancy equates approximately 6 months of supply demonstrating that vacancy is very low.

When broken down by borough level Middlesbrough has the highest amount of vacant industrial stock by floorspace at 171,000 sqft, which equates to 5.3% vacancy. This is partially due to the fact that Middlesbrough is the only area marketing new build property i.e. TeesAmp. In other areas, vacancy is extremely low with Redcar and Cleveland and Darlington – at less than 1%. In terms of total floorspace, the largest market is Stockton-on-Tess, followed by Darlington. This is unsurprising as both have larger than average units when compared to other areas.

Office take-up and vacancy rates

Table 6-1 below shows a breakdown of the take up in the region by local authority area since 2014. The regional average annual take-up is 292,382 sqft - with 2015 seeing the most take-up in a single year at 420,093 sqft. Stockton-on-Tees has the highest average take up at 126,646 sqft followed by Darlington at 59,770 sqft and then Middlesbrough at 55,168 sqft. Stockton-on-Tees also has the highest number of units and floorspace taken-up. In contrast, based on take-up of units and floorspace, the Redcar and Cleveland office market appears virtually non-existent.

Table 6-2 below shows the take-up by the size of unit broken down by each local authority area. Middlesbrough and Redcar have seen the most take-up in small-sized units of all local authority areas with 63% and 64% respectively under 1,000 sqft. Stockton-on-Tees and Hartlepool have seen the most take-up from units between 1,000 – 5,000 sqft at 61% and 53% respectively. Stockton-on- Tees has seen more take-up from 5,000 – 20,000 sqft units than any other area with 29 units in total. This reflects the existing stock which is larger than other areas e.g. Prince’s Wharf. There is very little take-up over 20,000 sqft which is unsurprising as stakeholders, agents etc. report that there is almost no demand for larger units.

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Table 6-3 below shows the total office stock and current vacancy level for the Tees Valley region by each individual local authority area recorded on CoStar. The Tees Valley as a whole currently has 572,000 sqft of vacant office property against a total stock of 7.5m sqft – this equates to a vacancy rate of 7.6%. When compared against the annual average take-up rate for the region of 292,382 sqft, shown in Table 6-1 the current vacancy equates approximately 1 year 11 months of supply demonstrating that vacancy is reasonable.

When broken down by borough level Middlesbrough has the highest amount of vacant industrial stock by floorspace at 176,000 sqft, which equates to 9.2% vacancy. Middlesbrough has examples of large offices in the town centre that are currently empty, and which have little prospect of meeting modern occupier requirements. Some of these offices have proposed change of use to residential under PDR. The two other main office locations, Stockton-on-Tees and Darlington, both have 8% vacancy which is reasonable. Both Redcar and Cleveland and Hartlepool have lower vacancy at 5.1% and 4.3% respectively. This is unsurprising because even though vacancy is low, each of these areas have a small market with less churn of occupiers.

Coronavirus impact

The challenges created by social distancing restrictions mean that many companies have adopted remote working practices, as discussed in the above transport and digital section. Consequently, the demand for commercial property has been on the decline; RICS’s UK Commercial Property Market Survey for 2020 Q3 reports that a net balance of -33% (% experiencing increase less those experiencing decrease) of commercial space occupants had experienced an increase in tenant demand. Further to this, 78% of the survey’s respondents felt that the market was in downturn. This has meant that the supply side of the market has also slowed with the Bank of England’s Summary of Business Conditions Report for 2020 Q4 highlighting a fall in new build commercial space, despite an uptick in the overall property market.

It is possible that, depending on the persistence of current remote working paradigms, the nature of demand for commercial property will fundamentally shift. Commercial spaces may be downsized in lieu of more flexible working arrangements i.e. businesses operating a rota system for staff and so

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not requiring as much floorspace on a day-to-day basis, or that the leasing of properties itself becomes flexible such that contracts are for shorter periods of time. As a result, much current commercial space may be re-purposed for residential or other uses.

10.4. Culture

Tees Valley has always had a small number of successful arts and cultural venues, including the likes of Stockton Arts Centre (ARC) and Middlesbrough Institute of Modern Art (MIMA). In recent years, the range of venues and events has grown with the development of Festival of Thrift, and the Hippodrome and Theatre Hullabaloo at Darlington, to name just a few. Other cultural developments would, once completed, constitute significant additional cultural assets, including Kirkleatham Estate and the combined sites, alongside buildings and artefacts associated with the Stockton to Darlington Railway and Hartlepool Maritime.

The figure below identifies the locations of some of Tees Valley key cultural and visitor attractions as at 2019.

Figure 10.5. Guide to the area at a glance

Source: Enjoy Tees Valley Mini Guide

The range of Tees Valley’s cultural and visitor offer is wide and varied. The assets associated with offer are summarised in Table 10.6 below.

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Table 10.6. Cultural and visitor assets in Tees Valley

Source: Culture and Visitor Sector Analysis and Baseline Insights, Amion Consultants, 2019

Area Profiles

Darlington has a strong industrial heritage including the first railway in the country from Darlington to Stockton (with a bicentenary in 2025), a broad cultural offer including the newly renovated Hippodrome Theatre and a nationally renowned children’s theatre group (Theatre Hullabaloo). As such, the town has further opportunities to grow the visitor offer.

Hartlepool has a rich maritime heritage and is home to the National Museum of the Royal Navy. Plans are in place to develop the Waterfront to create a mix of civic, cultural, leisure and visitor attractions that complement the wider Hartlepool Marina area. The town is home to the Northern School of Art, the leading provider of specialist creative art and design in the north, counting Sir Ridley Scott among its former pupils. It is central to the opportunity to create the biggest film studios outside London on the former council depot site, which will put Hartlepool at the centre of film making in the north.

Middlesbrough’s Central Square will provide modern Grade A office developments and events space. The recent upgrade of the Town Hall facility provides a cultural venue with access to a new range of bars and restaurants, from high street chains through to the quirky Bedford and Baker Street.

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Redcar & Cleveland offers a wide range of outdoor pursuits and culture activities across the borough including the North York Moors National Park, the heritage coastline, the beaches and the towns. These culture activities include festivals (such as The Festival of Thrift) and events, and the provision of new cultural venues including Kirkleatham, which will continue to grow the visitor offer.

Stockton is home to a mix of retail and visitor opportunities with Teesside Park and traditional market towns such as Yarm, whilst in Stockton the vision for a repurposed High Street is being created. This has a focus on culture, including the restoration of the Globe theatre (3,000 seat venue), leisure, heritage and events including Stockton International Riverside Festival (SIRF) and Great North CityGames, to appeal to more visitors. This ambition will also focus on strengthening the links to the river – one of the Tees Valley’s greatest natural assets. The river offers enormous leisure and development potential to maximise the ten miles of tidal controlled river frontage to create a thriving river-based economy, building on successful attractions including the Olympic-standard International White Water Course at the Tees Barrage, the Air Trail ropes course and Preston Park.

10.5. Tourism and visitor economy

In 2019, the visitor economy continued its recent trend of sustained growth. Visitor expenditure surpassed £1bn, an increase of 3% on the previous year’s figure. The number of visitors throughout the year increased by 2% to 20.24m, with a total of 23.06m days spent in the area (up by 2.2% from 2018). Day visits account for the vast majority of this at 18.05m, with 2.19m overnight visitors. Despite this, overnight visitors spend almost twice as much per head as day visitors (£51.54 compared to £27.26). The number of people directly employed in tourism stood at 9,965; when indirect employment is counted, this rises to 12,391, with approximately 121 jobs added since 2018. The food and drink sector accounts for 34% of total expenditure and 36% of employment. The chart below summarises trends over the last five years:

Figure 10.6. Tees Valley tourism industry figures (2019)

25.00 23.06 1200.00 22.46 22.57 21.29 20.60 19.76 19.85 20.24 18.65 1000.00 20.00 18.02 1018.00 962.34 923.41 858.21 800.00 15.00 819.69

600.00 12.39 10.00 11.91 12.07 11.04 11.35 400.00

5.00 200.00

0.00 0.00 2015 2016 2017 2018 2019

Visitor numbers (million) RHS Visitor days (million) RHS Employment (thou's) RHS Total expenditure (£m) LHS

Source: STEAM

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The local authority breakdown shows that Stockton-on-Tees has much higher visitor activity than 4 other LAs, for which the figures on spend, visitor numbers and employment are fairly equally distributed.

Figure 10.7. Tourism numbers by Tees Valley local authority (2019)

7 300

6 250

5 200 4 150 3 100 2

1 50

0 0 Darlington Hartlepool Middlesbrough Redcar and Stockton on Tees Cleveland

Visitor numbers (million) RHS Visitor days (million) RHS Employment (thou's) RHS Total expenditure (£m) LHS

Source: STEAM

In terms of typical spend, the table below summarises the average amount spent by visitors depending on the nature of their visit. Those visitors stopping overnight spend significantly more than those who visit just for the day.

Table 10.7. Visitor spend per person Staying with Serviced Non Serviced All Overnight Day friends and Accommodation Accommodation Visitors Visitors Relatives Spend per person £ 104.49 £ 49.28 £ 36.55 £ 62.55 £ 26.56 per day £ Darlington Spend per person £ 194.81 £ 345.80 £ 86.73 £ 140.63 £ 26.56 per trip £ Spend per person £ 68.99 £ 47.48 £ 36.55 £ 43.09 £ 26.56 per day £ Hartlepool Spend per person £ 130.26 £ 329.88 £ 82.19 £ 97.37 £ 26.56 per trip £ Spend per person £ 77.72 £ 52.34 £ 36.55 £ 47.24 £ 26.56 per day £ Middlesbrough Spend per person £ 144.74 £ 365.45 £ 86.73 £ 105.60 £ 26.56 per trip £ Spend per person £ 92.49 £ 49.14 £ 36.55 £ 50.74 £ 26.56 per day £ Redcar and Cleveland Spend per person £ 154.96 £ 356.61 £ 88.07 £ 120.56 £ 26.56 per trip £ Spend per person £ 80.19 £ 50.32 £ 36.55 £ 44.54 £ 26.56 per day £ Stockton-on-Tees Spend per person £ 149.35 £ 338.30 £ 86.48 £ 105.42 £ 26.56 per trip £ Spend per person £ 87.09 £ 49.28 £ 36.55 £ 49.21 £ 26.56 per day £ Tees Valley Spend per person £ 159.82 £ 344.86 £ 85.79 £ 112.99 £ 26.56 per trip £ Source: STEAM

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Tourism and Coronavirus

The pandemic has had a pronounced adverse impact on the visitor economy in Tees Valley. STEAM’s modelling projects losses of almost half of the GVA generated by the sector, falling from over £1bn to £525.5m for 2020. A substantial proportion of businesses in the creative, culture, tourism and hospitality have reported that their future viability is under threat; internal survey work indicates that, by contrast, 95% of visitor economy businesses had experienced business growth in the 12 months prior to the pandemic. The sector’s decline can therefore be almost entirely attributed to Coronavirus impacts, with for instance social distancing measures limiting the capacity of visitor businesses and travel restrictions reducing tourism from other areas. Should these measures be extended even further, substantial job losses and closures in these sectors can be expected.

10.6. Tees Valley Natural Capital Accounts

The first Natural Capital Account for Tees Valley was developed in 2019, this uses the Natural Capital Indicators of asset quantity, quality and location, and ecosystem services, to be included in local Natural Capital Atlases. Natural Capital Accounts extend traditional accounts by putting economic values on benefits that are not provided through the market. They are presented as an extended balance sheet across the logic chain from ecosystem asset, services and benefits to values as shown in the table below.

At this stage, the Account does not provide trend data over time, or a comparator with other areas (as not all areas have completed an Account to date). It is intended that this data will be available in future years, to provide a fuller understanding of the relative importance of an areas’ natural assets.

In Tees Valley, monetised annual benefits include:

o Recreational visits - £100m p.a. (Capital asset value £3.3bn) o Clean air - £7m p.a. (Capital asset value £235m) o Fisheries/aquaculture - £360,000 p.a. (Capital asset value £12m)

And annual social cost of carbon emission - £5m (Capital asset cost £450m)

The most significant non-monetised benefits in Tees Valley flow from: water abstraction, flood protection, biodiversity, physical and mental health.

Other non-monetised benefits include those deriving from timber, pollination services and other non-market benefits that people gain from nature.

Urban area natural accounts

As part of the ongoing development of its national Natural Capital accounts, ONS have developed indicators identifying the extent of natural land cover and green and blue space within built-up areas. These baseline indicators are summarised below:

• The built-up areas of Tees Valley cover 19,586 hectares (approx. 76 square miles) representing a quarter of Tees Valley’s total geographic area. In terms of population, these built-up areas account for 98% of the total Tees Valley population.

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• Natural land cover e.g. grassland, heath, scrub, orchards and coniferous trees in Tees Valley built-up areas is 5,836 hectares, 29.8% of total Tees Valley built-up area (30.7% in GB as a whole). • Tees Valley blue space i.e. all inland water areas including rivers, lakes, ponds and canals is 117 hectares, 0.6% of Tees Valley built-up areas (1.2% GB). • Functional green space (any green space that has a functional use) is 1,346 hectares, 6.9% of Tees Valley built-up areas (7.1% GB). • Publicly accessible green space (these cover parks and public gardens, playing fields, cemeteries and religious grounds) is 902 hectares i.e. 67.0% of Tees Valley functional green space (67.9% GB). • Non-publicly accessible green space (allotments and growing spaces, golf courses, bowling greens and other sports facilities such as cricket grounds) is 444 hectares. • There are 620 functional green spaces in the built-up areas of Tees Valley of which 368 are publicly accessible.

CO2 emissions

Impact of industry closure in Tees Valley on carbon emissions The North East region as a whole has experienced the largest percentage decline in emissions of any part of the UK over the past decade, partly as a result of industrial closures as the figure below shows.

Figure 10.8. End-user CO2 emissions by region, Index: 2005 = 100

Source: ONS and BEIS 2018 Local Authority Carbon Dioxide Emissions

Tees Valley CO2 emissions have fallen sharply in recent years, from 17,744.1 kt in 2005 to 7022.3 kt in 2018, see Figure 10.9 below. CO2 emissions in 2018 were twice the UK per capita rate (in 2018 Tees Valley averaged 10.4 tonnes per capita and the UK 5.2 tonnes). This reflects the energy intensive nature of the business base in Tees Valley. Managing these emissions whilst continuing to support the Clean Energy, Low Carbon & Hydrogen sector will be a key focus for the region going forward.

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Figure 10.9. Total CO2 emissions by Tees Valley local authority, 2005 to 2018 20000 18000 16000 14000 12000 10000 8000 6000 4000

Kt C02 C02 Kt emitted 2000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Stockton-on-Tees 4474 4354 4437 4460 3418 3664 3032 3524 3429 2968 3110 2764 3017 2649 Redcar and Cleveland 1054310154103439527 8482 4255 3747 8199 9772 8980 7025 2751 2701 2603 Middlesbrough 1044 1050 1055 977 852 859 806 843 772 698 689 649 621 631 Hartlepool 859 854 812 814 755 836 725 760 721 655 631 618 613 605 Darlington 824 806 782 771 699 739 663 693 682 604 598 571 547 534 Source: UK local authority and regional carbon dioxide emissions national statistics: 2005-2018

The above estimates can be broken down by broad grouping as shown in the table below. Whilst emissions are falling across all sub-groups, large industrial installations still account for over half of all CO2 emissions.

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Carbon Emissions from Natural Assets

It is estimated that net emission from natural capital assets in Tees Valley is around 73,000 tonnes of CO2 equivalent per year. This has an annual social cost of around £5m. The value of carbon emission is expected to rise sharply over the next 50 years such that annual costs would reach £26m in 2073, if emissions are not reduced. These emissions are detailed in the table below by LCM (land cover map) habitat classification.

Pollution removal by woodland

The table below shows the estimated value of fine particulate matter less than 2.5 micrometres in diameter (PM2.5) pollution removed by woodland natural assets in Tees Valley; totalling almost 28 tonnes. Redcar & Cleveland accounts for well over half of the PM2.5 pollution removal in Tees Valley.

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Source: Natural Capital & Environmental Economics

Climate change and flood risk

Flooding can have a severe economic toll; the floods that occurred during winter 2019/20 are estimated to have caused losses of around £333m across the UK. However, recent investment in flood defences, totalling £2.7bn since 2017, has meant that these costs are substantially reduced- in this same time period, approximately £29.4bn has been saved as a result of households being better protected. For instance, estimates show that, without these safeguards, the costs of the winter 2019/20 floods would have been 14 times greater in magnitude.

The Environment Agency’s recently published Flood and Coastal Erosion Risk Management Strategy outlines the risks to the UK of global-warming induced tidal rises. Since 1900, sea levels have risen by 16 cm, and, should current trends continue, by 2100 sea levels may be over a metre higher, leaving the country more vulnerable to flood damages. As of 2020 there are currently 5.2m UK homes and businesses at risk of flooding. Tidal flooding in the Tees Estuary can result in flooding of low-lying areas. Presently, flood risk around Port Clarence and the heavily industrialised areas around Teesmouth are of particular concern. The Environment Agency’s (EA’s) Tees Tidal Flood Risk Management Strategy (June 2019) identifies the following areas as being at significant risk from flooding today:

• Greatham South/Port Clarence • Billingham • Greatham North • Riverside Park • North Ormesby • Transporter South

In addition, the Oil Refinery and Teesside Park, presently at low and moderate risk respectively, are expected to be at significant risk by 2070 without any intervention. Flood risk is also expected to increase from low to moderate in Portrack. However, the EA’s flood risk management proposals, if implemented, would reduce all the above area’s flood risks to low long-term flood risk.

Over 20,000 people and 4,000 non-residential properties are presently at risk of flooding from rivers and the North Sea in the Tees catchment area. This geography is depicted in Figure 10.10.

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Figure 10.10. Tees Catchment Overview

Source: Northumbria River Basin District Flood Risk Management Plan 2015-21, Part B – Sub Areas in the Northumbria River Basin District, March 2016

The figure below from the government’s flood risk website shows the main at-risk areas in the Tees Valley (a darker shade of blue indicates a higher probability of flooding).

Figure 10.11. Tees Estuary Flood Risk

Source: https://flood-warning-information.service.gov.uk/long-term-flood-risk/map

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10.7. Personal well-being and health Health – both physical and mental – and well-being is a key driver of local economic performance. A fit, lively and engaged labour force is significantly more productive than one that is not. Beyond the obvious productivity improvements flowing from simply reducing the number of days lost in absenteeism due to ill health, research (Oswald et al) suggests that workers displaying ‘positive affect’ i.e. higher levels of happiness are up to 12% more productive.

Physical and mental activity, including activities such as volunteering, benefits both body and mind. Sport England’s Active lives survey records the number and rate of physically inactive adults at the local level. The survey also records those participating in volunteering.

Table 10.8 below shows the wide variation in activity levels across Tees Valley. 160,200 or almost three in ten of Tees Valley adults are classed as physically inactive; this rate is higher than those for the North East and England. In contrast, the proportion of adults rating as physically active or fairly active are below the regional and national rates. Stockton, Middlesbrough and Hartlepool in particular record relatively high levels of physical inactivity.

Table 10.8. Active lives survey, May 2019-20 Active Fairly active Inactive

Number % Number % Number % Hartlepool 40300 53.3% 9900 13.0% 25500 33.7% Middlesbrough 64500 58.0% 10900 9.8% 35800 32.2% Redcar and 68400 60.9% 11400 10.1% 32600 29.0% Cleveland Stockton-on- 98100 62.1% 14800 9.4% 45000 28.5% Tees Darlington 54000 62.3% 11300 13.0% 21400 24.7% Tees Valley 325,400 59.8% 58300 10.7% 160200 29.5% North East 1317300 60.1% 241700 11.0% 633700 28.9% England 28558100 62.8% 5338500 11.7% 11573600 25.5% Source: Active Lives Survey, Sport England. Inactive defined as undertaking less than 30 minutes of physical activity (including walking, cycling, dance, fitness or sport) a week; fairly active defined as 30-149 minutes; active defined as 150+ minutes.

ONS Health Index

The Health Index for England is a new measure ONS are currently developing to understand the health of the nation. It uses a broad definition of health, including health outcomes, health-related behaviours and personal circumstances, and wider determinants of health that relate to the places people live, such as air pollution. The Health Index provides a single value for health showing how health changes over time and can be broken down to focus on specific topics to show what is driving these changes.

Long-term health conditions are associated with differing labour market outcomes; 51.2% of the economically inactive population in Tees Valley have health conditions or illnesses lasting longer than 12 months. Furthermore, the unemployment rate for those classed as disabled under the Equalities Act in Tees Valley is 14.2%, substantially higher than the rate of 4.9% for people without these characteristics (Source: ONS APS, NOMIS).

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Similarly, to the Indices of Deprivation indicators, of particular significance in the Tees Valley is health’s strong correlation with economic inactivity and unemployment. Unhealthy people have more difficulties engaging successfully with the labour market and unemployment itself tends to lead to unhealthy people, both physically and mentally. Tees Valley has some of the highest levels of economic inactivity, unemployment and health issues anywhere in the country.

The overall health indices for all five Tees Valley local authorities are below the national average and have deteriorated since 2015. However, there is a clear distinction to be made between the health of the people e.g. mortality, physical and mental health and the lives they lead e.g. unemployment, working conditions and education, where Tees Valley scores relatively poorly, as compared with the health of the Tees Valley itself as a place e.g. access to green space, housing and services where it scores relatively highly. These results are summarised in the tables below.

Tees Valley health indices

Healthy people Healthy lives Healthy places Overall Health Index 2015 2018 2015 2018 2015 2018 2015 2018 Darlington 94.8 92.4 95.2 97.7 103.7 101.3 97.9 97.2 Hartlepool 89.0 87.2 90.4 87.5 103.9 102.1 94.4 92.3 Middlesbrough 92.6 87.8 87.7 89.7 100.6 97.4 93.6 91.6 Redcar & Cleveland 92.8 90.4 92.1 92.3 104.0 104.9 96.3 95.9 Stockton-on-Tees 92.7 91.0 95.7 95.4 103.4 102.3 97.3 96.3 England 100.0 98.9 100.0 101.4 100.0 99.8 100.0 99.7 Source: ONS.

Subdomain summary by local authority

Darlington Hartlepool Middlesbro’ Redcar and Stockton Cleveland Healthy lives Physiological risk factors 87.2 84.6 96.2 79.2 91.5 Behavioural risk factors 95.1 81.0 82.2 90.7 85.1 Unemployment 101.4 81.2 87.3 97.7 95.4 Working conditions 102.9 89.1 99.5 88.5 96.3 Risk factors for children 95.8 81.9 80.2 87.8 91.1 Children and young people's 100.7 95.3 87.9 96.1 101.8 education Protective measures 100.8 99.5 94.5 106.2 106.8 Healthy people Mortality 95.4 83.8 79.5 90.1 88.3 Physical health conditions 86 86.0 95.7 86.8 89.5 Difficulties in daily life 89.5 81.1 81.9 84.8 85.9 Personal well-being 104.6 97.9 101.1 105.5 106.3 Mental health 86.7 87.4 81.0 84.9 85.1 Healthy places Access to green space 105.5 108.2 107.6 107.5 106.5 Local enviroment 106.4 111.0 104.9 111.0 106.9 Access to housing 109.7 111.7 103.4 115.3 110.5 Access to services 101.6 102.5 104.7 102.6 101.9 Crime 83.4 77.0 66.5 88.2 85.8 Source: ONS

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Well-being in Tees Valley

Personal well-being indicators provide alternative metrics in understanding the local economic environment and in helping to stimulate inclusive growth. ONS have identified four well-being measures covering:

• Life satisfaction – overall, how satisfied are you with your life nowadays? • Worthwhile – overall, to what extent do you feel the things you do in your life are worthwhile? • Happiness – overall, how happy did you feel yesterday? • Anxiety – overall, how anxious did you feel yesterday?

People are asked to respond on a scale of 0 to 10 with 0 ‘not at all’ and 10 ‘completely. Thresholds are labelled as per the table below:

Table 10.8. Well-being indicator group scales Life satisfaction, worthwhile and Anxiety scores happiness scores

Response on Label Response on Label

an 11 point scale an 11 point scale

0 to 4 Low 0 to 1 Very low 5 to 6 Medium 2 to 3 Low 7 to 8 High 4 to 5 Medium 9 to 10 Very high 6 to 10 High

Source: ONS

The figure below shows the scores for each Tees Valley local authority with comparison to North East rates, benchmarked against the national average.

Figure 10.12. Well-being ratings in Tees Valley, year ending March 2020 Anxiety (UK average 3.05) Happiness (UK average 7.48)

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Life Satisfaction (UK average 7.66) Worthwhile (UK average 7.86)

Source: ONS

Key findings

• Well-being indicators are closely correlated to the deprivation measures observed in the Indices of Deprivation, where Middlesbrough and Hartlepool both lie amongst the ten most deprived local authority areas in the country. • Middlesbrough and particularly Redcar & Cleveland recorded relatively low levels of anxiety (and therefore higher well-being) compared to other areas. Hartlepool showed the highest levels of anxiety. Whilst Darlington, Middlesbrough and Redcar & Cleveland anxiety levels were broadly unchanged on the previous year, Stockton and Hartlepool witnessed large increases in anxiety. • Happiness, life satisfaction and worthwhile indicators showed broadly similar results in terms of how each local authority performed. Middlesbrough consistently recorded the lowest levels of well-being across all three indicators in contrast to Darlington which recorded the highest. Redcar & Cleveland and Stockton recorded well-being scores at or around the national average whilst Hartlepool recorded relatively low levels of well-being with low scores in happiness and considering things being worthwhile in particular. • Whilst all districts saw falls in well-being compared to a year ago, Middlesbrough recorded the largest declines in each of happiness, life satisfaction and worthwhile indicators.

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10.8. Place and Culture SWOT analysis

Strengths Weaknesses A rich industrial heritage, diverse landscape, strong Lack of wider awareness of Tees Valley and what events programme and wide range of local it has to offer. attractions help make Culture and Tourism one of the fastest growing sectors in employment terms. Negative perceptions, particularly related to the industrial legacy of the region, potentially Some of the lowest business overhead costs in the stemming from: country combined with affordable housing and a • Poor quality, low value existing housing low cost of living. stock.

• Numerous pockets of deprivation, Recently established destination marketing offer, particularly in Middlesbrough, with with engaged leisure/ attraction businesses. households recording low levels of well-

being and high levels of fuel poverty. Strong educational offer via Teesside University • Its status as a post-industrial region, and and the Northern School of Art in Middlesbrough the economic challenges it faces as a and Hartlepool. result of this.

Strong creative and digital hub with potential for Low levels of Cultural Lottery investment expansion and innovation e.g. Hartlepool’s BIS compared to national average and other parts of centre for business start-ups in the creative the North East. industries.

Small cultural infrastructure, unused to Tees An attractive and healthy place to live with Valley-wide working, matched by low levels of outstanding and easily accessible coast and cultural engagement across all five boroughs (in countryside. the bottom 20-30% nationally).

Year on year growth in tourism (up until 2020), No knowledge and skills development with visitor expenditure topping £1bn in 2019. programme for the culture sector.

Highly skilled sector businesses and a growing Potential lack of clarity or connectivity between number of networks. culture, creative industry and leisure ‘sectors’.

Highly collaborative and successful partnerships Lack of a coordinated approach towards design across the environment, culture and university quality across all areas of placemaking due to a sector. reduction of in-house skills, expertise and

capacity within LAs in recent years.

Rates of fuel poverty in Tees Valley, while below the English average, were well above the rate for the North East. Middlesbrough stands out as having a very high proportion of fuel poor households.

Opportunities Threats Development of a regional strategic marketing Potential growth constraint from labour and skill offer. shortages.

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A growing culture offer, with the potential to help Challenge to attract and retain talent. reverse the declining working age population and make Tees Valley the place to live, work or visit. Competition from other HEIs and urban cultural hubs. Attraction of wider visitor numbers and spend from family and friends of students at the Durham Lack of skilled ‘employment ready’ workforce University’s International Study School at Queen’s results in lost inward investment. Campus, Stockton-on-Tees. Competition from other cities/ city regions Collaborative investment between culture and developing a strong place-based cultural offer. education / skills sectors to develop talent pipeline & apprenticeship programmes for cultural and Lack of capacity in the culture sector to respond creative careers. to opportunities.

Untapped potential to increase business Increasing flood risk and threat to key industrial engagement and partnerships for mutual benefit. infrastructure.

Developing Tees Valley as an exemplar region for Relatively high levels of physical inactivity and Clean Growth - potential to contribute significantly health deprivation combined with low rates of to the country’s CO2 reduction targets. life satisfaction and happiness impacting negatively on productivity. The government’s recent Planning White Paper may provide much needed drive and focus for placemaking in the future.

Borderlands Creative and People and Places £3m Programme for South Tees investing in our most deprived communities and stimulating our cultural sector.

Middlesbrough Environment City national pioneer project under the Climate Action Fund worth over £1.5m. This will help the public support and buy in to the clean growth agenda.

Inward investment for our natural assets and nature recovery including the Environment Agency’s £3m flood protection/nature recovery project at Greatham Creek.

Potential for increased economic contribution from the social enterprise sector.

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Section 11: Performance Gaps and SEP 2016 Baselines

Figure 11.1 summarises and quantifies some of the key metric performance gaps identified in the Executive Summary. The bullet points below describe the data.

Figure 11.1. Key metrics performance gaps

• Output (GDP) – Gap equals GDP required to match UK GDP per head. Source: ONS, 2018 estimates. • Productivity (GVA per hour worked) – Gap equals GVA required to match UK GVA per hour worked. Source: ONS, 2018 estimates. • Enterprise (Number of registered enterprises) – Gap equals number of enterprises required to match UK enterprises per resident population aged 16+. Source: ONS, 2020 estimates. • Employment (Number of employed residents) – Gap equals number of employed residents aged 16 to 64 required to match UK employment rate. Source: ONS, July 2019 / June 2020 estimates. • Qualifications (Number of residents with an NVQ4 qualification or above) – Gap equals number of residents aged 16 to 64 required to match proportion of UK residents with an NVQ4+ qualification. Source: ONS, 2019 estimates. • Commercialisation (Firms introducing either a new or significantly improved product or service) – Gap equals proportion of firms that introduced either a new or significantly improved product or service between 2014 and 2016 required to match the LEP average rate. Source: Enterprise Research Centre 2019.

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SEP 2016 baseline information and updates

The tables below summarise the baseline and progress to date for each the six thematic building blocks that underpin the SEP’s overarching target of generating 25,000 additional new jobs across the Tees Valley between 2016 and 2026. Note that baseline figures are taken from data confirmed as correct at the time of writing the SEP. Where there have been retrospective revisions to ONS data sets, this is explained in the notes section for each metric. The latest update provides an indication of the direction of travel, in relation to achieving SEP ambitions.

SEP target – Business Density: 10% Growth: reducing the gap to 72.2% of the UK rate (or 344 enterprises per 10,000) Definition: Business Density is defined as the number of enterprises registered in an area as a percentage of the overall number of residents (16+). SEP baseline (2015 data): 307 enterprises per 10,000 adults or 65.6% of UK rate. Latest updated data: 2015 – 16,500 enterprises at 306 per 10,000 adults or 65.5% of UK rate. 2016 – 17,100 enterprises at 317 per 10,000 adults or 65.6% of UK rate. 2017 – 17,500 enterprises at 323 per 10,000 adults or 64.5% of UK rate. 2018 – 17,230 enterprises at 318 per 10,000 adults or 63.7% of UK rate. 2019 – 17,765 enterprises at 327 per 10,000 adults or 64.8% of UK rate. 2020 – 17,610 enterprises at 324 per 10,000 adults or 63.7% of UK rate. Notes: Latest update reflects ONS retrospective data revisions to population estimates.

SEP target – Jobs Density: 55% Growth: or a jobs density figure of 0.75 (related to a reduction of the jobs density gap to 0.07 or approximately 25,000 additional jobs) Definition: Jobs density is defined as the number of jobs in an area divided by the resident population aged 16-64 in that area. For example, a job density of 1 would mean that there is one job for every resident aged 16-64. SEP baseline (2014 data): 0.12 gap. Tees Valley currently has jobs density of 0.70 against a UK average of 0.82. Latest updated data: 2014 - 0.11 gap. Tees Valley job density of 0.70 (292,000 jobs) v UK average of 0.81. 2015 – 0.11 gap. Tees Valley job density of 0.72 (299,000 jobs) v UK average of 0.83. 2016 – 0.15 gap. Tees Valley job density of 0.70 (292,000 jobs) v UK average of 0.85. 2017 – 0.15 gap. Tees Valley job density of 0.71 (293,000 jobs) v UK average of 0.86. 2018 - 0.16 gap. Tees Valley job density of 0.70 (291,000 jobs) v UK average of 0.86. 2019 - 0.14 gap. Tees Valley job density of 0.72 (299,000 jobs) v UK average of 0.86. Notes: Latest update reflects ONS retrospective data revisions to job density estimates. Note also that the job density estimates above were not available for Tees Valley until after the SEP was published. Once they were available then the jobs total estimate element became the official estimate of the total number of jobs in Tees Valley. These official estimates replace the previous informal method of summing BRES employee jobs estimates with APS self-employment to obtain Tees Valley total jobs. The jobs total of 303,500 quoted in the SEP (2015 estimate) was calculated in this fashion.

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SEP target – GVA per hour worked: 30% Growth: reducing gap to 94% of UK average or £29.15 per Tees Valley worker Definition: ONS’s preferred measure of productivity is Gross Value Added (GVA) per hour worked. This measure removes employment rate, economic inactivity, demographic and commuting considerations with GVA per head and work pattern issues with GVA per job. SEP baseline (2014 data): £28.30 representing 91.3% of the UK average Latest updated data: 2014 – £29.2 representing 91.6% of UK rate 2015 – £30.2 representing 92.1% of UK rate 2016 – £30.6 representing 92.0% of UK rate 2017 – £31.3 representing 91.4% of UK rate 2018 – £31.8 representing 90.9% of UK rate Notes: Latest update reflects ONS retrospective data revisions to GVA per hour worked estimates.

SEP target – Population: 6% Growth: increasing the Tees Valley population to 706,200 by 2026 Definition: Population projections provide an indication of the future size and age structure of the population based on mid-year population estimates and a set of assumptions of future fertility, mortality and migration. SEP baseline (2014 data): Population growth rate of 2.61% and a population figure of 666,200. Latest updated data: 2014 – 667,000 2015 – 668,300 2016 – 671,000 2017 – 672,500 2018 – 674,300 2019 – 675,900 Notes: Latest update reflects ONS retrospective data revisions to population estimates.

SEP target – CO2 emissions: 25% Reduction on 2005 baseline to 12.5m tonnes Definition: CO2 emissions relates to the following sectors: Industry, Road Transport, Public and Commercial, Other Transport, Agriculture and land use and waste. SEP baseline (2005 data): 16.7m tonnes (including 825 for Darlington, 862 for Hartlepool, 1,030 for Middlesbrough, 10,427 for Redcar & Cleveland and 3,520 for Stockton). Latest updated data: 2005 – 17.7m tonnes (including 824 for Darlington, 859 for Hartlepool, 1,044 for Middlesbrough, 10,543 for Redcar & Cleveland and 4,474 for Stockton). 2015 – 12.1m tonnes (including 598 for Darlington, 631 for Hartlepool, 689 for Middlesbrough, 7,025 for Redcar & Cleveland and 3,110 for Stockton). 2016 – 7.4m tonnes (including 571 for Darlington, 618 for Hartlepool, 649 for Middlesbrough, 2,751 for Redcar & Cleveland and 2,764 for Stockton). 2017 – 7.5m tonnes (including 547 for Darlington, 613 for Hartlepool, 621 for Middlesbrough, 2,701 for Redcar & Cleveland and 3,017 for Stockton). 2018 – 7.0m tonnes (including 534 for Darlington, 605 for Hartlepool, 631 for Middlesbrough, 2,603 for Redcar & Cleveland and 2,649 for Stockton). Notes: Latest update reflects ONS retrospective data revisions to CO2 emissions estimates.

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SEP target – NVQ Level 4: 20% Growth: equating to 36% of residents having a NVQ Level 4 qualification Definition: NVQ Level 4 is defined as the percentage of Tees Valley residents aged 16-64 who are qualified to a NVQ Level 4 or above. This equates to a degree level qualification. SEP baseline (2015 data): 30% of residents aged 16-64 presently have a NVQ Level 4 qualification Latest updated data: 2015 – 125,300 or 30.4% of residents aged 16-64 2016 – 126,600 or 30.8% of residents aged 16-64 2017 – 123,700 or 30.1% of residents aged 16-64 2018 – 125,700 or 30.6% of residents aged 16-64 2019 – 120,700 or 29.6% of residents aged 16-64 Notes: Latest update reflects ONS retrospective data revisions.

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Section 12: Bibliography

The following outlines key sources under each section of the Economic Assessment.

Further material is available at: https://teesvalley-ca.gov.uk/research-intelligence/

SEP 2016 Baseline sources • Business Density – ONS, NOMIS: UK Business Counts - Enterprises and Mid-year Population Estimates. • Jobs Density - ONS, NOMIS: Jobs Density. • GVA per hour worked – ONS: Sub-regional Productivity: Labour Productivity (GVA per hour worked and GVA per filled job) indices by Local Enterprise Partnership. • Population – ONS, NOMIS: Mid-year Population Estimates.

• CO2 emissions – BEIS: UK local authority and regional carbon dioxide emissions national statistics: 2005 to 2018. • NVQ Level 4 – ONS, NOMIS: Annual Population Survey.

Section 3: Area Profile Sources: ONS, PHE Coronavirus: long-term health effects, DEFRA, MHCLG, Census, TVCA, Teesworks, Social Mobility Commission, Joseph Rowntree Foundation UK Poverty Report 2020.

Section 4: High Streets Sources: ONS, Centre for Cities.

Section 5: Economic Growth and Productivity Sources: ONS, Annual Business Survey, Economic Modelling Specialists International (EMSI), HMRC, HMG, DIT, DfT, Bank of England, TVCA, OBR.

Section 6: Business Growth Sources: ONS, TVCA, ScaleUp Institute.

Section 7: Education, Employment and Skills Sources: DfE, Higher Education Statistics Agency (HESA), ONS, Economic Modelling Specialists International (EMSI), Education Skills Funding Agency (ESFA), Burning Glass Labour Insight, Working Futures.

Section 8: Research & Development, Innovation and Energy Sources: Roper and Turner (2020), Enterprise Research Centre, Nuffield Trust, GovGrant, BEIS, HMRC, Nesta (2020), NAO (2016), ONS, HESA, Smart Specialisation Hub, UK Research and Innovation; R. Harris, April 2019, Harris and Yan (2019), TVCA Specialist data requirements to inform the Local Industrial Strategy, Durham University Business School, TVCA, Vivid Economics.

Section 9: Transport & Digital Infrastructure Sources: Census, DfT, Connect Tees Valley, thinkbroadband.com, BEIS, UK Civil Aviation Authority, TVCA, ONS faster indicators, Ofcom, ONS.

Section 10: Place and Culture Sources: ONS, Valuation Office Agency (VOA), MHCLG, Colliers, BEIS, Natural Capital Accounts and Environmental Economics, Environment Agency, Scarborough Tourism Economic Activity Monitor (STEAM), Active Lives Survey; Oswald et al, 2009, Happiness and Productivity, IZA Discussion Paper, Aspinall Verdi Tees Valley Office and Industrial Workspace Availability Study 2019, Amion, Rightmove.

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