Evidence Review Has Focused on the Following Priority Themes for the NEIER 1
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A review of existing evidence to inform the North East Independent Economic Review Final report 20 December 2012 A review of existing evidence to inform the North East Independent Economic Review Final report Contents 1. Introduction .......................................................................................................................... 1 2. Overview of NELEP performance ....................................................................................... 3 3. Public policy ....................................................................................................................... 26 4. The North East in UK, European and global markets .................................................... 30 5. Labour markets and skills ................................................................................................. 34 6. Infrastructure and land markets ....................................................................................... 41 7. Private and social enterprise ............................................................................................ 46 8. Capital markets .................................................................................................................. 52 9. Conclusions ........................................................................................................................ 56 Annex A: Bibliography ........................................................................................................ A-1 Annex B: Supporting data tables ....................................................................................... B-1 Contact: Rebecca Pates Tel: 0161 475 2112 email: [email protected] Richard Hindle 0788 443 7607 [email protected] Approved by: Richard Hindle Date: 19/12/12 Director www.sqw.co.uk 1. Introduction 1.1 During 2012, North Eastern Local Enterprise Partnership (NELEP) has been engaged in an on-going process to determine future direction, against changing economic circumstances, and to build the capacity needed to deliver against these emerging priorities. In September 2012, NELEP asked a team of leaders from finance, industry, public and civil society to produce a strategic and constructively critical view of the economy of the area, the challenges it faces, and some headline priorities. The North East Independent Economic Review (NEIER) will be led by Lord Andrew Adonis and, based on the evidence gathered, will produce a series of strategic policy recommendations for NELEP, LEP partners in the North East and Central Government by Spring 2013. 1.2 NELEP, supported by SQW, has already been developing its short-term business plan. To inform both the NEIER and the business planning process, SQW was asked to undertake a headline review of the existing evidence on the local economy. The purpose of the review was to explore the current performance of the NELEP area in terms of strengths and weaknesses, recent trends and underlying drivers, and identify opportunities and challenges looking forward. The evidence review has focused on the following priority themes for the NEIER 1: • Public policy • The North East in UK, European and global markets • Labour markets and skills • Infrastructure and land markets • Private and social enterprise • Capital markets. 1.3 SQW worked closely with the NELEP Executive Team to identify material for this review. It draws upon ninety relevant and up-to-date evidence documents, including those produced as part of the Tyne and Wear City Region Economic Review in 2010/11 and wider evidence relating to Northumberland and County Durham. To supplement the review of existing evidence, SQW also undertook a headline analysis of key statistics to provide the most up-to- date picture on the performance of the NELEP area. 1.4 In addition to SQW’s review of existing evidence, the NEIER will involve two calls for evidence from regional partners and the preparation of submissions by sectoral, professional and community groups across the NELEP area. The full evidence base will be synthesised and considered by the Review Team, who will provide their recommendations and strategic actions for NELEP and others in early 2013. 1 Source: Terms of reference for an Independent Economic Review of the North East 1 Report structure 1.5 This report draws together the key messages from existing literature relating to the performance of the NELEP against the themes above. It is unlikely to present any real surprises to local stakeholders given that it is based on existing evidence, but should provide a reasonably comprehensive summary of strengths, weaknesses, opportunities and challenges for the NELEP area to inform the forthcoming NEIER. It draws on a wide range of available evidence, and gains from assembling material from different perspectives for different purposes at different times, while being supplemented in places by more recent information. But it is essentially a compendium, rather than a single consistent analytic assessment. The report was discussed with NELEP at a meeting in mid-December: this final report takes into account comments received at that meeting. 1.6 The report is structured as follows: • Section 2 presents an overview of NELEP socio-economic performance, based on the most up-to-date secondary datasets • Sections 3-8 presents the key messages from a review of existing literature on the themes of public policy, the North East in UK Europe and global markets, labour markets and skills, infrastructure and land markets, private and social enterprise, and capital markets • Section 9 summarises the findings and provides conclusions. 1.7 The report is supported by two annexes: the bibliography is at Annex A; Annex B contains the detailed data which support Section 2. 2 2. Overview of NELEP performance 2.1 In this section, key statistics are presented on the economic performance and socio- economic characteristics of the North Eastern Local Enterprise Partnership (NELEP) area. The information is based on the most up to date data for the LEP area, set against national benchmarks. The data has been sourced by SQW for the purposes of this study, to provide a more recent picture of NELEP performance than available from the literature. The related detailed data can be found in Annex B. 2.2 We have used the most up-to-date evidence available throughout the section. However, the latest year in which evidence has been published varies and so the detailed statistics are not directly comparable in all cases: this is noted in the text. Some survey-based data sets are prone to sampling errors. Therefore, where possible, we have taken three-year averages of datasets such as the Annual Population Survey to remove any outliers amongst the data which arise from sampling error alone. Key messages and statistics Figure 2-1: Key messages • The NELEP area lags the England average, and to a lesser extent the other northern regions, on almost all headline economic indicators (as illustrated in Table 2-1 below). • GVA per head across the LEP area is below the national average and, despite a higher growth rate in recent years than the North East region, the gap with the national average is still widening. • Key drivers of the GVA gap in the NELEP area are low employment rates, a low proportion of residents with high-level skills, and low enterprise rates. • The productivity of those in work in the NELEP area also acts as a drag on GVA performance, underpinned by structural change from higher productivity manufacturing jobs to lower paid service sector jobs (dominated by public sector employment and low occupational levels). Source: SQW Table 2-1: Key drivers of economic performance Employment rate % of Population 16-64.2011 (perGVA head) 2009 Productivity per (GVA job) Enterprise (VAT registr’nsper 10,000 WAP) Skills of (% WAP with NVQ4+) Innovation (% of employees in KIBS) Performance compared to the England average where / indicates higher/lower levels than the England average, and = indicates similar levels to the England average NELEP 66% = 65% £14,621 £37,533 448 26% 52% area* North 66% = 65% £15,304 £37,551 445 25% 52% East North 68% = 65% £16,884 £39,178 562 28% 52% West Yorkshire 68% 64% £16,512 £39,776 549 27% 49% and Humber England 70% 65% £20,498 £43,928 655 31% 54% 3 Source: SQW analysis Note: GVA data is only available from ONS at NUTS3 level and so a broad LEP area has been used (Durham CC, Sunderland, Tyneside and Northumberland) Economic Output 2.3 Gross Value Added (GVA) is the main measure of economic output generated by an economy that is used by the Government 2. Latest data shows that the North East Local Enterprise Partnership area 3 generated £29.2 billion in GVA in 2009, of which half was produced in Tyneside (Newcastle upon Tyne, Gateshead, South Tyneside, North Tyneside). Together this area creates 74% of the North East’s GVA. 2.4 Figure 2-2 shows GVA growth since 1997 from the LEP area compared to the North East, North West, Yorkshire & Humber and England average (indexed to 1997). The chart shows that the LEP area has experienced a higher growth rate than the North East, North West and Yorkshire & Humber regions. However, the gap between the LEP area and England has widened in recent years. Figure 2-2: GVA growth (1997-2009), Index 1=1997 1.80 1.70 1.60 1.50 1.40 1.30 Index 1=1997 1.20 1.10 1.00 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 LEP area North East North West Yorkshire and Humber England Source: SQW analysis of ONS data. GVA at current basic prices. Note: GVA