NUTS to the North-South Divide
By Esmond Birnie, Chief Economist in Northern Ireland
Every few years sees a resurgence of angst about a North-South Divide in the UK economy and it’s that time again. While it’s true that there are some significant differences between the UK regions, the reality is much more complex than merely an inexorable widening of the prosperity gap.
First of all, the performance of different regions in recent years does not fit a simple North-South pattern. Because we do not have measures of inflation specific to individual regions, recent comparisons of changes in living standards have to be made in nominal terms. On this basis, according to the Financial Times[1], UK Gross Value Added (GVA) per head grew by a total of 1.5% between 2007 and 2010 (which implies a real terms decline). But according to the latest ONS data[2] , the three top performing regions in terms of growth were in very different parts of the country - London at 3.9%, Scotland 3.7% and the East Midlands 1.6%. Nor is there any clear pattern in terms of the weaker performing regions, as the four sluggards were Yorkshire and Humberside at 0.1%, West Midlands -0.2%, East of England -1.8% and Northern Ireland, at a worrying -2.3%. Again, this pattern is not a simple “North-South divide”. According to that view of the world, a number of regions appear in the “wrong” list.
How does the data look if we take a longer perspective? Divide regional GVA, including that produced by incoming commuters, by the regional resident population to get GVA per capita and London is the top performer amongst the larger (so-called NUTS1) regions. (NUTS is Eurospeak for Nomenclature of Territorial Units for Statistics and is how we reference subdivisions of countries for statistical purposes). London boosted its performance from 156% of the UK average in 1997 to (a provisional) 171% in 2010, while at the other end of the scale, Wales was the worst performing NUTS region, posting a decline from 78% in 1997 to 74% in 2010 (though these figures do not adjust for differences in the cost of living between London and Wales).
But you can’t stop there because there are also significant variations within each of the NUTS1 regions. Get down to counties and cities at the NUTS3 level and we discover that two of the five richest UK ‘regions’ in 2009 - Edinburgh and Belfast - are actually in the “North”. True, Belfast’s relatively favourable standing is surprising, and partly reflects the contribution to the city’s economy made by commuters (some in relatively well paid public sector jobs) who are resident elsewhere in Northern Ireland. In fact, there may be a number of cities across the “North” (e.g. York, Leeds, Glasgow and Cardiff) with measured GDP per head above average which is “inflated” by this commuter factor. The presence of some high productivity manufacturing may also make a contribution.
In fact, the region with the greatest internal differences is London. The Inner West of the capital has a GVA per capita of around £109,000 – eight times that of London’s Outer East and North. In simple multiplication terms, the East- West divide in London is greater than the FT’s so-called North- South divide. So the moral of this particular story is that nothing – particularly in regional economics – is as simple as it seems.
Contact details
Email: Esmond Birnie
Tel: +44 (0)28 9041 5808
[1] Budget 2012 Analysis 22 March 2012, p. 22
[2] 14 December 2011, “Regional, sub-regional and local Gross Value Added 2010”, Statistical Bulletin
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