In our previous blogs (here, here, here, here …), we discussed about productivity and why it is so important on a national level but also on the firm level as our cycle graph explains.
That’s why our latest Regional Manufacturing Outlook dedicated a productivity section to each of the UK regions and countries and today we would like to share with you some of these results.
When you aggregate the sectors, our capital is on the front seat
Let’s start with the whole economy performance.
It should not be a surprise to see London at the top with productivity 27.8% higher than the UK average. The capital benefits particularly from its highly profitable firms not only in the financial service sector but also in business services and information and technology. Thanks to this, London wages are also the highest paid in the entire UK.
The South East ranks second just above the UK average with all the other regions/countries below the UK average which is extremely skewed by the outstanding London’s performance.
At the bottom of the table we can find Wales with productivity roughly 18% lower than the national average.
When looking at manufacturing, the situation is quite a different one
ONS also provide regional productivity by industry and we can clearly see that the picture is quite different from the one for the whole economy.
First of all, the difference between the most productive manufacturing region and the least productive is not as big as the one for the whole economy.
Secondly, the ranking is quite different with the North West top of the table with a productivity 15.8% above the UK manufacturing average, closely followed by Scotland. To complete the list of the regions above the UK manufacturing productivity average, we have the South East and the East of England.
London in this case is performing quite poorly with a productivity roughly 10% lower than the national average with only the East Midlands recording an even lower manufacturing productivity.
We like to go granular
In our productivity report, one of the key messages was to recognise the differences between the whole economy and specific sectors. We also underlined that manufacturing is not homogeneous and, to have a proper analysis, it is necessary to check subsector’s performances, weaknesses and strengths. Well, in our latest Regional Manufacturing Outlook, we continued this approach and we tried to check productivity performances at its lowest possible level.
The lowest level of regional granularity that the ONS provide is sub-regional productivity (NUTS 3 for those familiar with this breakdown).
The results are only provided for the whole economy and not by sector, however it is interesting to see how certain areas have large disparities within the region, whereas others do not appear to be affected by this divergence.
The bottom two performers are Yorkshire & Humber, and Wales where their sub-regional top performers (North and North East Lincolnshire and Central Valleys respectively) having a productivity just a few points above the regional average.
On the other hand, a few of the regions which we have seen being below the national average have areas with productivity higher than the UK average.
In the graph these are those going from the East Midlands where Derby has a productivity 2.4% higher than the UK average to the North West where the Cheshire East area is 17.3% more productive than the national average.
The Cheshire performance is clearly connected to some of the manufacturing excellence such as their famous pharmaceutical's hub. This result could be already seen in the manufacturing productivity chart where North West was on top.
For more about our Regional Manufacturing Outlook, you can find the complete report here or you can check out Martyn’s blog or video below.