Section 1 Overall Competitiveness
1. Gross Value Added (workplace basis) and gross disposable household income per head
Gross Value Added (GVA) and Gross Disposable Household Income (GDHI) measure different aspects of a region’s income. GVA gives an indication of the value of the economic activity generated within an area, while GDHI provides an indication of the income received by resident households and non-profit organisations that serve households.
Workplace-based GVA allocates the incomes of commuters to where they work, rather than where they live. Workplace and residence estimates differ only in the East of England, London and the South East.
The regional GVA estimates included in this publication are those published by the Office for National Statistics (ONS) on 21st December 2005.
GVA (workplace basis) per head
GVA measures the economic activity generated within a region through the production of new goods and services. Table 1(a)(i) and 1(a)(ii) detail GVA at current prices in £ per head indexed to the UK average, and £ per head.
Between 1989 and 2004, London consistently had the highest GVA per head of population, growing from £11,877 in 1989 to £24,955 in 2004 (varying between 146 and 152 per cent of the UK average during these years). Map 1(a) shows that the South East and Northern Ireland had the greatest percentage increase during this time, at about 130 per cent and 128 per cent respectively. By contrast, East Midlands, North East and Wales were the slowest growing, increasing by 102 per cent, 102 per cent and 98 per cent respectively between 1989 and 2004. Over the same period, the all items Retail Price Index (RPI) increased by 62 per cent.
Disposable household income is defined as total household income (including benefits) less current taxes on income, wealth and other social contributions. While GVA gives an indication of the value of all economic activity in a given area, gross disposable household income (GDHI), (Tables 1(b)(i) and 1(b)(ii)), measures what financial resources households have available to spend on goods and services.
During 2004, GDHI per head of population in London, at £15,298, was 19 percentage points above UK income per head (£12,816). The North East and Northern Ireland had the lowest relative income at £10,906 and £10,988 per head respectively, 15 and 14 percentage points below the UK average. In 2004, regional GDHI was above the UK average in three regions: East of England (£13,889), London (£15,298) and South East (£14,656).
All the UK regions have experienced growth in GDHI. Between 1995 and 2004, the index of income per head for Northern Ireland fell by almost 3 points, the largest fall in any UK region or country during this time, whereas the index for the South East rose 3.6 points. The South East also had the highest growth at just over 54 per cent in the same period.
2. Labour productivity
This is an indicator of competitiveness within the manufacturing, services and other sectors (including agriculture, forestry and fishing, fuel extraction, electricity and gas supply and construction). Table 2(a) is calculated as GVA per workforce job.
Growth in GVA per workforce job in manufacturing between 1996 and 2003 was highest in Northern Ireland at 37 per cent, followed by the South West, at 30 per cent. In most regions growth in the manufacturing sector was above the all item Retail Price Index (RPI) inflation (18.7 per cent over this period), except for the East of England (17 per cent) and Wales (9 per cent).
In the services sector, the fastest growing region was the West Midlands at over 46 per cent growth between 1996 and 2003. Northern Ireland experienced the slowest growth at just over 33 per cent, followed by Wales and the North East, both at just over 37 per cent. The remaining (“other”) sectors show more variation between regions: London increased by almost 47 per cent between 1996 and 2003, while Northern Ireland experienced growth of just 8.5 per cent.
It is important to consider the value of these indicators in the context of the mix of industries between regions. Some industries are highly labour intensive and so may have relatively low productivity figures when compared with the more capital-intensive industries. Chart 2(a) illustrates the value of GVA per workforce job for manufacturing and services in the UK regions.
GVA per job filled and per hour worked
The estimates in Tables 2(b)(i) and 2(b)(ii) along with Charts 2(b)(i) and 2(b)(ii) overcome two of the issues affecting GVA per head of population as an indicator. The GVA generated within a region - Table 1(a) - is workplace-based, while the population estimate is based on persons residing within a region. Thus commuting may artificially inflate the GVA per head estimates for regions with a high level of inward commuting, such as London.
GVA in table 2(b)(i) is shown relative to the number of jobs filled in the region and is used as a proxy for GVA per worker. This measure allows fairer comparison of productivity across regions, taking into account total numbers of filled jobs within an area. In 2004 London (at almost 125 per cent) had the highest GVA per job filled when compared to the average (UK=100). The difference between the other regions was less marked than GVA per head of population (table 1(a)) with all indices being within roughly 10 per cent of the average, except for Northern Ireland being 14 per cent lower than the UK average.
In Table 2(b)(ii), GVA is presented relative to the number of hours worked in the region. Similar patterns to table 2(b)(i) emerge with London being the highest, at 119 per cent of the UK average in 2004, and the differences between regions are not as marked as for GVA per head of population. The lowest figure for relative GVA per hour during 2004 was for Northern Ireland, at 82 per cent of the UK average. Of the English regions, the lowest figures were recorded in the Yorkshire and Humber at 91.4 per cent, followed by the North West as the next lowest at 92.5 per cent.