Productivity Growth
2.25 Productivity growth is generally analysed using the GVA per head measure, enabling national and sub-regional comparisons. Over the longer term (1996-2006), growth in SW economic output was slightly faster than the England average, although productivity growth rates regionally and nationally were similar. Over the medium term (2001-2006), however, SW economic output and productivity both grew faster than the England average.
2.26 In the period 2005 to 2006, all regions experienced an upturn in growth rate of productivity after a slowdown in 2004 to 2005 when South West England recorded its lowest rate (3.2%) in recent years. The South West rate picked up to 4.7% in 2005-06, still lower than seen earlier in this decade. Economic commentary suggests that 2007 has been a good year for the South West but lower growth rates are anticipated again in 2008 and 2009.
2.27 Sub-regional Productivity Growth (NUTS 2) - Each of the sub regions in the South West has faced different economic growth conditions. Between 1995 and 2005, Gloucestershire, Wiltshire and North Somerset (GWNS), and Cornwall and the Isles of Scilly (CIoS) experienced productivity growth well above both the English and regional averages (5.2%) with annualised growth rates of 5.6% and 5.5%, respectively. While the Dorset and Somerset region was around average, the Devon County area was well below the national average with growth of only 4.1% per annum over this ten year period. The slowdown in 2005 – seen last year in the more up-to-date regional data – is now evident in the sub-regional figures – only Devon and Somerset seem to have been sheltered from the national economic downturn in 2005, with growth rates at 4.2%, somewhat higher than the England figure of 3.4%. Indeed, it was the fastest growing sub-regions in the South West that were most affected – productivity in both Cornwall and the GWNS region grew at below 3%. Regional figures for 2006 suggest that we will see these growth rates pick up again in the next sub-regional GVA data release. The figure gives details of growth rates at NUTS 2 level in South West England. It suggests that GVA per head growth rates have recently begun to converge, perhaps as improved communication (in particular ICT) and the shift to a more dispersed services dominated economy make distance from large markets (London) less important.
2.28 Sub-regional Productivity Growth ( NUTS 3) - Between 1996 and 2005 the fastest annualised growth rates were experienced in the northern and eastern part of the region Gloucestershire, North and North East Somerset and South Gloucestershire, and Bournemouth and Poole – in excess of 6% per annum, compared to regional and national averages of 5.2%.
2.29 In the period 2000-2005, growth in the northern parts of the region remained buoyant, while Bournemouth and Poole growth rates fell back to just above average. Meanwhile, Cornwall and the Isles of Scilly experienced an increase in productivity growth from 5.5% per annum (over the ten year period) to 6.0% per year, suggesting some improvement in the lagging Cornish economy. Devon also showed a marked step up in growth rate between the ten and five year periods - Devon (excluding Torbay and Plymouth) is dominated by Exeter, which has seen rapid expansion in recent years. At the other extreme, Torbay experienced amongst the lowest growth rates in England over the last five and ten years.
2.30 Interestingly, while most areas suffered a downturn in growth in 2005, Torbay’s productivity growth rose from around the bottom to fourth highest of the NUTS 3 sub-regions. Torbay’s economy has been flagging in recent years – this, along with similar growth in economic output, may signal that some recovery is now underway. Dorset and Somerset also performed well above average in 2005, while Bristol had the second lowest productivity growth rate in England at only 1.1%.
2.31 Growth Projections - Growth projections were prepared using the South West Regional Accounts which are produced by the Business and Economy Module of the South West Observatory ( South West Economy Projections : Autumn 2007). They give an indication of economic prospects for the South West region in the short and medium term, covering the period from 2006-2014. The analysis is based on the assumptions that current trends continue and that the national economy grows as predicted in the HM Treasury forecasts. The Treasury view that underpins this analysis is that any adverse effects will be short lived. However, thinking about future economic conditions has moved on somewhat since these particular projections were produced (credit crunch, etc.) and because the recent developments in global financial markets have generated considerable uncertainty over prospects for the UK economy, these projections must be used with caution.
2.32 Output (GVA) - According to the projections, SW GVA is projected to reach £101 billion by 2008. GVA is projected to increase at an average annual rate of 5.9% over the period 2006-2014, the 4th highest growth rate amongst the English regions. Variances in the projected growth for regions are driven by a number of factors, including projections of growth in specific sectors and their relative presence in each of the regions.
2.33 GVA per head is also projected to grow at a slightly faster rate than for England as a whole. While the gap with the England and UK average is projected to stay the same, London and the South East continue to diverge.
2.34 The projections suggest that all broad industry sectors in South West England, with the exception of agriculture and the extractive industries will grow in real terms over the period 2006-2014, with manufacturing holding its own. The fastest growing sectors are projected to be real estate, renting and business activities and other services, i.e. more of the same. Output growth is projected to be strongest in the urban north and east of the region; and in Cornwall and Isles of Scilly, with slower growth projected for the rural sub-regions and for Plymouth and Torbay. Indeed, Torbay’s output is projected to decline but the more recent GVA data (i.e. produced since the projections) suggests that this may not necessarily be the case.