State of the South West 2008

GVA Per Head

2.18 Output per head is used by central Government and the UK regions as a measure of relative economic performance: a broad ‘productivity rate’. Productivity is an indicator of relative economic prosperity. To increase economic output, an economy can either increase the amount of inputs (land, labour or capital) that it uses or it can use those resources more efficiently (productively). GVA per head is an imperfect measure of productivity, however, because of the low quality of the underlying data and methodological issues of estimation.  In addition, sub-regional productivity is calculated as workplace GVA divided by number of residents and so suffers from large distortions in areas where there are substantial net commuter flows.  An area which has high rates of inward commuting will appear to be relatively more productive than it would if calculated using workers rather than residents.  For example, areas in the South West such as Bristol and Swindon, where the number of workers producing the output is far higher than the resident population, have exaggerated productivity estimates. In addition, because the denominator consists of all residents, relative rankings are affected by the importance of non-active members of the population, making places with a high proportion of retired people appear to perform less well. Alternative measures of productivity are analysed later in the chapter.

2.19 In 2006, the regional productivity rate, measured as GVA per head, was £17,467 making the South West the most productive region outside of the Greater South East but still some way behind the English average (£19,082). South West England's productivity rates were approximately 8% lower than the English average. Of course, the English average productivity rate is inflated by London’s performance - excluding the capital, South West England's performance improves from 92% to 98% of the English average.

2.20 Sub-regional GVA per head ( NUTS 2) – In 2005 (latest for sub-regional GVA data), GVA per head for the South West was 91% of the England average.  Of the region’s NUTS 2 areas, Gloucestershire, Wiltshire and North Somerset (which includes both Bristol and Swindon) is the most productive (£20,295 in 2005). This sub-region functions relatively well and is economically strong. It is 22% more productive than the region’s average, 11% more than the England average and ranks third highest of England’s 30 NUTS 2 areas. Dorset and Somerset is the next highest performing NUTS 2 area and yet only achieves 81% of the England average. Indeed the region possesses wide intra-regional disparities, characterised by a decline in economic performance towards the south and west.

2.21 Sub-Regional GVA per head ( NUTS 3) - Productivity, measured as GVA per head, is highest in the two northern, urban areas of Swindon and Bristol, which were the third and seventh most productive sub-regions in England, respectively, in 2005. Productivity per head in Swindon is £27,354 and in Bristol is £23,434, 50% and 28% above the English average. Although urban productivity rates are inflated by commuting, it does illustrate how important urban centres are as economic drivers of regional economies.

2.22 Only two other sub-regions, “North and North East Somerset and South Gloucestershire”, and Gloucestershire County lie above the England average - mainly because of the proximity and influence of the City of Bristol. In stark contrast, Torbay, and Cornwall and the Isles of Scilly recorded the lowest rates of productivity in 2005. They were the second and fifth lowest rates of any sub-region in England, 38% and 37% below the English average, respectively. Devon and Dorset were also over 20% below the English average.  The intra-regional ‘ productivity gap ’ is discussed later in the chapter.