Output GVA and GVA Per Head (Economic Performance, State of the South West 2011)

Output - Gross Value Added

2.5.5 Gross Value Added (GVA) is a measure of economic output and describes the total value of goods and services produced through economic activity in any particular period. This also equates to the total level of income generated by economic activity. In other words, it is the total size of the economic value created which can be distributed as income and is available to spend. GVA is a similar concept to Gross Domestic Product (GDP), the only difference being that GDP includes taxes and excludes subsidies on products (i.e. GDP = GVA – subsidies + taxes) and therefore gives a market price valuation. GVA is the measure used for assessing regional economic performance and is what we focus on in this report.

2.5.6 The following analysis expresses GVA in current basic prices (referred to as nominal GVA) and therefore growth figures include the effects of inflation. We do not have regional deflators, which would enable us to account for the effects of inflation and price differentials between the regions. It is therefore not possible to calculate real regional GVA growth accurately.

GVA

2.5.7 The South West economy was estimated to be worth £95.3 billion in 2009. This was 9% of English GVA, ranking South West England as the fifth largest regional economy in England. The region’s economy grew by 3.1% per annum between 2004 and 2009, the third quickest growth rate after London (4.6%) and the East of England (3.2%). These average rates were depressed by the negative rates recorded in 2009. The nominal GVA growth rates in the South West have broadly tracked the national average and for much of the period 1991-2009 the region grew at a slightly higher rate (Figure 2.5.1).

Figure 2.5.1 Economic Growth Rates (GVA) at Current Prices 1991-2009

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Economic Growth Rates (GVA) at Current Prices 1991-2009 [Figure 2.5.1] Source: ONS

2.5.8 South West nominal GVA contracted by 2.1% between 2008 and 2009. This was the same percentage decline as the UK average and the fourth smallest of the English regions behind London (-1.5%), the North East (-1.5%) and the North West (-1.6%). In the latest ONS release, GVA figures for 2008 were revised downwards and 2007 upwards with South West GVA now reported as growing by 2.8% between 2007 and 2008 (down from 3.6% in last year’s release). This rate was slightly below the England average of 3.1%. However, the national average was heavily influenced by London’s strong performance; in fact, the region’s growth rate over 2007/08 was still the joint second highest of all the English regions. Therefore, overall, figures suggest that the region exhibited a degree of relative resilience to the recession through 2008 and 2009 For more information on the latest GVA figures, see the special briefing: South West Gross Value Added: the latest data (Dec 2010). LINK

2.5.9 Sub-regional Performance: The latest sub-regional GVA data relates to 2008. These figures give an indication of how the first half of the recession (second half of 2008) affected the region’s constituent parts.

2.5.10 Figure 2.5.2 shows how the larger NUTS 2 sub-regions contribute to total South West GVA. All sub-regional GVA estimates are workplace based. The north east of the region is the key area of economic activity, accounting for over half of regional GVA, while Cornwall and the Isles of Scilly makes the smallest contribution of the South West NUTS 2. These proportions have remained broadly constant over time.

Figure 2.5.2 Share of South West GVA by NUTS2 Sub-Regions 2008

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Share of South West GVA by NUTS2 Sub-Regions 2008 [Fig 2.5.2] Source: ONS

2.5.11 Of the NUTS 3 areas, the strongest annualised GVA growth between 2003 and 2008 was recorded in Bournemouth and Poole (6.1%), Cornwall & Isles of Scilly (5.7%), Dorset and Devon (both 5.4%). These rates compared to a regional average of 4.7% and an England average of 4.8% over the same time period. The high growth rate in Cornwall suggests that high levels of investment (leveraged by EU funding) have had some positive effect on its economy. In fact, over a ten year period (1998-2008), Cornwall’s economy grew by 6.5% per year (vs. England 5.1%), the highest of all SW NUTS 3 areas. Plymouth’s economy has also shown marked improvement over the last five years, with output increasing by 5.1% per annum in the five years - prior to this (1998-2003) output growth was more sluggish, increasing by only 3.6% per year against a national average of 5.4% per annum. Areas exhibiting relatively slow growth rates between 2003 and 2008 were Gloucestershire (3.0%), Torbay (3.7%) and Wiltshire (4.2%). Bristol, one of the most productive parts of the region, grew by 4.3% a year making it the fourth slowest growing area in the region.

2.5.12 Between 2007 and 2008, output growth slowed considerably across the region’s NUTS 3 areas. Swindon saw a significant slow down in GVA growth with a 3.0% nominal increase in 2008 (this compared to a 7.2% rise between 2006 and 2007). This reflects its vulnerability to the early effects of the recession, the manufacturing sector (a significant part of the local economy) being hit comparatively hard. Bristol appears to have been more resilient, recording an above average rate of GVA growth in 2008 (+3.7% vs. SW average of +2.8% and England average of 3.1%); this was largely due to healthy output growth within its business and financial services sector. Bournemouth & Poole (+3.6%) and Cornwall & IoS (+3.4%) also exhibited relative resilience in 2008. Torbay saw the smallest annual growth in GVA in 2008 (+1.6%) exacerbating its already poor economic performance in recent years. As signalled by regional figures, the majority of sub-regional growth rates in 2009 are likely to be negative.

2.5.13 Productivity can be described as how much economic output is generated from a certain amount of input. It gives an indication of how efficiently the economy is using resources (most often labour input) and is used as an indicator of relative economic prosperity.

2.5.14 GVA per head is frequently used by national and regional policy makers as a headline indicator of regional performance (productivity and income) for comparing and benchmarking regions that differ in geographical size, economic output and population. However, GVA per head is not necessarily an effective or accurate measure of productivity, particularly at a sub-regional level. Official GVA per head estimates for the sub-regions are calculated by taking the total GVA generated by those working in an area and dividing it by the number of people living in that area. The denominator therefore includes those people living in an area who do not work (e.g. pensioners, students, inactive individuals...etc) and the overall measure does not account for different labour market structures such as part-time working and commuting patterns. This means that areas with relatively high numbers of non-active people appear to perform less well on this measure. Areas which benefit from a large number of inward commuters, such as Swindon and Bristol, appear to be relatively more productive than other areas as the number of workers producing output is far higher than the resident population.

2.5.15 GVA per head in the region was £18,211 in 2009, ranking the South West fourth out of the English regions behind London (£34,200), the South East (£20,923) and the East of England (£18,591) - see Figure 2.5.3. South West GVA per head was 89.1% of the English average; again, the national average is heavily influenced by London’s high rate (see below). If London is excluded, the South West moves from 89.1% to 101.1% of the remaining English average.

Figure 2.5.3 Regional GVA per Head 2009

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Regional GVA per Head 2009 [Fig 2.5.3] Source: ONS

2.5.16 Sub-regional GVA per head NUTS 2: There are wide intra-regional disparities in productivity in the South West with a clear trend of less buoyant economic performance towards the south and the west of the region (see Table 2.5.1). In 2008, Gloucestershire, Wiltshire and Bristol/Bath had the highest GVA per head of the South West NUTS 2 areas at £22,262 – 6% more than the English average and 19% more than the South West average. GVA per head in this area ranked fourth highest of the 36 UK NUTS 2 areas. Conversely, Cornwall & the Isles of Scilly recorded the second lowest GVA per head of the UK NUTS 2 areas at £13,256 – 71% of the South West average and 63% of the English average.

GVA per Head by NUTS 2 Sub-region - workplace based estimates at current basic prices, 2008

	GVA per head (£)	Index (SW=100)	Index England = 100
England	21,049	112.7	100.0
South West	18,682	100	88.8
Gloucestershire, Wiltshire and North Somerset	22,262	119.2	105.8
Dorset and Somerset	17,183	92.0	81.6
Devon	15,583	83.4	74.0
Cornwall and Isles of Scilly	13,256	71.0	63.0
Source: ONS

2.5.17 Sub-regional GVA per head NUTS 3: The highest GVA per head values in 2008 were found in the NUTS 3 areas in the north and the east of the region. Swindon (£30,233) and Bristol (£27,182) had GVA per head rates well above the English average of £21,049. These urban areas benefit from the way that GVA per head is calculated (workplace based GVA divided by resident population) and, therefore, the figures are inflated by inward commuting. Nonetheless, the figures do indicate how important these urban centres are as drivers of the regional economy.

2.5.18 The only other NUTS 3 area with GVA per head rates higher than the English average is the area around Bristol - Bath and North East Somerset, North Somerset and South Gloucestershire (£21,640). This area benefits from agglomeration and spillover effects across the Bristol ‘city-region’. At the other end of the spectrum, Torbay and Cornwall have substantially lower productivity rates - GVA per head in these areas is 59.8% and 63.0% of the English average respectively. The relative position of Cornwall, however, has been improving over time (see next section).

2.5.19 Figure 2.5.4 depicts the wide intra-regional disparities in GVA per head with the urban areas in the north and east of the region clearly outperforming areas in the south and west. Overall, as is normally the case, the more predominantly urban areas in the South West record higher productivity rates than more rural areas.

Figure 2.5.4 GVA per head for South West NUTS3 sub-regions. 2008 (Index England = 100)

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GVA per head for South West NUTS3 sub-regions. 2008 (Index England = 100) [Fig 2.5.4] Contains OS Data / Source ONS

	GVA per head	Index England = 100
England	21,049	100.0
South West	18,682	88.8
Swindon	30,233	143.6
Bristol	27,182	129.1
North Somerset, Bath & North East Somerset, South Gloucestershire	21,640	102.8
Bournemouth and Poole	20,732	98.5
Gloucestershire	20,082	95.4
Wiltshire CC	17,900	85.0
Somerset	16,819	79.9
Plymouth	16,479	78.3
Devon CC	15,813	75.1
Dorset CC	14,983	71.2
Cornwall and Isles of Scilly	13,256	63.0
Torbay	12,589	59.8
Source: ONS