2.5.24 This section predominantly uses GVA per head to indicate how performance has changed over time; however, we also consider growth in GVA per FTE.
2.5.25 Figure 2.5.6 shows South West GVA per head indexed to the national average (both including and excluding London) over time. From the late 1990s onwards, regional GVA per head against the England average (minus London) grew steadily and in 2003 surpassed it. Since then it has continued to rise and in 2009 was 1.1 % above the average. Conversely, GVA per head against the national average (including London) has remained fairly steady at around 90% since 1989 but saw a notable decline from 2005 onwards, clearly reflecting London’s buoyant performance during the late economic boom. Note the small increase in 2009, reflecting the less than severe recession in the South West than average – SW GVA per head contracted by 2.5% compared to an England average of 2.9%.
Figure 2.5.6 GVA Per Head Growth Rates at Current Prices 1991 - 2009
2.5.26 Sub-regional GVA per head growth NUTS 2: Cornwall & the Isles of Scilly exhibited particularly strong GVA per head growth between 1998 and 2008, growing on average by 5.6% a year, against a regional average of 4.4% (and national average of 4.6%). While these annualised growth figures do mask the fluctuation of rates between years (see Figure 2.5.7) they provide a figure that can be compared across areas. Dorset and Somerset also recorded above average (regional and national) growth rates of 4.8% a year during this period. The NUTS 2 region around Bristol and Swindon - Gloucestershire, Wiltshire and Bristol/Bath - saw below average growth (+ 4.2%). Figure 7 shows some convergence of GVA per head growth rates in 2008. It is difficult to say whether this pattern will change as the impact of the second half of the recession feeds through into sub-regional GVA data.
Figure 2.5.7 GVA per head growth rates for NUTS2 sub-regions at current prices. 1998 - 2008
2.5.27 Sub-regional GVA per head growth NUTS 3: Of the NUTS 3 areas, the fastest annual GVA per head growth between 1998 and 2008 was seen in Cornwall & the Isles of Scilly (5.6%); Bournemouth (5.6%); and Bath and North East Somerset, North Somerset and South Gloucestershire (5.1%). These all surpassed the regional and national average over the same period.
2.5.28 Torbay had the lowest annualised growth rate in the region between 1998 and 2008 - 2.5% which was over two percentage points less than the England average. This can be partly attributed to its very poor economic performance in 2002 (as a result of the dot.com bust). The area has not yet recovered from this downturn in the ICT sector, on which its economy was dependent, and has recorded lower than average rates in much of the rest of the period up to present. Over time, Torbay’s relative position has weakened, with its GVA per head falling from 73% of the England average in 1998 to 60% in 2008 (see Figure 2.5.8). Cornwall’s strong performance, on the other hand, has meant its relative position lifted from 57% to 63% - substantial progress, given that other areas (and the average) have not stood still.
2.5.29 The region’s two areas of high productivity – Swindon and Bristol - also experienced slow annualised growth between 1998 and 2008 (3.3% and 3.8%, respectively). Growth rates varied considerably across the time period - at times growth was higher than the regional and national averages and at other times was well below. Prior to the recession (2006-7), GVA per head growth was above the regional average in these two areas; however, Swindon saw the slowest regional rate of growth between 2007 and 2008 (+1.1%), while Bristol maintained above average growth (+2.3%). Given the performances of other NUTS 3 areas over the last ten years, there has been a convergence between the four most productive NUTS 3 areas on the GVA per head index – the gap between first and fourth place declining from 65 to 45 percentage points. Similarly, there has been a reduction in the range of GVA per head index values across all NUTS 3 areas, falling from 105 to 84 percentage points between 1998 and 2008.
Figure 2.5.8 GVA per head for NUTS3 sub-regions. 1998 - 2008 (England = 100)
2.5.30 Growth in GVA per FTE (South West Regional Accounts) In 2008, the average productivity rate in the South West, as measured by nominal GVA per FTE, was £43,052. This is somewhat below the GB average of £48,832 for all industries. Figure 2.5.9 shows how SW productivity has improved over time - GVA per FTE has grown by 3.5% per year since 1998. The productivity growth rate in the South West has, however, been consistently lower than the GB average (4.6% pa since 1998) meaning the gap between the South West and the national average has increased slightly. As with growth in GVA per head, it should be understood that the GB expansion is heavily influenced by high productivity rates and growth in London and the South East. Figure 2.5.9 also shows productivity for Great Britain (excluding London), which is much closer to SW productivity, though still at times below this average. Note that there are some methodological differences (improvements) in how GVA in the SW Regional Accounts is calculated compared to the ONS Regional Accounts estimates discussed above, for example, the Regional Accounts GVA estimates include the GVA of the oil and gas extraction industry which ONS figures exclude (classed as 'extra-regio'). This serves to lower SW productivity relative to Great Britain as a whole and may also contribute to the widening of the productivity gap.
Figure 2.5.9 GVA per FTE current prices
2.5.31 Growth projections: Growth projections are produced twice a year by the South West Economy Module (SWEM) using the South West Regional Accounts - this section draws on the SWEM Projections for Autumn 2010. The projections use historical trends and HMT consensus forecasts for the UK economy to give an indication of the economic prospects of the region up to 2030.
2.5.32 GVA growth: The projections estimate that real GVA (fixed at 2005 prices) in the region fell by around 5.9% between 2008 and 2009, the smallest rate of decline of the English regions. The SW economy is expected to have returned to positive growth (1.9%) in 2010. It should be noted that these projections were produced before the 2010 ONS GVA figures analysed above and, as such, the actual figures have already deviated from these projections. Annualised GVA growth rates are then estimated to be around 2.5% per year between 2010 and 2015, moderating to 2.4% per annum. between 2015 and 2030 – these rates compare favourably with UK rates of 2.3% for both time periods and only London and the South East are expected to grow at a faster rate in the longer term. The longer the timescale, however, the more uncertainty there is in the projections. The risks are that these projections are too influenced by recent events and the outcome could vary significantly on either side of this trend.
2.5.33 GVA per head growth: Regional GVA per head is predicted to grow much more slowly between 2010 and 2015 (1.6% p.a.) than it did between 1995 and 2005 (2.6% p.a.). SW productivity growth is anticipated to be the same as the UK average between 2010 and 2015 and marginally below (1.5% pa versus 1.7%) in the longer term.
2.5.34 Growth projections now appear less optimistic than they have done in the past as they incorporate the significant contraction in output of the recession. The impact of a recession on productivity crucially depends on how firms react to the changing conditions - if they shed their workforce at a rate faster than output is falling, productivity will rise. However, evidence to date suggests that in this recession output shrunk more quickly than labour as many firms decided to hang on to staff for longer, meaning labour productivity fell sharply. This is because often labour adjusts more slowly than production. After previous recessions, however, productivity recovered strongly, suggesting the South West may experience a productivity boost in the years to come. Indeed firms that have not laid off staff may now be in a better position to respond to opportunities emerging from the economic recovery and will not need to face the costs of recruitment and training.
2.5.35 In addition to these bi-annual projections, the SW Economy Module and South West Councils also commissioned a piece of research South West Growth Scenarios 2010 – 2030 (2009) which set out the impact of three potential growth scenarios for the South West economy for the period 2010 to 2030. The report is accompanied by a comprehensive database for sub-regions and local areas within South West England.
