It is a decade since England’s 38 local enterprise partnership’s (LEPs), including those in the North East and Tees Valley launched ten -year strategic economic plans (SEPs). For most, their time will be up at the end of March.
Tees Valley LEP, perhaps uniquely, had not one but two SEPs in quick succession due to the economic disaster of the SSI steelworks closure in 2015. Its second SEP was launched in 2016 and will run until 2026. So how are they doing?
There is often a delay of a year or more on the publication of economic statistics so we cannot give a final opinion yet, but the ten-year expiry date is worth marking and the picture today is unlikely to alter significantly in another 12 months.
Jobs
Neither the North East nor Tees Valley LEP targeted unemployment specifically, in spite of the fact that it is the one economic statistic more than any other that is probably most widely reported and taken as a measure of the health of the regional economy.
Though the Office for National Statistics (ONS) has conceded some uncertainty over the reliability of recent labour market statistics, it is clear from Figure 1 that over the past decade unemployment in the North East and Tees Valley has been gradually converging with the national average for England. The Tees Valley level has fallen most dramatically from 13.1% in 2012 to 4.4% in the year to September 2023.
While the LEPs did not target unemployment, the North East (but not Tees Valley) did target its converse, the employment level. It committed to completely closing the gap with the national rate, excluding London, by 2024. But it only succeeded in closing it by a miniscule 2% and it has now gone into reverse again.
As the LEP explains: “By July 22-June 23 the gap…had narrowed slightly (by 2%) when compared with the April 13-March 14 period.” But following the pandemic “compared to 2020, the latest North East rate was 1.2% lower, while the England excluding London rate had increased by 0.2%, reversing progress towards closing the gap.”
Figure 1. Source: Nomis
Though Tees Valley did not target the employment rate it is included in Figure 2 for comparison. By the year to September 2023 Tees Valley had overtaken the North East; its employment rate stood at 73.6% compared with 70.9% in its northern neighbour. Both continued to lag the England average (including London) of 75.9%.
Figure 2. Source: Nomis
Employment and unemployment aren’t simply two sides of a coin; they are more like two sides of a triangle, with economic activity (people either in work or seeking work) making up the third side. The North East LEP aimed to halve the activity rate gap with the average for England excluding London. But it has not happened. Instead, by the LEP’s own admission, by June 2023 the gap had widened by 40% as recent increased working age inactivity has impacted on the North East more than nationally. Once again, Tees Valley is included in the chart below for comparison (Figure 3). The rate there shot up by 2.8% in the year to September 2023.
Figure 3. Source: Nomis
As with economic activity, the North East LEP aimed to halve the private sector employment density gap with the national average excluding London. But it is not happening nearly fast enough. Between 2015 and 2021 the gap narrowed by 9% according to this measure, according to the LEP’s website, but the data was provisional only. During the Covid-19 pandemic private sector employment in the North East decreased by 0.3% between 2019 and 2021. This was a smaller percentage decrease than for England excluding London (down 0.7%). However, due to proposed changes to population estimates, the impact of the pandemic on the rate is unclear, says the LEP.
The number of businesses (Figure 4) gives an indirect indication of private sector employment density, targeted by the North East, as well as new businesses, targeted by Tees Valley in its first SEP, when it aimed to create 3,200 enterprises by 2024.
Figure 4. Source: Nomis
Tees Valley was progressing well – in theory – towards this target before it abandoned it in its second SEP. By 2016 the number of businesses in the area had increased in just two years from 14,580 to 17,100, a rise of 2,520. However, there is an important caveat. This coincided with the closure of the SSI steelworks at Redcar and a business leader pointed out at the time: “Starting in business as a taxi driver is, with all due respect to taxi drivers, not the best alternative occupation for a skilled steel worker”. Over the next seven years the number hardly rose any further and by 2023 had reached only 17,470.
In the North East the number of new businesses rose from 44,760 in 2014 to 55,120 in 2023 (a rise of 23%) while the national figure (including London) was up from 1,950,030 to 2,370,125 (an increase of 22%). So the North East was keeping pace with the national average but hardly closing the gap at all.
More and better jobs
Above these “closing the gap” comparative targets, the North East had two overarching absolute targets – to create 100,000 new jobs, of which 60% (later increased to 70%) would be better jobs, defined as managerial, professional and associate professional occupations.
By the year to June 2023 the total number of new jobs was 61,500, probably not enough to reach the target in time. According to the LEP: “The furlough scheme and the recruitment of additional health workers delayed the impact of the pandemic on employment until after 2020. Since that date, employment has decreased by 8,100, despite an increase of 7,800 in the most recent year.”
However, the number of better jobs has outperformed the LEP’s hopes and has already reached 82,100.
Tees Valley LEP, in its 2016 plan set itself a target of creating 25,000 new jobs by 2026. At the time there were 267,000 jobs in the LEP area and by 2022, according to the latest statistics, this had fallen to 265,000. So, Tees Valley is heading in the wrong direction by this measure.
Productivity
Productivity, said the American Nobel Prize winner for economics, Paul Kruger, isn’t everything, but in the long run it is almost everything. Or, as the ONS explains less succinctly but more understandably:
“Productivity is important because it is a key determinant of living standards in the long term. Increasing productivity over time allows businesses to produce more goods and services per unit of input. This ultimately enables higher wages, aids economic growth, increases profitability, and boosts tax revenues.”
Gross domestic product (GDP) and gross value added (GVA), often used regionally when calculating productivity and economic growth, are extremely closely related. GDP is equivalent to GVA plus VAT and other taxes on products less subsidies on products.
Both the North East and Tees Valley LEPs targeted GVA in their SEPs. The North East aimed to halve the gap with the national average (excluding London) by 2024. Instead, the gap has increased.
Between 2014 and 2021, says the LEP, the gap between the North East and England excluding London widened by 43%. In both areas productivity rose over this period, but the larger increase was in England excluding London. In 2021, at the time of the Covid pandemic, GVA per hour decreased for both the North East and England excluding London but the fall in the North East was larger, leading to a further increase in the gap.
Tees Valley’s first SEP in 2014 included a target of increasing the area’s total GVA by £1bn by 2024. This required an increase from £14.9bn to £15.9bn and by 2019 the target had been reached. Then came Covid, and Tees Valley’s economy, like that of all parts of the UK, declined (though not as sharply as in the North East) (Figure 5). In 2020 Tees Valley’s GDP was back down to £14bn, below where it had been in 2014, climbing again to £15.4bn the following year.
Figure 5. Source: ONS
However, in the meantime the target had moved, with the introduction of the 2016 SEP. This set a new, much more ambitious target of increasing GVA by £2.8bn, though the clock was reset so the new plan would run until 2026. The price base was updated too from 2014 prices to 2016 prices. The new target requires GVA to rise to £18.6bn by 2026, which looks almost impossible in the time remaining.
Verdict on the targets
North East LEP:
- Completely close the employment rate gap: No progress.
- Cut the economic activity gap by 50%. It has widened by 40%.
- Cut the private sector employment density gap by 50%. Disappointing and uncertain progress.
- Cut the GVA gap by 50%. The gap had widened by 43% by 2021 and widened still further during the pandemic.
- Create 100,000 more jobs. Still challenging: 61,500 by June 2023.
- 70% of the new jobs to be “better” jobs. Success! 82,100 new better jobs delivered so far.
Tees Valley LEP 2016 SEP
- Create 25,000 more jobs. By 2022 the number had fallen by 2,000.
- Increase GVA by £2.8bn. Back to Square 1 after Covid-19.
Comment
More that 60 years ago Lord Hailsham, a Tory grandee, put on a cloth cap, which he presumably thought was appropriate for a visit to the land of Andy Capp, and wrote a report for the Macmillan government on how the North’s economy could be regenerated. At least we got the A19 dual carriageway out of it – a huge improvement in travel terms, though not as picturesque, as the meandering road between Sunderland and Stockton via Easington.
The Hailsham Plan was not the first attempt at economic development for the region, though it was the first in living memory for most people today. It certainly wasn’t the last. It has been followed by an average of about one a decade ever since, except in the 1980s (Margaret Thatcher didn’t do regional economic planning, though she did create urban development corporations).
Hailsham was followed by Dan Smith’s plan “Challenge of the Changing North” in 1967, the North Regional Strategy Team’s plan of 1977 and then two plans from One North East, the regional development agency, in the Blair years – “Unlocking Our Potential” in 1999 and “Leading the Way” in 2006. Most recently came the strategic economic plans for the North East and Tees Valley discussed above.
Yet in spite of the best efforts of the LEPs here we still are, analysing another failed plan – or rather, two sub-regional plans to develop our economy to the level of the rest of the country. Now Levelling Up Secretary Michael Gove is trying a new approach – not so much economic development (though there is that too) as social development. He wants us to feel better about the places where we live by brightening up our towns and cities: happiness through the high street.
The Levelling Up White Paper published exactly two years ago, on 22 February 2022, set out a list of medium-term ambitions not just in employment and productivity as discussed above but in fields like education, health, local public transport, housing, crime and “pride in place”, all to be achieved by 2030. So, in six years’ time someone will be doing a similar analysis to this one but applied to the new levelling up policies. Can we be confident that they will come to more optimistic conclusions? Or will levelling up be just another of the disappointments dating back to Hailsham and his flat cap?
