Our Economy 2020 With insights into how our economy varies across geographies - North East Data Hub
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Our Economy 2020 With insights into how our economy varies across geographies
OUR ECONOMY 2020 OUR ECONOMY 2020
2 3
Contents
Welcome and overview
Welcome from Andrew Hodgson, Chair, North East LEP 04
Overview from Victoria Sutherland, Senior Economist, North East LEP 05
Section 1
Introduction and overall performance of the North East economy 06
Introduction 08
Overall performance of the North East economy 10
Section 2
Update on the Strategic Economic Plan targets 12
Section 3
Strategic Economic Plan programmes of delivery: data and next steps 16
Business growth 18
Our Economy 2020
Innovation 26
Skills, employment, inclusion and progression 32
Transport connectivity 42
Investment and infrastructure 46
Section 4
How our economy varies across geographies 50
Introduction 52
Statistical geographies 52
Where do people in the North East live? 52
Population structure within the North East 54
Characteristics of the North East population 56
Participation in the labour market within the North East 57
Employment within the North East 58
Travel to work patterns within the North East 65
Income within the North East 66
Businesses within the North East 67
International trade by North East-based businesses 68
Economic output within the North East 69
Productivity within the North East 69
OUR ECONOMY 2020 OUR ECONOMY 2020
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Welcome from An overview from
Andrew Hodgson, Chair, Victoria Sutherland, Senior Economist,
North East Local Enterprise Partnership North East Local Enterprise Partnership
I am proud that the North East LEP has a sustained when there is significant debate about levelling I am pleased to be able to share the third annual Our Economy report. As Andrew
record of using economic evidence to inform its up the economy, devolution and the importance has highlighted, this year’s report is being published at a time of immense change
decision making. This is a commitment shared by the of infrastructure, we have taken the opportunity in the economy. It is important that we have a benchmark against which we can
Board, our Executive Team and our partners across to present evidence about the diversity and assess the impact of COVID-19 on the North East economy and this year’s report
the regional economy. interconnectedness of our regional economy. will provide this.
The Strategic Economic Plan, our roadmap for As we look forward, a strong evidence base will Each year, Our Economy reviews the North East’s performance across a range
bringing more and better jobs to the region, is be a crucial part of our response to dealing with of indicators. These were selected to reflect the international evidence on what
built on a comprehensive understanding of the the economic impact of COVID-19. The pandemic is drives regional economic growth and the issues and priorities identified in the
challenges and opportunities that the North East having a significant impact on the regional, national North East Strategic Economic Plan.
economy faces. and international economy and understanding the
nature and extent of these changes will be critical for The value of the goods and services produced by the North East and the two
The natural first step in the work we did last year the regional response. key factors that underpin this – the proportion of our residents that are in
with regional partners and government to build the employment and the productivity of our workforce – have all increased since
proposals in our Local Industrial Strategy was a COVID-19 will impact on every indicator we analyse. 2014. However, the proportion of residents in employment has declined slightly
review the evidence about our region’s productivity At the time of publication (June 2020), none of the since last year’s report and productivity has remained the same as last year
performance. Indeed, one of my highlights of the datasets we draw on in this report had published before inflation is considered (meaning it has declined in real terms). In addition,
year was the Local Industrial Strategy Summit held any post-COVID-19 data. As such, this report is best as the performance of England excluding London has continued to improve on
in July, where we tested the emerging findings from seen as a baseline of how the North East economy all three of these measures, the gap between the North East’s performance and
this review and explored international evidence was performing prior to COVID-19. We will work with England excluding London has widened. These are disappointing findings and
about what works in improving productivity. These our partners to return the North East to a positive suggest that, even before COVID-19 began to impact on the North East, there was
evidence-led discussions contributed significantly to trajectory as soon as possible. Having this baseline a need to do more to grow and develop our economy.
our approach. available is a crucial contribution to the future and I
am pleased to welcome its publication. Despite this, the region has seen good progress across a wide range of indicators.
Our Economy is an underpinning tool in this work. It The North East has improved its performance compared to 2014 on around 60% of
tracks the performance of the North East economy This is our third Our Economy report. As with the indicators we have examined and closed the gap with England excluding London
highlighting changes over time, and its publication previous two, it has been compiled by our Senior on around 40%. Key areas of progress since 2014 include increased expenditure on
has become an established event in our calendar. Economist, Victoria Sutherland, who will leave us this R&D by businesses, increased proportion of our working age population qualified
I am proud that the Its comprehensive review of key data enables us to month to take on an exciting new role with the What In this year’s Our Economy report, to degree-level and above, increased employment in science, research, engineering
understand how the region is performing, enabling Works Centre for Local Economic Growth. Whilst I and technology roles, improved access to superfast broadband and 4G and
North East LEP has us to focus on the key issues impacting on our would like to thank everyone in the North East LEP we have examined the economic increased public expenditure on transport. It will be important that the region works
a sustained record
economy, and to position the North East for future
growth and opportunities.
team that has contributed to Our Economy, I would
like to put on record my particular thanks and best geography of the North East in together to build on these improvements, especially at this time of economic crisis.
of using economic It also provides an opportunity to explore important
wishes for the future to Victoria for the work she has
done to develop Our Economy and on the North East
more depth. This has demonstrated In this year’s Our Economy report, we have examined the economic geography
of the North East in more depth. This has demonstrated both the diversity of our
evidence to inform its
themes in detail through our annual deep dive.
Two years ago, we focused on our international
LEP’s wider research and analysis work during her
time with us.
both the diversity of our places and places and how interconnected they are. Going forward, the focus of our efforts
must be to ensure that every part of our region is able to contribute to, and
decision making.
links as we considered the implications of the EU how interconnected they are. benefit from, efforts to improve the performance of our economy.
Exit referendum, and last year explored regional Andrew Hodgson,
competitiveness as we framed our approach to Chair, North East Local Enterprise Partnership Victoria Sutherland,
the Local Industrial Strategy. This year, at a time Senior Economist, North East Local Enterprise Partnership
OUR ECONOMY 2020 OUR ECONOMY 2020
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Section 1
Introduction and
overall performance
of the North East economy
OUR ECONOMY 2020 OUR ECONOMY 2020
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Section 1
Introduction
The North East Local Enterprise Partnership area • A strong cultural, heritage and sports offer used. This is generally for 2018, 2019 or 2018/19
that supports the tourism sector.
The North East LEP area covers seven local • C hange over time has been measured from 2014,
authority areas: Our Economy report to reflect the publication date of our Strategic Map of the North East LEP area
To Edinburgh, Glasgow, Aberdeen
Principal rail links
Economic Plan Port of Berwick
Berwick-upon-Tweed Tyne & Wear Metro
County Durham The report:
LEP boundary
• T he North East LEP area has been benchmarked Holy Island
Gateshead Provides an annual overview of the North against England excluding London in line with A1 Motorway
East LEP area economy and how it is changing our Strategic Economic Plan targets. Where Farne
Islands Key routes
Newcastle upon Tyne over time possible and where it adds value, comparative Enterprise Zones
data has also been provided for the other core Wooler
North Tyneside Provides a resource for partners to inform city LEP areas. In a small number of cases, where Ports
decision making data was not available for England excluding Airports
Northumberland London, England or the UK has been used as an
Provides a comprehensive pre-COVID-19 alternative benchmark Alnwick
South Tyneside baseline against which future trends can
be compared •N
ot all datasets are available at a LEP level. To Scotland
Northumberland
A697
Coquet
Sunderland Where LEP level data is not available, data A68
National Park Rothbury A1
Island
Positions the North East for future for the North East region as a whole, which
The North East economy was traditionally opportunities, including those arising from the includes the Tees Valley LEP area, has been used.
dominated by mining and manufacturing. Industrial Strategy. To differentiate where these have been used,
we refer to the North East region. A clear priority Ashington
Whilst manufacturing remains an important part As well as providing an overview of the North going forward is to work with data providers Bellingham
Morpeth
Bedlington
of the regional economy, it has diversified over East economy, this year’s report examines the to encourage them to publish more data at a A68
A696
Port of Blyth
Blyth
recent decades and also has: economic geography of the North East in more LEP level Newcastle Cramlington
A189
Airport
depth. The North East LEP area has a unique Whitley Bay
Tynemouth
• K ey assets in the energy sector, including offshore combination of major conurbations, large and •W
here data has a monetary value such as GVA, NEWCASTLE
UPON TYNE
Port of Tyne
South Shields
energy and subsea technologies, regional energy, small towns and sparsely populated rural nominal values have been given, which means A69
A69
To Carlisle,
and demonstration and innovation areas, a geography that provides opportunities that data has not been adjusted to account Manchester Haltwhistle Hexham
Blaydon
A1 SUNDERLAND
and challenges for the development of the for inflation A692
GATESHEAD Port of Sunderland
•W
orld leading clinical research that supports a
A68
economy. Using local and small area statistics Consett Stanley A693
Washington
growing health and life sciences sector allows us to see a more nuanced picture of • F rom time to time data sources available to the Chester-le-
Street
A1 (M)
A690 Seaham Harbour
Seaham
the North East which challenges established North East LEP will change because of the ways A691
• A vibrant digital community with a combination narratives that have often arisen when the in which data is collected or reported by ONS DURHAM
A19
Peterlee
of start-up, high growth and established North East is summed up by one number or other data providers. We will keep the data
Wingate
businesses across a wide range of specialisms or rate. sources under review and where necessary,
A68
Spennymoor
Bishop
change the indicators we use or report in Auckland Sedgefield
To Hartlepool
• C apabilities across a range of enabling services The diversity of places, together with consultation with the North East Economic Newton
Aycliffe
and Middlesbrough
including education, financial, professional their interconnectedness, are important Evidence Forum
and business services, transport and logistics, considerations as we map out how to develop A688
and construction the North East economy after COVID-19. • S ection 4 provides data for a range of geography Barnard
Castle
To York,
Leeds,
London,
types within the North East, all of which are Midlands
• S ignificant employment in the public sector Throughout this report: described in the text.
across both local services and central
government back office and shared services • T he most recent available data has been
OUR ECONOMY 2020 OUR ECONOMY 2020
10 11
Overall performance
of the North East economy
Understanding the North East’s performance In relation to the North East, the key issues that underpin our lower
level of GVA per head compared to England excluding London are:
In How Regions Grow (2009), the Organisation for Economic Co-operation and
Development (OECD), outlined the key factors that underpin the size • A lower proportion of the population that are in employment
This report will explore a wide range of different elements of the North East’s economy. of a region’s economy. These are:
To put this in context, we will start by examining our overall economic performance and what underpins this. • A lower level of productivity.
• T he size and structure of the region’s population
Whilst, both have increased since 2014, the gap between the
Size of the North East economy In 2018, the GVA per head of the North East LEP area was £20,617. This is • T he proportion of the region’s population that are in employment North East LEP area and England excluding London has widened on both
below the GVA per head of England excluding London (£25,346) and England measures. This is because England excluding London has increased its
Gross Value Added (GVA) measures the value of the goods and services as a whole (£29,356). • T he productivity of those in employment. employment rate and productivity rate by more than the North East over
produced in an area, industry or sector and is used to estimate the size of their this period.
economies. In 2018, the GVA of the North East LEP area was £40.9 billion, which GVA per head increased by 10.1% between 2014 and 2018 in the North East LEP
is 2.5% of English GVA and 3.4% of the GVA of England excluding London. area, a smaller rate of increase than for England excluding London (11.8%). Components of GVA
As different areas vary in size, it can be difficult to compare regional Care must be taken in interpreting this increase, as inflation will mean the
Economically
economies using GVA. To overcome this, GVA is divided by the number rate of growth is much lower in real terms. Working age Employment
active Productivity
of people living in the area to allow comparisons to be made across
geographies of different sizes.
GVA = Population x population
x Working age
x Economically x per worker
Population active
population
Gross Value Added (GVA) per head (£), North East LEP, England excluding London and England, 2014 and 2018
Overall performance of North East LEP area economy
£29,356
2014 2018 Performance improved
£25,346 £26,154 North East as % of
30,000 Indicator Most recent data Change since 2014 compared with
£22,670 England excl. London
£20,617 England excl. London
25,000 £18,720
GVA per head £20,617 (2018) Increased by 10.1% 81 No - gap widening
20,000
15,000 Population 1.98 million (2018) Increased by 1.6% - -
10,000 Working age population Decreased by 1.0
62.8% (2018) 102 No change
as % of total population percentage point
5,000
0 Economically active as 75.5% Increased by 0.4
95 No - gap widening
North East LEP England excluding London England % of working age population (Jan 2019 to Dec 2019) percentage points
Employment as % of working age 71.1% Increased by 2.3
93 No - gap widening
Source: Regional Gross Value Added (balanced approach) (ONS) population (Jan 2019 to Dec 2019) percentage points
Productivity
£29.94 (2018) Increased by 8.4% 91 No - gap widening
(GVA per hour worked)
GVA of In 2018, the GVA of the North East LEP area was £40.9 billion, which is 2.5% of English GVA
£40.9bn Sources: Regional Gross Value Added (balanced approach) (ONS), Population estimates (Nomis), Annual Population Survey (Nomis); and Subregional productivity (ONS)
Notes: 1. ‘Employment as % of working age (16 to 64) population’ used instead of the OECD measure of ‘employment rate as % of economically active population’ as this is the more commonly used (and understood) measure in UK and is used in the SEP targets.
2. To ensure that seasonal factors are not affecting comparison, the same time periods are used for both the most recent year and the 2014 benchmark year for each indicator. For example, the most recent Annual Population Survey data is for the period Jan 2019 to Dec 2019 – so Jan 2014 to Dec
2014 is used as the comparator.
3. Productivity (GVA per hour worked) is nominal unsmoothed.
4. “No change” is an increase or decrease of less than 0.5 percentage points
OUR ECONOMY 2020 OUR ECONOMY 2020
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Section 2
Update on the Strategic
Economic Plan targets
OUR ECONOMY 2020 OUR ECONOMY 2020
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Section 2
Employment rate Economic activity rate
Target: Close the gap in the employment rate (%) Target: Reduce the gap in economic activity rate (%)
Progress: By December 2019, the gap between the North East LEP area Progress: By December 2019, the gap between the North East LEP area
for people aged 16 to 64, North East LEP and England for people aged 16 to 64, North East LEP and England
and England excluding London had reduced by 3%. The North East and England excluding London had increased by 11%, with an earlier
Update on Strategic excluding London, 2008/09 to 2016/17
employment rate has declined during 2019. This is likely to reflect the small
excluding London, 2008/09 to 2016/17
reducing of the gap being reversed by a decrease in the North East
economic activity rate during 2019. Again, this is likely to reflect the small
decline in employment over this period and changes in the types of jobs
Economic Plan targets available leading to some mismatch between labour demand and supply. decline in employment over this period and changes in the types of jobs
available leading to some mismatch between labour demand and supply.
78 80
76
78
The Strategic Economic Plan sets out six targets for the region to achieve between 2014 and 2024. 74
Our headline targets are to create more and better jobs in the We also have four targets that compare the North East LEP area’s 72 76
North East LEP area. performance with England excluding London.
70
74
More and better jobs Employment rate 68
72
In 2014, there were 811,300 jobs in the North East LEP area. We have set a It is important that residents in the North East LEP area are benefiting from 66
target to increase this by 100,000 to 911,300 by 2024. the additional jobs created. One way of measuring this is the employment
rate. In 2014, the North East LEP area had a lower employment rate than 64 70
In addition, we have set a target that 70% of the additional 100,000 jobs England excluding London. We have set a target to close the gap between the
09
10
11
12
13
15
16
18
19
14
17
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10
11
12
13
15
16
18
19
14
17
ar
ar
ar
ar
ar
ar
ar
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ar
ar
ar
are ‘better jobs’. Better jobs are defined as managers, directors and senior
ar
North East’s employment rate for 16 to 64 year olds with England excluding
ar
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ar
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ar
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ar
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5-
9-
7-
3-
0
4
8
6-
2-
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5-
9-
7-
3-
8
officials; professional occupations (such as civil engineers and doctors); London by 100% by 2024.
r1
r1
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r1
r1
r1
0
r1
r0
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r1
4
8
r0
8
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and associate professional and technical occupations (such as laboratory
technicians and graphic designers).
Economic activity rate North East LEP England excluding London
Source: Annual Population Survey (Nomis) Source: Annual Population Survey (Nomis)North East LEP England excluding London
Source:
Note: The Annual Population Survey is released Annual
quarterly, Population
with Survey
each release (Nomis)
covering a 12-month period - Note: The Annual Population Survey is released quarterly, with each release covering a 12-month period -
Source: Annual Population Survey (Nomis)
Progress: By December 2019, the number of jobs had increased The economic activity rate measures the proportion of people aged 16 to January to December; April to March; July to June; or October to September January to December; April to March; July to June; or October to September
by 57,000. This had been driven by an additional 70,400 better jobs 64 who are participating in the labour market, including those employed
(equivalent to 124% of the total net change) and those out-of-work but actively seeking a job. We want to reduce the Private sector employment per working age person Gross Value Added per hour worked (£)
gap between the North East’s economic activity rate and England excluding
London by 50% by 2024. Progress: Between 2015 and 2018, the gap widened by 17% on this Progress: Between 2014 and 2018, the gap between the North East
measure. This reflects a 3.9% increase in private sector employment LEP area
gva per hourand England excluding London widened by 19%. This was
Target: Reduce the gap in private sector employment density,
across England excluding
North London,
East LEP and England compared
excluding totoa2016
London, 2009 0.3% increase in the because the 8.4% increase in North East productivity was smaller
Private sector employment North East LEP area. than the 10.1% rise across England excluding London.
There are fewer private sector jobs per head (16 to 64 population) in the £34
North East than in England excluding London and the target is to reduce this 0.7
gap by 50% by 2024. Continuous data is only available from 2015 so we are 0.6
£32
TARGET: using this as a baseline year rather than 2014.
811,300 868,300 911,300 0.5
APR 2013 JAN 2019 JOBS
0.4 £30
- MAR 2014 - DEC 2019 BY 2024
Gross Value Added per hour worked
0.3
57,000 70,400 £28
NEW JOBS NEW Gross Value Added (GVA) measures the contribution to the economy of each 0.2
BETTER JOBS individual producer, industry or UK region. GVA per hour worked is a way of
124% measuring productivity. We previously defined productivity as GVA per full 0.1
£26
time equivalent job, but due to changes in the underlying datasets, we are 0.0
now using GVA per hour worked. This brings us in line with the Industrial 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
£24
Strategy. We aim to reduce the gap between the North East and England North East LEP
North East LEP
North East LEP (previous dataset) England excl. London
North East LEP (previous data set)
England excl. London (previous dataset) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
excluding London on GVA per hour worked by 50% by 2024. Source: Business Register and Employment Survey - (Nomis)
England excl. London England excl. London (previous data set)
Source: Annual Population Survey Workplace Analysis (Nomis) Source: Business Register and Employment Survey (Nomis) and Population estimates (Nomis) Source: Subregional productivity in the UK (ONS)
OUR ECONOMY 2020 OUR ECONOMY 2020
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Section 3
Strategic Economic Plan
programmes of delivery:
data and next steps
The North East Strategic Economic Plan sets out
five programmes of delivery. These are:
Business growth
Innovation
Skills, employment, inclusion and progression
Transport connectivity
Infrastructure and investment
OUR ECONOMY 2020 OUR ECONOMY 2020
18 19
Section 3
Business growth
Business growth in the North East LEP area economy
Why is this important? What does the data tell us? • T he value of goods exports per adult in the
North East region is higher than across England Performance improved
Change since 2014 North East as %
Research from the Enterprise Research Centre • T he North East LEP area has fewer businesses excluding London. The value of goods exports Indicator Most recent data
(except where stated) of England excl. London
compared with
estimates that growth businesses account for about per head than England excluding London and has increased since 2014. Whilst the value of England excl. London
three fifths of job creation and, in particular, that fewer business births and deaths. The North service exports per adult is lower in the North
‘high growth’ businesses are responsible for almost East underperforms England excluding London East region than across England excluding
a quarter of job creation despite being just 1% of job on these measures. The North East business London, it has increased by more than 60% Increased by
Private sector enterprises
319 (2019) 44 enterprises 67 No change
creating firms. base has grown since 2014 between 2014 and 2017 per 10,000 adult population
per 10,000 adults
Business growth is aligned with the Strategic •W
hilst the proportion of businesses that • In 2018/19, the North East region had more than
Economic Plan targets to increase the number are growing (both start-ups and existing one and a half times more new jobs created per Decreased by 2 births
Business births
of jobs in the North East by 100,000 and to businesses with a turnover of £1-£2 million) person due to foreign direct investment (FDI) 41 (2018) per 10,000 adults 65 No - gap widened
per 10,000 adult population
reduce the gap in private sector job density with is slightly below the English rate, the gap projects than England excluding London. (since 2015)
England excluding London by 50% by 2024. It also is relatively small. This suggests that the
contributes to increasing productivity. smaller business base is not adversely Increased by 2 deaths
Business deaths
affecting the North East’s ability to generate 37 (2018) per 10,000 adults 64 No - gap widened
per 10,000 adult population
growth businesses. However, it does impact on the (since 2015)
total number of growth businesses
% of start-ups scaling turnover
1.8% Unchanged No - gap widened
from less than £500,000 to 90 (England)
(2015-18) (since 2012-15) (England)
£1 million in three years
% of scaling survivors increasing turnover Increased by 1.6
7.0% Yes - gap narrowed
from £1-2 million to percentage points 92 (England)
(2015-18) (England)
£3 million in three years (since 2012-15)
Value of exports in goods per adult £6,072 Increased by
110 No - gap narrowed
(North East region) (Jan-Dec 2019) £271 per adult
Value of export in services per adult Increased by
£2,542 (2017) 75 Yes - gap narrowed
(North East region) £973 per adult
Jobs created through Foreign Direct Investment Decreased by 48 jobs per
Yes - gap widened
projects per 100,000 working age population 132 (2018/19) 100,000 working age people 164
(compared with 2015/16)
(North East region) (since 2015/16)
Sources: UK Business Counts (Nomis), Business demography (ONS), UK Local Growth Dashboard (Enterprise Research Centre), HMRC Regional Trade Statistics, International exports of services from subnational areas of the UK (ONS) and Department for International Trade.
Notes: 1. To ensure that seasonal factors are not affecting comparison, the same time periods are used for both the most recent year and the 2014 benchmark year for each indicator. For example, the most recent HMRC Regional Trade Statistics data is for the period Jan-Dec 2019
– so Jan-Dec 2014 is used as the comparator.
2. Changes in methodology mean that some datasets do not have comparable statistics back to 2014:
• For business births and deaths, 2015 is the earliest comparable data.
•There is no published estimate of jobs created for England excluding London before 2015/16
3. In relation to Foreign Direct Investment, safeguarded jobs numbers excluded due to non-availability and to be consistent with DIT Inward Investment Results summary. 100,000 working age people used as a denominator to be consistent with Invest North East England statements.
4. UK Business Counts and Business Demography are separate datasets that cover different periods of time.
• The former is a detailed snapshot of the number of enterprises at a point in time, most recently the end of March 2019
• the latter covers all births and deaths of enterprises over the course of a calendar year, most recently 2018.OUR ECONOMY 2020 OUR ECONOMY 2020
20 21
Wider commentary Business births and deaths Business growth
Business base In 2018, there were 6,750 business births in the
North East LEP area. This is equivalent to 41
Start-ups scaling from less than £500,000 to £1 million in three years (%),
In 2019, there were 52,375 private sector births for every 10,000 adults. The proportion of 2015
North East LEP, Core City LEPs and England, 2015 to 2018
enterprises in the North East LEP area. Business births and deaths per start-ups in the North
If the North East had the same business birth 10,000 adult population, North East LEP, East LEP area that
• T his is equivalent to 319 private sector rate as England excluding London, there would England excluding London and England, 2018 survived to 2018 and were Greater Manchester 2.2
enterprises for every 10,000 adults in have been approximately 10,400 business births generating more than
Sheffield City Region 2.1
the North East in 2018 - almost 3,700 more. £1 million in revenues in
Births
2018 was 1.8%, slightly England 2.0
• If the North East LEP area had the same rate of 6,020 businesses closed in the North East LEP below the English
Greater Birmingham 2.0
private sector enterprises per head as England area during 2018. This is equivalent to 37 closures average (2.0%). and Solihull
excluding London, there would be an additional for every 10,000 adults. Again, this is below the 41
North East 1.8
26,200 enterprises. England excluding London equivalent (58 per The North East is ranked
10,000 adults). fourth out of the eight Leeds City Region 1.7
Looking at the private sector enterprises in the core city LEPs.
64
North East LEP area in more detail: Whilst this would initially appear to be a positive West of England 1.7
finding, research has shown that the most dynamic Derby, Derbyshire, Nottingham
• In common with the national picture, the and successful regions have both high birth and and Nottinghamshire
1.5
majority were micro-enterprises (employing death rates. 75
Liverpool City Region
1.5
between 0 and 9). There were 45,810
enterprises in this category, accounting for There is a strong connection between high birth
87.5% of all private sector enterprises rates and high death rates for two reasons: Note: England excluding London data not available
• 5 ,460 enterprises were small (employing 10 • A pproximately one quarter of start-ups close in Deaths
to 49), 895 were medium (employing 50 to 249) the first two years
and 210 were large (employing 250 or over).
A slightly higher proportion of enterprises in • S ome start-ups displace existing companies, 37 Scaling survivors £1-2 million to £3 million in three years (%),
the North East LEP area were medium or for example, by introducing better products The proportion of North East LEP, Core City LEPs and England, 2015 to 2018
large than in England excluding London (2.1% or processes. businesses within the
compared to 1.8%). North East LEP area with
West of England 8.7
58 a turnover of £1 million
to £2 million in 2015 that Sheffield City Region 7.9
increased turnover to £3
million or more by 2018 Greater Manchester 7.7
66
was below the English Derby, Derbyshire, Nottingham
7.6
average (7.0% compared and Nottinghamshire
to 7.6%). England 7.6
Greater Birmingham
The North East LEP was and Solihull
7.5
Number of private sector ranked sixth out of the
North East
enterprises in the North East
7.0
North East LEP eight core city LEPs on this
measure. Leeds City Region
LEP area in 2019 England excl. London 6.9
52,375
Liverpool City Region 6.8
England
Note: England excluding London data not available
Sources: UK Business Counts (Nomis), Business demography (ONS), Population estimates (Nomis) Source: UK Local Growth Dashboard 2018 (Enterprise Research Centre)OUR ECONOMY 2020 OUR ECONOMY 2020
22 23
Access to finance
Equity finance
In 2018, the North East region accounted for 4% of UK equity investment by value and 3% of
UK equity deals.
• T he North East region accounted for 11% of investment value and 8% of deals in England
excluding London
• T he North East had the highest number of deals per 10,000 SMEs among the eight English
regions outside of London.
However, there were just ten venture capital (VC) investors based in the North East in 2018.
Equity deals per 10,000 small and medium enterprises (SMEs), English regions, 2018
London 6.8
North East 3.1
UK 2.8
East of England 2.1
North West 1.8
South East 1.6
Yorkshire and the Humber 1.5
South West 1.2
West Midlands 0.9
East Midlands 0.6
Number of unique equity investors by region, 2018
Venture capital listed as one Venture capital listed as primary
investment strategy investment strategy
London 735 374
South East 44 23
East of England 42 27
North West 39 21
West Midlands 19 9
South West 14 9
Yorkshire and the Humber 13 6
East Midlands 12 9
North East 10 6
Source: Small Business Finance Markets (British Business Bank)OUR ECONOMY 2019 OUR ECONOMY 2019
24 25
International trade Almost 90% of the value of goods exported from the • T his is an increase of £2.1 billion or 63% compared What next?
North East region came from three commodities: to 2014
Since 2014, the North East has made progress across a range
2019 Machinery and transport 55% • T he North East accounted for 4.3% of the value of of indicators, with increases in the number of businesses, the
service exports from England excluding London in proportion of start-ups that are growing and in the value of
2017. This is a smaller proportion than for trade in goods and services being exported. However, gaps remain with
Chemicals (including pharmaceuticals) 21%
goods (6.3%). England excluding London on most indicators and progress
has stalled on many measures since last year’s report, with
Inward investment uncertainty around the UK’s exit from the EU likely to have
Manufactured goods 12% played a part in this.
The value of exports in goods In 2018/19, the North East region secured 59 foreign
from the North East region was direct investment (FDI) projects. These investments Looking forward, the key evidence priorities include developing
By value, the North East region was responsible for: created almost 2,200 new jobs. our understanding of:
£13.3 billion 7.8%
of exports of chemicals
(including pharmaceuticals)
The number of jobs created through FDI in the
North East region in 2018/19 was 27% lower
• The factors that underpin the North East’s low levels of
business start-up and lower growth ambitions and the
from England excluding London than in 2015/16 (the earliest date of comparison). interventions that can help address these
However, this decrease was smaller than for England
The value of imports in goods
7.8%
excluding London (down 41%) and the third smallest • The reasons North East businesses are less likely to export
into the North East region was of exports of manufactured goods of the nine English regions. than those in other regions and how they can be encouraged to
build international links
£14.4 billion
The North East region significantly outperforms the
national average on securing FDI – with more than • The challenges and opportunities that the UK’s exit from the EU
6.9% of machinery and transport exports one and a half times more jobs per person created
due to FDI projects than across England excluding
and from COVID-19 are creating for North East businesses and
what support they need to be able to respond effectively.
London in 2018/19.
A number of studies looking at specific Priorities for the business growth programme of
industries have suggested that HMRC data may Foreign-owned businesses delivery include:
Exports in goods underestimate the scale of exports from the North
East region. Goods exports are allocated on the In 2017, almost 3,700 businesses in the North • Continuing to support businesses to grow and scale-up
• In 2019, 59% of the North East region’s exports in proportion of the exporting business’ employees in East region were foreign-owned, equivalent to through the Scaleup North East programme
goods (by value) were to the EU and 41% were to the region. Where this is not an accurate proxy for 4.7% of all businesses, a higher proportion than
non-EU countries the proportion of exports from the region, the North England excluding London (3.5%) and the highest • Encouraging a more entrepreneurial society, with more people
East will be underrepresented. percentage of any English region. aspiring to start a business and more people acting on this
• T he trends across these two markets since 2014 ambition. This is critical in creating the future pipeline of scale-
have varied with: Exporters of goods Foreign-owned businesses accounted for: up businesses
34%
• North East exports in goods to the EU having In 2019, there were 4,286 exporters of goods in • Encouraging businesses to adopt digital technologies and
increased in value by 10% between 2014 and the North East region. This was 3.2% of the total of the North East region’s turnover enhance the leadership, with these identified as key drivers of
2019, from £7.1 billion to £7.9 billion in England (some were based in more than one productivity growth
region). It was equivalent to 20 exporters per 10,000
• North East exports in goods to non-EU
countries having remained unchanged in value
adults, the lowest figure among the nine English
regions and well below the figure for England (29 25% of the North East region’s GVA • Supporting North East businesses to respond to the
challenges and opportunities created by the UK’s exit from
between 2014 and 2019, at £5.4 billion per 10,000 adults). The number of exporters in the the EU and COVID-19. The focus will be on building resilience
region increased by 6.7% between 2014 and 2019, These are similar to or slightly higher than for and on helping businesses think bigger and enhance their
• T he North East accounted for 6.3% of the value of although this was a smaller percentage increase England excluding London (32% and 25%, global position
exports in goods from England excluding London than in England as a whole (12.5%). respectively). About 42% of the North East region’s
in 2019. Within this, the North East accounted for foreign-owned businesses had an EU-based • Continuing to support the region to develop its international
a larger proportion of exports to the EU (7.6%) Exports in services owner, 34% had an owner from the Americas, 19% linkages, with these critical not only to trade but also to
than to non-EU countries (5.0%) from England from Europe outside of the EU and 4% from Asia. investment, research, education and tourism.
excluding London. In 2017 the value of service exports from the North All of these percentages are similar to England as
East region was £5.5 billion. a whole.
Sources: Regional Trade Statistics (HMRC), International exports of services from subnational areas of the UK (ONS), Inward investment results (DIT), Annual Business Survey - foreign-owned businesses (ONS)OUR ECONOMY 2020 OUR ECONOMY 2020
26 27
Innovation
Innovation in the North East LEP economy
Why is this important? What are the key findings from the data? • S cience, research, engineering and technology
professionals accounted for 5.7% of the North
By bringing forward new products and processes, • 3 6% of businesses in the North East region East LEP area’s employment in 2019, with a
innovation plays a key role in improving the North report they are innovation active, compared to further 2.2% employed in science, engineering Performance improved
North East as %
East’s productivity and competitiveness. 39% across England and technology associate professional roles Indicator Most recent data Change since 2014 of England excl. London compared with England excl.
London
Sources of data available on innovation are • B usiness expenditure on R&D and patents • T hese proportions were higher than those
limited and focus on those aspects of innovation granted per head are low compared with of England excluding London (5.6% and
that are measurable, such as business England excluding London but both have 1.9%). The number of people employed in
% of businesses that are innovation active 36% (2016-18) Decreased by 6 percentage points 92 (England) Yes - gap closing
expenditure on research and development (R&D) increased and closed the gap since 2014 science, research, engineering and technology (Compared to 2014-16)
and patents approved. professional roles in the North East LEP area
• T he North East region has a slightly lower per increased by 15,400 between 2014 and 2019 and
There are limited data that capture the capita spend on R&D undertaken by higher the proportion grew by 1.7 percentage points,
importance of networks, relationships and the education institutions than England excluding closing the gap and overtaking the proportion in Business expenditure on R&D £2.0m (2018) Increased by £0.7 million 39 Yes - gap closing
per 10,000 adult population per 10,000 adult population
diffusion of innovation. Most data on innovation London but, with the North West, a much England excluding London.
are only available for the North East region. lower per head spend on R&D undertaken by
government bodies
Business employment in R&D 27 (2018) Increased by 8 jobs 54 Yes - gap closing
per 10,000 adult population per 10,000 adult population
Higher education expenditure on R&D £1.1m (2017) No change 90 No - gap widened
per 10,000 adult population
Government expenditure on R&D £0.3m (2018) Increased by £0.2 million
per 10,000 adult population North East & North West per 10,000 adult population 59 Yes - gap closing
regions combined
Patents granted per million adult population 27.9 (2018) Increased by 7.5 patents per million 51 Yes - gap closing
adult population
% employed in science, research, engineering and 5.7% Increased by 1.7 102 Yes - overtaken
technology professional roles (Jan 2019 to Dec 2019) percentage points
% of employment as science, engineering and 2.2% Increased by 0.2 113 Yes - gap widened
technology associate professionals (Jan 2019 to Dec 2019) percentage points
Sources: UK Innovation Survey (BEIS), Annual Population Survey Workplace Analysis (Nomis), Business Expenditure on R&D (ONS), Country and regional breakdown of expenditure on R&D in the UK (ONS) and Patents (Intellectual Property Office)OUR ECONOMY 2020 OUR ECONOMY 2020
28 29
Wider commentary Business expenditure and employment on 6,000 full-time equivalents were employed
research and development in R&D in businesses in the North East region
Innovation activity in businesses in 2018.
Whilst the most recent data available on total
36% of the North East region’s businesses reported R&D expenditure is for 2017, more recent data - • T his is 3.1% of total employment in R&D in
they were innovation active between 2016 and 2018 for 2018 - is available for business expenditure England excluding London
– a slightly lower proportion than for England as a on R&D. Expenditure on R&D by North East region
whole (39%). businesses was £443 million in 2018. • T here were 27 individuals employed in
undertaking R&D within businesses in the North
Only headline regional data is currently available for • T his is 2.2% of total expenditure on R&D by East region for every 10,000 adults. This is
2016-18 but, in 2014-16, North East region businesses businesses in England excluding London the lowest rate of any English region and only
defined as ‘broad innovators’ were more likely than 54% of the English excluding London rate (51),
non-innovators in the region to: • £ 2.0 million was spent on R&D by North East although this is up from 44% in 2014.
region businesses for every 10,000 adults.
• E xport This compares to £5.2 million across England Employment in science, research, engineering
• E mploy science and engineering graduates excluding London and is less than a fifth and technology
• E mploy other graduates. of the rate of expenditure in the best
performing region (East). 5.7% of employment in the North East LEP area
The North East region lagged the UK on all three in 2019 was in science, research, engineering and
measures. North East region innovative businesses No total regional 2018 R&D spend data is technology professional roles.
were five times more likely than non-innovators in the available, but, in 2017, over a half (54%) of North
region to employ individuals with the following skills: East expenditure was by businesses, compared
with 74% in England excluding London.
Science
• E ngineering / applied sciences
• G raphic arts / layout / advertising
•D esign of objects or services.
Total expenditure on R&D
Research
In 2017, expenditure on research and development Expenditure (£m) by businesses on R&D
(R&D) within the North East region was £711 per 10,000 adults, North East region and England
excluding London, 2014 and 2018
million, equivalent to 1.3% of GVA. This is a lower
proportion than across England excluding London. £5.2m
Engineering
The government has set a national target that R&D £4.5m
expenditure will be 2.4% of GVA by 2027.
R&D expenditure as % of GVA, North East region
Technology
and England excluding London, 2017
2.5%
£2m
This was above the rate of England excluding
2.0%
£1.3m London (5.6%), with the North East’s 1.7
1.5%
percentage point increase since 2014 closing the
previous gap completely.
1.0%
The number employed in these roles in the North
0.5% East LEP area increased by 15,400 in this period
2014 2018 to 49,200. In addition, there were 18,700 people
North East England excl. London
0.0%
employed as associate professionals in these
North East region England excl. London areas, up by 2,600 since 2014.
Sources: UK Innovation Survey (BEIS), Gross expenditure on research and development (R&D) (ONS), Research and Development in UK Businesses (ONS), Annual Population Survey Workplace Analysis (Nomis)OUR ECONOMY 2019
30
What next?
The North East has continued to see
Top 20 research subjects in North East LEP area universities by project funding
improvement in business expenditure
awarded by research councils, 2010 to 2020
Patents, trademarks and designs About 44% of this funding (£356 million) on R&D and employment in science and
has come from the Engineering and Physical research-related occupations. More
The North East region has amongst the lowest Sciences Research Council, with a further No. of projects
Funding
% of UK funding
Location disappointingly, the proportion of businesses
rates in England per adult of: 14% (£112 million) from the Medical Research (£ millions) quotient that report that they are innovation active
Council. The councils for Biotechnology and has fallen – but this has been the case in all
Metabolic and endocrine 10 25.0 21.1 6.0
• P atents granted (lowest) Biological Sciences Research, Economic and regions, with the uncertainty as a result of
• T rademarks registered (lowest) Social Research, Natural Environment Research the UK leaving the EU likely to have played a
•D esigns registered (second lowest). and Science and Technology Facilities have each Astronomy and space science 17 23.5 19.4 5.5 part in this trend.
funded projects worth between £71 million and
The North East region had the highest rate of £81 million with the remainder (£35 million) from Information and knowledge management 6 17.3 22.4 6.3 In relation to building the evidence base, the
approval for designs in 2018, when expressed as the Arts and Humanities Research Council. priorities are:
a percentage of applications filed. The equivalent Extra-galactic astronomy and cosmology 23 15.6 11.9 3.4
rate for trademarks was the fourth lowest The twenty subjects that have received the • Understanding the opportunities that are
among the nine English regions. For designs and most funding for North East projects in this being created by the UK leaving the EU
Complexity science 5 14.9 17.8 5.0
trademarks respectively, 100% and 80% of the period cover many different science, technology, and COVID-19, focusing on anticipating
differences in registration rates between the engineering and mathematics specialisms. The the markets where innovative businesses
North East and England excluding London were seven most highly funded each had more than Computational methods and tools 18 14.7 15.7 4.4 in our region can increase their market
due to lower levels of applications. 10% of total UK project funding for that subject. share. This intelligence will help inform
Cold atomic species 14 14.4 26.7 7.6 the work of our pilot Innovation Delivery
Research specialisms These seven subjects each have location Partnerships
quotients above three, meaning that North East Materials characterisation 22 11.1 3.9 1.1
Since 2010, the UK Research Councils have universities have more than three times as • Developing new sources of intelligence on
funded more than 2,300 research projects in the much funding in these areas than would have innovation activities in the North East to
four universities in the North East LEP area, about been expected if funding was evenly distributed Neurological 16 10.6 2.5 0.7 plug gaps in the current evidence base.
4% of all UK projects. Funding for these projects throughout the UK.
has totalled more than £800 million, about 3.5% Climate and climate change 41 10.0 2.8 0.8 The priorities forthe innovation programme of
of the national total. delivery are:
Artificial intelligence 9 9.6 2.2 0.6
• Launching the North East
Innovation Delivery Framework
Patents granted by region, 2018 Inflammatory and immune system 12 9.4 5.1 1.4
Patents granted Patents granted per million adults
• Establishing pilot Innovation Delivery
East of England 466 93.2 Ground engineering 4 8.5 24.9 7.0 Partnerships, focused partnerships
between researchers and businesses to
West Midlands 371 78.3
Analytical science 24 8.3 2.6 0.7 grow their market share in emerging and
London 477 67.4 high growth sectors where we have a
Biochemistry and physiology 22 8.1 5.6 1.6 competitive advantage
South East 452 61.3
• Encouraging innovation challenge
England 2,574 56.9 Cancer 10 7.8 2.3 0.6
activities that bring external expertise
into organisations to help them identify
England excluding London 2,097 55.0 Phenomenology 6 7.5 54.9 15.5 innovative solutions to the challenges they
South West 232 50.3 face. COVID-19 has created a wide range of
Energy efficiency 8 7.3 6.0 1.7 new challenges where this approach can
North West 242 41.0 help generate innovative solutions
Bioenergy 7 7.2 10.2 2.9
East Midlands 133 34.0 • Ensuring innovation plays a key part in
rebalancing the economy.
Yorkshire and the Humber 140 31.6 Condensed matter physics 8 7.1 5.5 1.6
North East 61 27.9
Sources: Patent data, trademark data, design data (Intellectual Property Office), Gateway to Research (UKRI): North East LEP analysis Source: Gateway to Research (UKRI): North East LEP analysisOUR ECONOMY 2020 OUR ECONOMY 2020
32 33
Skills, employment, inclusion and progression
Skills, employment, inclusion and progression in the North East LEP economy
Why is this important? London. The Strategic Economic Plan has • B oth the economic inactivity rate and the
prioritised this by setting a target to increase unemployment rate have fallen over the past
Enhancing our region’s skills base will be the number of jobs by 100,000 by 2024 five years. The unemployment rates for young Performance improved
essential to improving our economic people (aged 16 to 24) and older workers (aged North East as %
Indicator Most recent data Change since 2014 compared with England excl.
of England excl. London
performance. Investment in skills helps • T he proportion of the North East LEP area 50 to 64) have also decreased over this period London
individuals access available employment population that is working age (that is defined
opportunities, establish businesses and build as 16 to 64) is slightly above that of England •D
espite these improvements, the working age Employment density per 1,000
658 (2018) No change (2015) 89 No - gap widened
careers. At an economy-wide level, it helps excluding London economic activity rate and unemployment rates working age population
drive productivity growth and social mobility. for all age groups remain above the England
•W
hilst the North East LEP area has lower rates excluding London rates Working age population as
62.8% (2018)
Decreased by 1.0
102 No change
This investment will be most effective if of economic activity and employment than % of total population percentage points
it reflects the skills needed by employers, England excluding London, these rates have • A s the North East unemployment rates for
ensuring alignment between labour demand increased since 2014 35 to 49 year-olds and 50 to 64 year-olds Economically active as 75.5% Increased by 0.5
95 No - gap widened
and supply. This is particularly important have declined faster than elsewhere, the gap % of working age population (Jan 2019 to Dec 2019) percentage points
at the current time as the region’s economy • T he working age population of the North with England excluding London has narrowed.
Employment as % of working 71.1% Increased by 2.2
and labour market are going through a period East has a lower qualifications profile than For younger age groups, however, the gap 93 No - gap widened
age population (Jan 2019 to Dec 2019) percentage points
of transition. England as a whole, a higher proportion of has increased
those aged 16 to 64 having no qualifications % of working age population Increased by 4.2
However, skills are only part of what is needed and fewer qualified to degree-level or above • A verage (median) weekly pay in the North East with NVQ Level 4+ qualifications
32.7% (2019)
percentage points
88 Yes - gap narrowed
to help individuals access these opportunities (NVQ Level 4 or above). However, the North is only 90% of the England average. This is
with wider measures required to ensure inclusion East LEP area has made progress on this since partly offset by lower living costs % of working age population Decreased by 1.0
and progression. 2014, with the percentage with higher level 8.8% (2019) 116 No - gap widened
with no qualifications percentage point
qualifications increasing and the percentage • A verage weekly pay increased by 11.2% between
What are the key findings from the data? with none decreasing 2014 and 2019, the second lowest rate of % of employers with a vacancy who Increased by 5
growth of the eight core city LEPs. However, 29% (2017) 91 No - gap narrowed
report skills shortages as a reason percentage points (2013)
• The key challenge that the North East LEP • F ewer employers in the North East LEP than between 2018 and 2019, the North East had the
area faces is that there are fewer employment across England excluding London reported that largest percentage increase of 4.8%. Yes - North East percentage
% of employers reporting Decreased by 5
opportunities per head than England excluding they had experienced skills shortage vacancies 13% (2017) 99 was previously higher than
skills gaps percentage points (2013)
England exc. London
% of 16 to 64 population that are 24.5% Decreased by 0.5
119 No - gap widened
economically inactive (Jan 2019 to Dec 2019) percentage points
% of 16 to 64 economically active 5.7% Decreased by 2.5
146 No - gap widened
population that are unemployed (Jan 2019 to Dec 2019) percentage points
% of 16 to 24 economically active 18.2% Decreased by 1.7
163 No - gap widened
population that are unemployed (Jan 2019 to Dec 2019) percentage points
% of 50 to 64 economically active 3.7% Decreased by 2.0
137 Yes - gap narrowed
population that are unemployed (Jan 2019 to Dec 2019) percentage points
Median gross weekly wages Increased by No - gap widened
£532.50 (2019) 90 (England)
of full-time workers (£) £53.80 (11.2%) (England)
Sources Business Register and Employment Survey (Nomis), Population estimates (Nomis), Annual Population Survey (Nomis), Employer Skills Survey (DfE), and Annual Survey of Hours and Earnings workplace analysis (Nomis)
Notes: 1.To ensure that seasonal factors are not affecting comparison, the same time periods are used for both the most recent year and the 2014 benchmark year for each indicator.
For example, the most recent Annual Population Survey data is for the period January 2019 to December 2019 – so January 2014 to December 2014 is used as the comparator.
2. Skills shortage vacancies are vacancies that are hard to fill because there is a lack of skilled or qualified people to take the job.
3. Skills gaps are where existing staff are not fully proficient in their job role.You can also read
