Productivity

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Productivity the South West
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PRODUCTIVITY

• What is productivity?
• Productivity refers to how well an economy
• uses the resources it has available by
• relating the quantity of inputs to outputs.

What does productivity measure? Productivity
measures the two primary inputs to the economy
capital and labour. Focus mainly on labour
productivity. Labour productivity looks at the
output produced per unit of labour input.
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MEASURES OF PRODUCTIVITY

• Output per hour worked

  1998 1999 2000 2001 2002 2003 2004
East Midlands 95.0 93.9 94.8 96.6 97.1 96.8 98.5
East of England 100.6 98.7 98.6 97.9 98.6 100.8 101.2
London 119.1 116.6 117.6 116.1 117.5 116.7 118.8
North East 94.6 95.7 94.9 98.1 94.9 93.9 93.6
North West 95.1 94.6 94.0 94.2 93.0 92.5 92.5
South East 104.1 105.4 106.3 106.0 105.2 107.2 105.5
South West 94.3 95.8 98.1 96.5 95.9 97.0 95.1
West Midlands 91.0 93.6 93.5 94.5 93.7 93.8 94.0
Yorkshire the Humber 93.4 94.1 94.1 94.7 93.0 92.2 91.4
England 100.8 100.8 101.0 101.2 101.2 101.3 101.3
Source ONS, 2006
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MEASURES OF PRODUCTIVITY

• GVA per hour worked (UK100), by region, 2004

Source ONS, 2006
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MEASURES OF PRODUCTIVITY

• Output per filled job

  1998 1999 2000 2001 2002 2003 2004
Yorkshire Humberside 92.3 92.8 92.2 92.4 92.6 91.8 90.2
North West 94.4 93.5 93.9 93.7 92.0 91.7 91.4
North East 91.2 92.9 93.6 94.9 92.5 91.7 92.2
South West 92.8 93.9 95.1 94.3 93.4 93.7 92.8
West Midlands 92.6 93.1 94.1 94.5 93.9 93.9 94.6
East Midlands 94.7 93.3 94.7 96.5 97.3 97.3 97.5
East of England 99.6 97.8 97.9 98.2 97.4 99.5 100.9
South East 103.4 104.7 105.2 104.7 104.0 104.9 104.2
London 123.0 122.9 122.4 122.1 123.6 123.5 124.7
England 100.8 100.9 101.0 101.3 101.3 101.3 101.3
Source ONS, 2006
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PRODUCTIVITY

• Why is productivity important?
• Increasing productivity is the driving force is
  central
• to long-term economic growth and the route to
• higher prosperity.

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THE PRODUCTIVITY GAP

• Why a gap in productivity?
• Many arguments as to why the productivity gap
• exists some of the main ones as follows
• London distorting the UK average
• Regional differences in the structure of industry
  and firms (manufacture technology vs. tourism
  hospitality, lack of foreign investment firm
  size)

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THE PRODUCTIVITY GAP

• Regions not benefiting equally from the 5 key
  drivers to productivity market failures have
  prevented the spread of economic prosperity from
  richer to poorer regions

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5 KEY PRODUCTIVITY DRIVERS

• What are these key drivers?
• Government identified 5 key drivers to
  productivity
• Skills
• Low productivity puzzling given the high levels
  of economic activity and skills levels in the
  region
• Investment
• Rates of investment in the South West do match UK
  but there is little foreign investment in the
  region

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5 KEY PRODUCTIVITY DRIVERS

• Innovation
• Lower levels of spending per head by businesses
  in the region. Very low levels of spending by
  South West universities. Is this significant
  jury out!
• Enterprise
• Good in the South West better than average on
  business creation survival
• Competition
• Very difficult to measure. No straightforward
  answer

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GEOGRAPHY PRODUCTIVITY

• Productivity decline from north east to
• south west
• Matches patterns of skills levels and employment
• Large cites recognised as engines of economic
  activity
• Proximity to London M4/5 corridor
• Peripherally of areas such as Cornwall plus
  likelihood of smaller local labour markets
  (inability to migrate to larger employment
  centres)