Britain’s uneven recovery

London’s dominance means that other UK regions, including Northern Ireland, are seeing their share of the economy decrease.

As the UK’s recovery continues, London is outpacing all other regions and Northern Ireland’s share of the national economy is falling behind by comparison.

The most recent statistics for gross value added (GVA) cover 2012 and comparisons are possible as far back as 1997. As all regions have experienced real terms increases in GVA over that time, the percentage shares of the economy are a better indicator of long-term regional performance.

The UK is sub-divided into 12 regions, which generated a total of £1.35 trillion. In addition, the offshore economy created £24 billion – primarily from North Sea oil.

London consistently has the highest GVA of any single region, totalling £309 billion in 2012. Its share of the economy had increased from 19.4 per cent in 1997 to 22.4 per cent.

Other southern English regions – East, South East and South West – accounted for £420 billion and their share of the economy has remained largely constant (30-31 per cent) over the last sixteen years.

The rest of England has lost out by comparison as a long-term decline has continued. The Midlands generated £178 billion with another £265 billion added by the North East, North West and Yorkshire. The combined ‘Midlands and northern’ share stood at 32.1 per cent, compared to 34.3 per cent in 1997.

Outside England, the devolved regions’ share has slightly decreased in same period: from 13.9 per cent in 1997 to 13.6 per cent ten years later and 13.4 per cent in 2012. Scotland, Wales and Northern Ireland contributed £183 billion.

Northern Ireland was the only region where GVA had not returned to its pre-2007 level although it is likely that this was attained in 2013; updated statistics will be published this December. When closely scrutinised, the figures show that our regional ‘slice’ is gradually becoming smaller (see table). Ideally, the province’s GVA share would reach and exceed its population share (2.9 per cent) but its share peaked at 2.3 per cent before the crisis.

GVA per head was still higher than Wales – £16,127 compared to £15,401 – although there is no room for complacency. The Welsh figure had increased by £240 over the last year compared to a rise of £108 here, which indicates Northern Ireland needs to keep improving its economic performance to avoid being overtaken by a fellow devolved region.

£2 billion borrowing cut

Government debt is likely to fall from £107.7 billion to £105.8 billion in this financial year, according to the latest forecast from the Office for Budget Responsibility. Public sector net borrowing in the month of June stood at £11.4 billion – up by £3.8 billion over the year. When the Bank of England’s asset purchase facility (APF) was excluded, borrowing was £0.1 billion lower than in June 2013.

The APF buys up high quality assets with the proceeds then being passed to the Treasury; a transfer did not take place in June but more transfers are expected in July and October.