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North East productivity grows at fastest rate in the UK

LEP welcomes region’s record performance.

The North East’s labour productivity is growing at the fastest rate in the UK, according to newly published figures from the Office for National Statistics (ONS).

The official data, focusing on Gross Added Value (GVA) and hours worked, also shows the region is performing at its best level since the ONS started producing comparisons based on this economic indicator in 2004.

Calculations of the GVA/hours worked showed that productivity in the North East Local Enterprise Partnership area grew by 14% between 2009 and 2012.

The region also showed the highest growth rate in the UK using the ONS’s alternative labour productivity measure of GVA/job filled in the latest available figures, covering the 2009 to 2011 period. Again, this measure shows the North East LEP area reached its highest ever level of productivity since the ONS started this series of comparisons in 2002.

North East LEP chief economist, Mauricio Armellini, said:
“Employment is a measure of quantity but GVA adds the wages paid and the profits made, so GVA is telling a much more interesting economic story. It is a more comprehensive measure of the economy.

“This measure of productivity divides the production by how many people are working or how many hours are worked. To increase it, you need to produce more with the same or with less, which you achieve by having more productive people in the workforce or by firms becoming more productive in their methods.”

The latest figures are further evidence of growing productivity in the North East LEP area, which covers County Durham, Northumberland and Tyne and Wear. In December, the ONS GVA figures for 2012 showed the region was ahead of the national average growth, with a 1.7% expansion compared to the 1.6% UK average. Overall, North East GVA growth was the third highest of the UK regions in 2012 and expanded at double the rate of London and the West Midlands.

Mr Armellini said:
“It’s not just a blip. The GVA growth shows that our area is producing more; the productivity growth shows that we are producing more with less. So it’s not just a quantitative improvement, it’s also a qualitative improvement.

“The LEP’s Strategic Economic plan is poised to take us further in this direction, creating more jobs and businesses, particularly productive businesses and up-skilling people to develop this part of the economy. Through the SEP we have identified GVA as being a really important measure. It is a key indicator of economic growth and of achieving our progress towards more and better jobs.”

The LEP’s Strategic Economic Plan (SEP) is currently being prepared for presentation to the Government following a consultation with stakeholders. It prioritises areas for action and sets out a vision that by 2030 ‘the North East will be a globally competitive economy, with more and better jobs created through making, trading and innovating’.

Paul Woolston, chair of the North East LEP, said:
“The latest GVA indicators are confirmation that the region is moving in the right direction. Although we are starting from a lower productivity and employment base than many other regions, our strong growth shows the North East is narrowing the productivity gap.

“Once we are able to begin implementing the SEP, we expect our rate of productivity to climb even more swiftly.”