search
date/time
 | North East Post A Voice of the Free Press |
6:10 AM 28th February 2023
business
Newcastle Set To Lead The North East’s 2024-2026 Economic Growth, Finds EY Report
Despite a challenging economic outlook for the wider North East, Newcastle’s economy is expected to grow by an annual average of 2% between 2024 and 2026, when measured by Gross Value Added (GVA). This is ahead of the average for the North East as a whole (1.7%) and only marginally behind the national growth rate (2.1%).
The city’s employment growth meanwhile is expected to average 1.3% per year from 2024 to 2026, in line with the national rate (1.3%). The forecast also projects that Newcastle will add half a billion pounds of value to its economy by 2026, compared with 2022.
Meanwhile, in a sign that the region’s growth is set to be focused in urban areas, Sunderland is expected to have the region’s second-fastest-growing economy from 2024 to 2026, with average annual GVA growth of 1.9%.
While trailing the rest of the UK, the North East’s annual average 1.7% GVA growth between 2024 and 2026 would represent a recovery from the 0.8% contraction in GVA forecast for 2023.
With job losses in the region’s manufacturing sector expected to offset gains elsewhere, employment growth in the North East faces a challenging outlook, with just 1% growth per year from 2024 to 2026 forecast – falling behind the national rate of 1.3%.
Stephen Church
“The North is home to many of the UK’s most dynamic and innovative businesses and, while the next 12 months will be economically challenging, there are areas across the region where we can expect to see encouraging growth over the next few years. The North’s cities are set to be particularly strong performers.
“However, progress is about the whole of our region, not just our bigger cities. And while several towns and cities are expected to see better economic and employment growth than many other parts of the country, too many places are still expected to trail behind.
“In order to spread growth, not just throughout the country, but throughout regions too, it is critical that the public and private sectors work together to combine their expertise, strengths, and capabilities. The North needs both working in tandem to succeed.
“Looking ahead, the regions across the North need their own clear strategies for growth, which reflect each region’s own strengths and unique attributes. Getting the right sector mix is key, and investment in high-value sectors and skills can help build a sustainable future – not just for the North, but for the whole country too.”
Darlington also expected to outpace North East average growth
Behind Newcastle and Sunderland, the next-best-performing location in the North East between 2024 and 2026 is expected to be Darlington, with the town forecast to see an average of 1.8% GVA growth per year. Darlington is also expected to keep pace with the regional rate of employment growth from 2024 to 2026, with 1% growth per year forecast.
Elsewhere, GVA growth in Stockton-on-Tees is forecast to average 1.6% per year from 2024 to 2026, outperforming three regional peers, but still marginally behind the North East rate and considerably slower than the national rate. The town’s employment growth is also expected to fall short of regional and national rates, with average jobs growth of 0.8% per year forecast over the same period.
Further behind in terms of expected annual average GVA growth from 2024 to 2026 are Middlesbrough (1.5%) and Hartlepool (1.4%). Hartlepool’s employment growth for the period is forecast to be on-par with Stockton-on-Tees at 0.8% per year, while Middlesbrough’s is expected to be slightly higher, at 0.9% per year.
Durham is expected to have the region’s slowest-growing economy from 2024 to 2026, according to the forecast, with annual average economic growth expected to be 1.2%. Durham is also expected to have the North East’s slowest employment growth over the same period, with job numbers growing just 0.7% per year on average.
The economic gap between London and the rest of the country set to grow again
The EY Regional Economic Forecast also says that the rising cost of living and weaker consumer spending are expected to deepen the economic divide between London and the rest of the UK.
The forecast says that UK Gross Value Added (GVA) is expected to decline 0.6% over the course of 2023, with London (-0.2%) the only part of the country predicted to see a smaller economic contraction than the UK overall. While Scotland is expected to match the overall UK GVA performance in 2023 (also contracting 0.6%), other parts of the UK are forecast to lag behind. Yorkshire and the Humber and the East Midlands are predicted to see the steepest GVA contractions, at 1% each.
Driving the contraction in UK output in 2023 are the forecast declines in services most dependent on household spending. With consumers struggling amid cost of living pressures, this year’s worst performing sectors are expected to include wholesale and retail (-3.3% GVA contraction), accommodation and food services (-2.7%), and arts, entertainment and recreation (-1.8%). Manufacturing (-2.9%), which relies on consumer spending to maintain demand, also faces challenges relating to higher input costs such as raw materials and labour, alongside increased borrowing costs.
At the other end of the spectrum, less consumer-dependent sectors like administrative and support services (0.8%) and professional services (0.1%) are expected to see some growth, while sectors like real estate (-0.2%) and financial and insurance services (-0.5%) are forecast to see smaller contractions than the rest of the economy.
Over the course of 2024-2026, UK GVA is expected to grow at an annual average 2.1%, with London growing 2.6%. The South East (2.2%), South West (2.1%), East of England (2.1%) and West Midlands (2.1%) are also forecast to outpace or match wider UK growth. Like London, the West Midlands and the South West are both expected to be boosted by strong growth in the information and communication sector, which is expected to be the UK’s fastest growing sector in the medium-term.
The pattern in GVA growth is reflected in jobs, with only London, Northern Ireland and Wales expected to perform better than the UK as a whole in 2023. Job numbers in these three areas are expected to be effectively unchanged this year, and down 0.2% across the UK. The West Midlands is forecast to trail the rest of the country, with job numbers shrinking 0.4%. London is also forecast to see the highest increase in its working age population in the medium term, with annualised growth of 1.2% between 2024 and 2026.
Rohan Malik, EY’s UK&I Managing Partner Markets & Accounts, says:
“The rising cost of living is likely to exacerbate the differences in regional economic performance, widening regional inequalities and heightening the need for economic policy which spreads growth out across the UK. Levelling-up presents an opportunity to boost growth for the whole of the UK – but familiar patterns are still all too present as the economy recovers from the pandemic.
“London clearly enjoys advantages in economic resilience, skill levels, and in productivity – both in higher and lower skilled sectors. But London’s performance also offers lessons for the rest of the country. Sector composition is key for regional economic performance, for example. Regions need their own visionary sectoral growth plans that define roles for the private sector, alongside government, as investors, employers and economic agents in their regions. It’s also vital to unlock investment in skills and encourage labour retention.
“The key to nurturing a strong sector composition is investment in high value-added sectors, like advanced manufacturing and information and communication. The transition to Net Zero, for example, represents a generational opportunity to rebuild the manufacturing base, upskilling workers in new energy generation and operation capabilities across the value chain from construction of solar farms, heat networks and hydrogen pipelines to electric vehicles and charging infrastructure. A one-size fits all approach won’t work though, and regions need to understand their own strengths, weaknesses, and sub-sector opportunities.
“High value sectors won’t function without a high value workforce and, too often, regions struggle to retain and uplift their skill bases. Fixing this needs to be approached from several angles: graduate and skills retention relies not just on the development of well-paid jobs, but strategic planning on the broader set of social, environmental and structural components that determine the quality of life in a given region too.”
“The rising cost of living is likely to exacerbate the differences in regional economic performance, widening regional inequalities and heightening the need for economic policy which spreads growth out across the UK. Levelling-up presents an opportunity to boost growth for the whole of the UK – but familiar patterns are still all too present as the economy recovers from the pandemic.
“London clearly enjoys advantages in economic resilience, skill levels, and in productivity – both in higher and lower skilled sectors. But London’s performance also offers lessons for the rest of the country. Sector composition is key for regional economic performance, for example. Regions need their own visionary sectoral growth plans that define roles for the private sector, alongside government, as investors, employers and economic agents in their regions. It’s also vital to unlock investment in skills and encourage labour retention.
“The key to nurturing a strong sector composition is investment in high value-added sectors, like advanced manufacturing and information and communication. The transition to Net Zero, for example, represents a generational opportunity to rebuild the manufacturing base, upskilling workers in new energy generation and operation capabilities across the value chain from construction of solar farms, heat networks and hydrogen pipelines to electric vehicles and charging infrastructure. A one-size fits all approach won’t work though, and regions need to understand their own strengths, weaknesses, and sub-sector opportunities.
“High value sectors won’t function without a high value workforce and, too often, regions struggle to retain and uplift their skill bases. Fixing this needs to be approached from several angles: graduate and skills retention relies not just on the development of well-paid jobs, but strategic planning on the broader set of social, environmental and structural components that determine the quality of life in a given region too.”
| Region | 2023 GVA Growth | Region | Annualised GVA Growth 2024-26 |
| London | -0.2% | London | 2.6% |
| Scotland | -0.6% | South East | 2.2% |
| UK | -0.6% | UK | 2.1% |
| East | -0.7% | South West | 2.1% |
| Northern Ireland | -0.7% | East | 2.1% |
| South East | -0.7% | West Midlands | 2.1% |
| North West | -0.7% | North West | 2.0% |
| Wales | -0.8% | Northern Ireland | 1.9% |
| South West | -0.8% | East Midlands | 1.9% |
| North East | -0.8% | Wales | 1.7% |
| West Midlands | -0.8% | Yorkshire & the Humber | 1.7% |
| Yorkshire & the Humber | -1.0% | North East | 1.7% |
| East Midlands | -1.0% | Scotland | 1.7% |