July 2015

WARWICKSHIRE MEANS BUSINESS

Economics blog: Addressing the productivity challenge

In his Summer Budget speech on July 8, the Chancellor of the Exchequer highlighted productivity as one of the great economic challenges facing the UK.  The graph below shows why this is such a problem, and the significant decline in the output of our workforce since the start of the recession. 

The productivity of our economy remains 2% below the pre-crisis peak, and lags substantially behind all other G7 nations apart from Japan, leading to the news stories earlier in the year that it takes a French worker only four days to produce the same amount of output as a UK worker does in five.

 

Warwickshire is not immune to these productivity problems, and analysis of recent data from Cambridge Econometrics highlights that the county’s economy under-performs significantly.  In 2014, Warwickshire’s output per worker was 87.5% that of the UK average (which itself is below the G7 average). This equates to a productivity gap of £1.48bn – in other words, our economy would produce nearly £1.5bn more output a year if the workforce in Warwickshire was as productive as the UK average worker. 

The problem with productivity is common across all parts of the county, although Stratford-on-Avon District is the best-performing at 90% of the UK average, and Nuneaton & Bedworth the worst-performing at 81% of the average. Using Cambridge Econometrics Local Economy Forecasting Model, it is forecast that without new policy interventions, the productivity differential between Warwickshire and the UK will increase. By 2025, the average output per worker in the county will be 87% of the UK (down by 0.5%).

Addressing this productivity challenge is key to the future success and prosperity of both the UK generally, and Warwickshire specifically, and will form a key focus of future interventions and initiatives.

 

Unemployment continues to fall

 

The number of people claiming Jobseekers Allowance (JSA) in the county continues to fall and is at its lowest since comparable records started. In total, there were 3.327 people claiming JSA in May 2015, down from 3,426 in April, representing just 1% of the working age resident population. All areas of the county saw falls over that period – Stratford-upon-Avon has the lowest levels with just 257 claimants (0.4% of the working age population) and Nuneaton & Bedworth continues to have the highest with 1,535 claimants (1.9%).

With regard to youth unemployment, this also continues to fall and there were 470 claimants aged 18-24 in the county in May (down from 505 in April). Of those, the number that have been claiming for more than 6 months has stayed relatively stable at 125. This is, of course, very good news but national research and analysis shows that this data significantly under-represents the scale of the issue for young people, with many out of work but not claiming benefits, or in low paid work. 

These youth unemployment figures also contrast with recent data on 16-19 year old NEETs (Not in Education, Employment or Training).  This data shows that in the year 2014/15, there were 920 NEET young people (5.1% of all 16-19 year olds), and a further 1920 (10.6%) whose situation was not known. These figures are a slight improvement on the previous year, but still remain above the England average.

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