Our Economy 2023 : Inclusive productivity in the North East
This spotlight page explores what the evidence tells us about inclusive productivity in the North East, covering output per hour worked and its relationship to various inclusion metrics
Introduction
This spotlight page explores what the evidence tells us about inclusive productivity in the North East.
It outlines the current levels of productivity compared to the national average and how the North East has lower productivity across different sectors.
It then examines the principal inclusivity challenges in the region, discussing low employment rates; low pay and poverty; and regional wealth inequality.
Having set the scene, it shows how these two concepts are intertwined in the region, analysing the link between productivity and wages and how employment by sector breaks down by different inclusion characteristics.
It also highlights some of the major barriers to both improving inclusivity and productivity in the region, while linking to further pages on the Evidence Hub that cover a much wider range of productivity drivers.
and the gap has never been this large
most households have no or a very small amount of savings
especially of older workers, those with disabilities, and ethnic minorities
are all linked with improving productivity and inclusivity
The productivity challenge
The data tells us that the North East has a productivity challenge. It has this in common with the UK as a whole, and with many of our regional neighbours, but the North East picture also has its own distinctive features.
- Output per hour worked is lower in the North East than the national average. The gap between the North East LEP area and England excluding London is larger than at any other point in the two decades that data is available for. This is partly because some of the most productive sectors in the North East such as the automotive sector were more heavily impacted by Covid-19
- Output is lower in the North East both because of the sectoral composition of the region and because sectors are less productive in the North East. Workers in the North East work fewer hours in highly productive sectors such as information technology and business services, and nearly all sectors are less productive in the North East. The challenge is to both increase the proportion of employment in high-productivity sectors and to raise productivity across all sectors
- Output in the region has been becoming more geographically concentrated over time. Some built up areas in the North East with low output per worker have caught up with the regional average since 2009, including areas such as Ashington, Blyth and South Shields. Despite this, the overall economic output in the region has been becoming more concentrated geographically with over half of output from just 5% of neighbourhoods
GVA per hour worked (£), 2008 onwards, North East LEP, national comparisons
Data information: Based on North East LEP area, national and regional data. Chart shows current price (unsmoothed) GVA (B) per hour worked data.
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North East GVA per hour worked as a proportion of England excluding London
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North East percentage of UK output per hour by industry (2019)
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GVA output per worker by North East built-up area, 2009 and 2020 (£millions)
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Proportion of total GVA from the top 5% of lower super output areas in the North East (%)
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The inclusivity challenge
As well as productivity in the region holding back overall growth, the North East also faces a range of inclusivity challenges. Employment is unevenly spread, with rates lower among workers in many groups with protected characteristics less likely to be in employment than the average. Although this also true in other regions, the gap compared to the national rate for many of these groups is especially large. Low pay, poverty and income inequality are all issues, as is an uneven distribution of wealth in the region.
- Low and unevenly distributed employment rate. The North East has a low employment rate compared to the national average. As with other regions, older workers, disabled workers, people from ethnic minorities and female workers are all less likely to be in employment in the North East. Within these groups, people with a disability and those in older age groups have especially large employment gaps compared to the national average and the same is also true for male workers
- Low pay and poverty. Employment alone also does not always ensure a decent standard of living with the region having a higher portion of jobs that pay below the living wage than the national average. Among the nine English regions, the North East region has the highest percentage of total household income from state support and the lowest percentage from employment. One consequence is that 1 in 5 children are growing up in low-income families, which can have a seriously negative impact on their future life chances
- Income inequality but at a lower rate than other regions. There are large differences in terms of individual and household income in the North East, and these differences tend to be larger than differences between regions. However, these inequalities are small by national standards even after accounting for housing costs. The main inclusivity challenge in the region in relation to income is there is a higher percentage of households in the low income groups than nationally.
- Unequal distribution of savings and property wealth. In contrast to income the North East has the second highest level of wealth inequality in England after London. This is because savings are very unevenly distributed, with most households having no or only a very small amount of savings. The uneven distribution of property wealth also contributes, with home ownership rates in the region being low despite the relative affordability of housing. Both of these are linked to low pay in the region
Employment rate since 2004, North East, England excluding London
Source: Annual Population Survey (ONS via Nomis, last updated: 18 Jul 2024, next update 15 Oct 2024)
Data information: Percentage of 16-64 population. Each rate is based on surveys over a 12 month period . This chart shows data for non-overlapping 12 month periods.
Geography: North East combined authority (CA) area and England excluding London.
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Employment by personal characteristic, North East rates
Source: Annual Population Survey (ONS via Nomis), released Aug 2023
About the data: Based on survey responses over a 12 month period. Rates are the proportion of the working age (16-64) population, unless otherwise stated.
Geography: North East LEP area
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Employment by personal characteristic, pp difference between rates, North East, England excl. London
Source: Annual Population Survey (ONS via Nomis), released Aug 2023
About the data: Based on survey responses over a 12 month period. Rates are the proportion of the working age (16-64) population, unless otherwise stated.
Geography: North East LEP area
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Economic inactivity rate (16-64 %), by disability status, 2013 onwards, North East, England excl. London
Source: Annual Population Survey (ONS via Nomis) latest update: 15 Aug 2023 (Apr 22-Mar 2023), next update: 17 Oct 2023 (Jul 22-Jun 23)
About the data: Disability status and economic activity status are both based on responses to survey questions with results weighted to be representative of populations in specific areas.
Economically inactive people are not in employment and have not recently actively sought work.
People with an "EA core disability" are those with a long-term health problem in accordance with the core definition in the Equality Act 2010.
People with a "work-limiting disability" are those who report a physical or mental health condition or illness lasting or expected to last 12 months or more that affects the amount or type of work they can do.
These two categories overlap substantially but some respondents are only within one so our analysis combines them in most charts.
Geography: North East LEP area, England excluding London
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Household income (gross), % by source, English regions
Source: Family Resources Survey (DWP), published 23 Mar 2023, latest data 2021/22
About the data:
Responses to survey of households that provides information on income and circumstances.
This chart shows the percentage of regional total gross household income by broad source
Employment income includes wages, salaries and self-employed income.
State support includes Tax Credits, State Pension plus any Pension Credit, Disability benefits and others
Other sources include investments and any other sources captured by the survey.
Geography: English regions. The North East region is one of nine and includes the North East and Tees Valley LEP areas
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Household income (gross), % by detailed source, North East region, England
Source: Family Resources Survey (DWP), published 23 Mar 2023, latest data 2021/22
About the data: Responses to survey of households that provides information on income and circumstances.
This chart shows the percentage of regional total gross household income by detailed source
Geography: English regions. The North East region is one of nine and includes the North East and Tees Valley LEP areas
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Gross weekly earnings by decile all workers North East and England (2022 - £s)
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Median Female weekly earnings % of Male earnings North East and comparators (%)
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Household income, % of households in each income band, North East region, England
Source: Family Resources Survey (DWP), published 23 Mar 2023, latest data 2021/22
About the data: Responses to survey of households that provides information on income and circumstances.
This chart shows the percentage of households within each band of gross weekly household income
Geography: The North East region is one of nine English regions and includes the North East and Tees Valley LEP areas
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GINI coefficient for wealth by English regions (2018 to 2020)
Data information: The ONS changed the reporting period for the asset and wealth survey from June to July to April to March in 2016
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Household financial wealth by quartile and region (April 2018 to March 2020)
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Proportion of home owners by region, 2018 to 2020 (%)
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Interaction between productivity and inclusivity
The evidence shows us that productivity is linked to higher wages in the North East and beyond, but productive sectors are not always the most inclusive.
- Productivity and higher wages are positively correlated across UK regions and North East sectors. The relative low productivity of the region is one of the reasons that wages are low in the North East, improving productivity is one way of trying to improve the standard of living in the region, combatting low pay and poverty
- Older workers, disabled workers and ethnic minority workers are less likely to work in more productive sectors. This suggests that these groups face barriers to participation in highly productive sectors. We need to consider how to improve the prospect of employment as well as distributing the benefits of productivity improvements to those who do not directly work in high productivity sectors
- Women are slightly less likely to work in productive sectors but more productive sectors in the region display smaller gender pay gaps. This demonstrates that increasing productivity does not have to come at the expense of progress on inclusivity, although the region will need to be careful that any strategy to improve productivity does not change this trend
Correlations with output per hour across North East sectors
North East LEP calculations. 1 = full positive correlation, 0 = no relationship, -1 = full negative correlation
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Relationship between GVA per hour worked and gross weekly pay across North East sectors
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Inter quartile ratio in gross weekly wages by North East sector
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Gross weekly wage by North East sector (£s)
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Female median weekly pay as a proportion of male by North East sector (%)
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Proportion of employment by inclusion characteristics North East sectors (%)
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Proportion of employment with a degree level qualification or higher by North East sector (%)
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Enablers of productivity and inclusivity
The evidence suggests there are some enablers which can improve both productivity and inclusivity in the North East. These primarily involve supporting individuals through things like qualifications to gain appropriate skills or improving health outcomes to increase participation in the workforce. Support for businesses is important too, embedding innovation and increasing R&D.
- Qualifications and productivity are positively correlated in the North East. This is because qualifications in general help workers increase their productivity, but also because qualifications are often necessary to access employment in high productivity sectors. The North East has lower rates of highly qualified workers and improving this is one way which the North East can work on both productivity and inclusivity
- The North East has higher rates of ill health than the national average. One of the major reasons that people do not find employment in the North East is ill health, but even if they do find a job health conditions are likely to limit the output of workers. Addressing health inequalities in the North of England could increase productivity by an estimated £20.2 billion in GVA. Improving health and improving the ability to those with long term health conditions is likely to both improve inclusion and productivity in the region
- Improving the connectivity between workers and employment hubs can help residents find jobs and employers find productive workers. In general, connections to major employment centres are strong in the North East due the primarily urban nature of the region. However, there are pockets of poorer connectivity, particularly in more rural areas, which limits the ability of residents in these areas to benefit from jobs growth. The increasing concentration of economic output in the North East makes connectivity even more important from an inclusivity perspective
- Improving the digital capabilities of firms and workers. Digital capabilities have the potential to considerably improve the productivity of firms and workers across the North East. The digital infrastructure in the region, except for more rural areas, is generally strong. However, there are clear digital skills gaps in the workforce which are a barrier to both inclusion and higher productivity, suggesting that a focus on digital skill in particular is one way of growing an inclusive regional economy
Qualifications, highest level, 16-64 (%) North East, core city areas
Source: Annual Population Survey (ONS via Nomis, last updated 16 Apr 2024, next update Apr 2025)
Data information: Percentage of 16-64 population, latest data from a survey taken throughout 2023. Levels used are from the Regulated Qualifications Framework (RQF). Prior to 2022, National Vocational Qualification (NVQ) levels were used and the statistics are not directly comparable with the latest release.
Geography: Mayoral combined authority (MCA) and Local Enterprise Partnership (LEP) areas. The D2N2 area includes Derby, Derbyshire, Nottingham and Nottinghamshire. These areas include the English conurbations with the highest populations outside of London. Data for Tees Valley and London are included for comparisons.
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Economic activity rate by qualification level, 16-64 (%), North East, England excluding London
Source: Annual Population Survey (ONS via Nomis, last updated 16 Apr 2024, next update Apr 2025), (economic activity rates: North East LEP analysis)
Data information: For each qualification level: The number of economically active 16-64 year-olds expressed as a percentage of all 16-64 year-olds. Economically active people are either in employment or actively seeking work (unemployed).
Latest data from a survey taken throughout 2023. Levels used are from the Regulated Qualifications Framework (RQF). Prior to 2022, National Vocational Qualification (NVQ) levels were used and the statistics are not directly comparable with the latest release.
Geography: North East MCA / LEP area, England excluding London
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North East and National Healthy Life Expectancy at Birth (2011-2020)
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Ill health lasting more than 12 months, employment rate of adults affected (%), North East, geographical comparisons
Source: Annual Population Survey (ONS via Nomis) latest update: 15 Aug 2023 (Apr 22-Mar 2023), next update: 17 Oct 2023 (Jul 22-Jun 23)
About the data: Information about health conditions or illnesses lasting more than 12 months. Based on responses to survey questions with results weighted to be representative of populations in specific areas.
The output is for all aged 16 and over. Differing age profiles between the North East and elsewhere may contribute to differences in the prevalence of these health conditions and the employment rate of people with them.
Many people experience more than one of the listed health conditions and, therefore, the individual percentages sum to more than the total percentage of people with such health conditions
Geography: Core city LEP areas with the exception of West Midlands mayoral combined authority (MCA) area, North East local authority areas. The core city areas represent areas containing the eight largest English conurbations outside of London. D2N2 includes Derby, Derbyshire, Nottingham and Nottinghamshire. England, England excluding London, Tees Valley and London have also been included as comparators.
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Distance travelled to work, % of workers with a workplace address, North East, 2011 and 2021
Source: 2021 Census topic summary TS058 - Distance travelled to work (ONS via Nomis)
2011 Census quick statistics QS702EW - Distance travelled to work (ONS via Nomis)
Information about the data: The 2021 Census was taken on 21st March 2021.
The distance travelled to work is, in kilometres, the distance between a person's residential postcode and their workplace postcode measured in a straight line. A distance travelled of 0.1km indicates that the workplace postcode is the same as the residential postcode. Distances over 1200km are treated as invalid, and an imputed or estimated value is added.
The percentages exclude those who indicated that they “work mainly at or from home” and those with no fixed place of work, who are working on an offshore installation or who are working outside of the UK.
It is difficult to compare this variable with the 2011 Census because Census 2021 took place during a national lockdown. The government advice at the time was for people to work from home (if they can) and avoid public transport.
People who were on furlough (about 5.6 million), could have given details based on their patterns before or during the pandemic, or what they did during the census taking place, including Census Day.
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Broadband Availability in North East Constituencies in 2023
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Additional data
These are only some of the major drivers of productivity and barriers to inclusivity in the North East. We don’t have scope to cover all factors in detail in this section of the Evidence Hub, but you can explore some of many other drivers in the region on the data reports below.
Other Our Economy pages
This spotlight page is just one aspect of our analysis for Our Economy this year. You can also explore our international case studies which examine how comparator regions across the world have approached their own challenges with inclusive growth, as well as our other inclusive productivity page looking at the conceptual links between the two concepts.
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