City Regions Article

This short article examines England’s eight largest city regions, outside of London. These city regions are of particular policy interest at the present time as the potential exists for each of them to negotiate an increase in devolved powers from central government, following the recent example of Greater Manchester. This article provides a short overview of key economic data for each of the city regions, with data for England and London shown for comparison purposes.

The geographical boundaries chosen to represent the city regions in this article are the existing combined authority boundaries for West Yorkshire, Liverpool, Manchester, North East, and Sheffield as well as the boundaries for the proposed combined authority for the West Midlands. For Nottingham, the boundaries chosen also reflect those in a combined authority proposal while, for Bristol, the boundaries are in line with discussions occurring locally around greater joint working. More details of the boundaries and naming used in this article are available in the appendix.

Main points:

• The eight city regions (encompassing 51 local authorities) are home to 27% of England’s population and 25% of England’s jobs. They produce 23% of England’s economic output (GVA).

• Four of the eight city regions have more in-commuters than out-commuters (Bristol, Greater Manchester, West Midlands, West Yorkshire) while in the remaining city regions out-commuters exceed in-commuters.

• Bristol outperforms the other city regions on economic indicators such as productivity, household incomes and employment rates.

• The differences in the data between the seven midlands and northern city regions are generally quite small. However, they all lag behind the England average across each of the key economic indicators.

• The seven northern and midlands city regions have labour productivity rates 9-16% below the England average. A relatively low share of residents with degree level qualifications is likely to be one contributing factor. In Bristol, productivity is close to the England average.

• Household incomes per head in the seven northern and midlands city regions are 15-22% below the England average, and are also lower than the average across the rest of the north and the midlands. House prices are also relatively low with median house prices in 2014 averaging £125,000-£139,000 across the northern and midlands city regions.

The eight city regions combined produced 23% of England’s Gross Value Added (GVA) in 2013, slightly lower than the 26% produced in London. Greater Manchester and West Midlands had the largest economies, each contributing 4.3% of England’s economic output. Nottingham and Sheffield had the smallest economies among the city regions contributing 1.6% and 1.7% of England’s output respectively.

In terms of the productivity of the city region economies, there was only a small amount of variation among the northern and midlands cities in 2013 with productivity (calculated as GVA per hour worked) 9-11% below the England average in Liverpool, Manchester, West Midlands and West Yorkshire, 13% below the England average in Nottingham and North East and 16% below the England average in Sheffield. For comparison, the average productivity across the whole of the north of England and midlands was 13% below the England average.

Productivity levels in Bristol were higher than in the other city regions, and were the same level as the England average. As such, productivity in Bristol was higher than across the South West region overall in which productivity averages 10% below the England average.

Figure 1: Labour Productivity (GVA per hour worked) by City Region

2013

Source: Office for National Statistics

Notes:

1. Data is smoothed. See the ONS Subregional Productivity release for further details

One factor that can influence labour productivity is skill levels. Table 2 shows the share of 16-64 year old residents in each city region in 2014 with either Level 4 qualifications (degree level) or no qualifications. Bristol had the highest share of residents with degree level qualifications at 41% (which is above the South West region average of 37%).

In the cities in the north and the midlands, the share with degree level qualifications ranged from 27-32%. This is in line with the average for the north and midlands overall (30%), but below the England average (36%), and some distance below the London level (49%).

Productivity can also be influenced by industrial structure. Figure 2 shows, for each industry, the share of England’s economic output (GVA) in that industry that was produced within the 8 city regions (combined) in 2012 and also for comparison by London. It shows the 8 city regions produced 28% of the manufacturing GVA in England and 28% of the output in Public administration; education; health. However, they only provided 15% of England’s GVA in Information and Communication and 17% in financial and insurance activities, two industries dominated by output in London.

Within the city regions there is some variability in terms of industry structure. Bristol and Manchester city regions had the smallest share of their GVA produced by manufacturing (10-11%) in 2012 while North East had the highest share (14%). Meanwhile, Bristol and Manchester had the highest share of their output produced by either Business service activities, Financial and insurance activities or Information and communication (a combined 25-26%) while Sheffield and North East had the lowest shares (17%).

High levels of net in-commuting can be a good indicator of a city region’s economic strength and importance to the wider economy (for example as illustrated by the high commuting flows into London). Table 3 shows net in-commuting flows (the level of in-commuting minus the level of out-commuting) as measured by the Census in 2011 for the eight city regions. It shows that four of the city regions, namely Bristol, Greater Manchester, West Yorkshire, and West Midlands had net in-commuting flows from the rest of the UK in 2011. The other city regions had more daily out-commuters to work than in-commuters.¹

Figure 3 shows the latest employment rate data (April 2014 – March 2015) for each of the city regions. Bristol is the only city region that had an employment rate (75.8%) above the England average (72.9%). Employment rates in five of the seven northern and midlands city regions were between 69.1-70.0%. In Liverpool and West Midlands, employment rates were lower at 65.8% and 64.9% respectively.

Figure 3: Employment rate by City Region

Source: Office for National Statistics

Overall, the eight city regions were home to 7.0 million jobs in 2013, 25% of the total for England. By contrast, London was home to 5.4 million jobs (19% of the England total)². Table 4 shows for 2013 the number of jobs in each city region and also the job density which compares the number of jobs with the number of residents aged 16-64. The job density data shows that only Bristol had a higher share of jobs per population aged 16-64 in 2013 than the England average while job density was relatively low in North East, Liverpool and Sheffield.

A higher job density will often be an indication that the city either has a high employment rate amongst its residents, or high levels of net in-commuting (or both),³ and indeed the jobs density data in Table 4 reflects the commuting and employment rate data in the preceding tables.
For example, in the case of Bristol, a relatively high employment rate amongst its residents plus net in-commuting into the city region is reflected in a high job density whereas in Liverpool, net out-commuting and a relatively low employment rate among its residents is reflected in a low job-density. West Midlands is unusual in that it has a relatively low employment rate among its residents but also has more in-commuters than out-commuters.

Notes for commuting, employment and jobs

1. In the case of Liverpool city region, the largest net commuting outflows were to Warrington local authority. For Sheffield city region the largest net outflows were to Leeds and Wakefield local authorities. For the North East city region the largest net outflows were to offshore installations and also to Darlington local authority. For Nottingham city region the largest net outflows were to North-West Leicestershire local authority.
2. These job totals are based on the ONS ‘Total Jobs’ measure, used for calculation of job densities at sub-regional geographies.
3. A high employment rate among residents aged 65+ could also contribute to a high job density figure.

Overall the eight city regions have a combined population of 14.9 million, which is 27% of England’s population. Table 5 shows the population in each of the city regions according to the 2014 mid-year population estimates as well as the age breakdown.

In terms of the incomes of residents, average Gross Disposable Household Income (GDHI) per head in the city regions in the north and the midlands in 2013 was 15-22% lower than the England average of £17,842. It was also lower than the average across the north and the midlands overall (£15,447), illustrating that on average GDHI per head was higher among residents outside of the city regions than within them in the north and the midlands.

In Bristol, GDHI per head averaged £17,664 which was close to both the England average and the average for the South West region overall.

Relatively low average incomes in the north and midlands city regions are reflected in relatively low house prices with median house prices¹ in 2014 ranging from £125,000 in North East and Sheffield city regions to £139,000 in West Midlands. By contrast, in Bristol city region, median house prices in 2014 were £207,750.

Examining data for the local authorities that make up the northern and midlands city regions, median house prices were lowest in County Durham (North East), Nottingham City (Nottingham) and Knowsley (Liverpool) at £108-112,000 while there were three local authorities with median house prices above £200,000, namely Solihull (West Midlands), Rushcliffe (Nottingham) and Trafford (Manchester) (£220,000, £212,000 and £204,000 respectively). Each of the local authorities in the Bristol city region had median house prices above £190,000 with the highest average in Bath and North East Somerset at £249,950.

Notes for population, household incomes and housing

1. These house price statistics are calculated using publicly available data from the Land Registry, utilising the methodology in the ONS statistical bulletin, “House Price Statistics for Small Areas in England and Wales, 1995 to 2014”, published 24/06/15