Why did productivity decrease in North Yorkshire?

Productivity only decreased in one part of the North so what can we learn from it?

This is part three in a series about the economy of the North. Regular readers will remember part one about broad based growth making Greater Manchester the fastest growing part of the country, with part two on how Cumbria is not far behind driven by manufacturing in Barrow.

This post looks at the other end of this leaderboard to ask - why is North Yorkshire the only part of the North to have seen a recent decrease in productivity and what can we learn from it?

For the purposes of this post, I will use ‘North Yorkshire’ to mean both the City of York and the North Yorkshire unitary area - as the ONS do - unless specified otherwise.

Taking a step back, there are ten subregions of England that have also seen a drop in productivity over the same time frame as shown in the chart below.

Looking at these areas, I would say there is no clear pattern to discern. There are very urban areas like ‘Inner London - East’¹ but also more rural areas like Cornwall and Suffolk.

There are parts of the North, Midlands and South - with the South and areas in and around London probably being overrepresented. The parts of London and West Midlands stand out as an area with significant devolution - contrasting with the other areas in this category which were nearer the top of the charts.

The biggest fall in productivity above is in ‘Outer London - East and North East’.² As this is a newsletter about the North, I’ll have to leave it to others to work out why productivity in London seems to be faring so poorly in recent years.³

Back in North Yorkshire, the drop in productivity is very marginal compared to some of these places, at just 0.7%. Looking into the data, the main measure of economic output known as Gross Value Added (GVA) actually grew by 8.7% from 2019 to 2023 but there was an estimated 9.5% growth in hours worked which cancelled it out in productivity terms (as productivity is measured by GVA per hour worked).

Photo by Karl Moran on Unsplash

The ONS estimates the number of hours worked by looking at the jobs in an area and multiplying it by estimates of the number of hours worked in different occupations.⁴ This hints at a change in the types of jobs in North Yorkshire being responsible for the reduction?

Firstly, I looked at the top ten sectors for GVA in North Yorkshire to compare their growth with the UK average over the period 2015-2023 (as per previous posts). North Yorkshire was more similar to Greater Manchester than Cumbria, in that it saw higher growth than the UK average in most of its sectors.

Secondly, as with previous areas, I’ve looked at GVA per employment as a crude measure of productivity in different sectors. For this one, I looked over 2019-2023. It’s a mixed picture - some areas have seen growth, others have seen a decline.

So what has driven this? It seems that North Yorkshire has been adding jobs in a few sectors which haven’t then necessarily been seeing an uptick in output measured by GVA. One way of looking at this is the chart below which decomposes the GVA per employment change above into the change in GVA versus the change in employment (with each bubble sized by the relative size of the sectors).

Now to some extent this is obvious: adding jobs in a sector, all else equal, will decrease productivity on this measure. So the issue seems to be that the extra people do not seem to be making a difference?

In particular, employment in ‘accommodation and food service activities’, ‘public administration and defence’ and ‘human health and social work activities’ has grown quite a bit more than output - balancing out positive productivity gains in areas like ‘manufacturing’ or ‘construction’.

Overall, if we look over the period from 2015 to 2023 in terms of productivity, then things don’t seem too bad - until you go from 2022 to 2023 when there was a 7% drop.

It also seems like the change has been concentrated in the North Yorkshire unitary authority area. Taking a dip into the next geographic level down, we can see the estimated productivity statistics for North Yorkshire as a whole, but also splitting out the City of York from the North Yorkshire unitary area (UA).

The North Yorkshire UA area now has productivity lower than where it was in 2019, bringing the whole of the combined area down despite the relative increase in York. York also already starts with higher productivity than North Yorkshire UA, perhaps signalling an urban/rural split? Very interested in comments on why this might be the case.

So whereas GM has been growing productivity across sectors and Cumbria has been adding jobs in one very productive sector, North Yorkshire has had more of a mixed picture.

In particular, North Yorkshire has been adding jobs in sectors like health, the wider public sector and hospitality without seeing much gain in measured output. And it hasn’t got a superstar sector like Cumbrian submarine manufacturing to pull it up.

However - this should not be seen as a big negative. Over the 2019-23 period, the drop has been small. And on a longer term view the area has been growing - even if other places are now catching up.

The simple answer here seems to be that particularly in 2023, North Yorkshire has been adding in jobs with relatively low productivity. To increase productivity, places simply need to do the opposite.

We will need to keep an eye on this to see if it is a longer term trend or a one off blip. And something that the York & North Yorkshire Combined Authority, with its mayor first elected in 2024 after the end of the available statistics, will be well placed to look into and hopefully change course on.⁵

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Just wanted to also say thanks for all the really positive feedback on the ‘Let Mayors Build’ report which I featured last week. A government looking for ways to speed up delivery of major infrastructure projects would be well advised to take up our idea: give established mayors the ability to approve and fund their projects just like places can do in other countries.

1. Inner London East - stretches in an arc from Lambeth round the City - but not including it - to Haringey and Newham via Tower Hamlets and Southwark.

2. This one includes the boroughs of Bexley and Greenwich round to Waltham Forest.

3. The subregional productivity data I’ve been using for this series has been under the Centre for Cities spotlight. Really recommend data nerds look at their report here. The summary of their view is that the data is undercounting the amount of time worked, meaning that productivity growth is not as strong as the raw numbers suggest. However, their view is also that this is more of a level shift (ish) than very different in each place. So if true we would still, for example, think that the major cities of the North are doing well and London is doing badly, but by different amounts. For these posts, I will continue to use the ONS data - but caution always advised.

4. See footnote 3 for more detail on this.

5. See their recent Local Growth Plan here.