Region to see stronger growth to 2020, says EY

Yorkshire and the Humber will see its productivity improve to 2020, although investment in tech skills will be vital to maintaining this trajectory, a new report from EY has revealed.

EY’s annual UK Regional Economic Forecast shows that at 1.2%, Yorkshire & Humber’s GVA (gross value added) growth from 2014-17 is likely to be the second lowest in the country, after the North East, and below the UK average of 1.5%.

The figures place it near the bottom of the regional growth league table, reflecting a slowdown in growth outside of the larger cities as a result of lower migration and falling job numbers. Retail, the public sector and, to an extent, manufacturing have been most affected – all are important sectors for Yorkshire & Humber.

Yorkshire and the Humber’s outlook is more positive with overall GVA across the region expected to increase by an average of 1.4% a year between 2017 and 2020, although it is still behind the UK average of 1.8%.

However, total employment growth in Yorkshire & Humber is expected to average only 0.1% a year up to 2020, as growth in manufacturing output does not translate to employment growth in the sector. While jobs growth continues to fall away as technology is used to boost productivity, this is countered by some job gains in the higher value-added service sectors.

Leeds’ GVA growth is expected to remain stable at 1.7% a year between 2017 and 2020 (1.7% 2014-17), outperforming Yorkshire & Humber (1.4%) and closing the gap with the UK (1.8%).

However, although total employment in the city will continue to grow, driven by gains in the professional, scientific and technical (2,200 jobs) and administrative and support services (2,400 jobs) sectors, this will be at a reduced rate of 0.3% a year compared to 1.5% a year in 2014-17.

Meanwhile, Hull will see GVA growth of 1.4% a year over the next three years, with employment expansion of 0.1%. Manchester and Reading (2.4% GVA per year) are expected to be the UK’s fastest growing cities over the next three years, outpacing even the capital.

The employment forecast illustrates the importance of sectors in determining growth prospects in the short to medium-term. The report forecasts that nationally, the GVA of the information and communications sector and professional services sector will grow by 3.5% and 3.4% a year, respectively, over the next three years. In contrast, manufacturing is only expected to grow by 1% over the same period.

Suzanne Robinson, Yorkshire & Humber senior partner at EY, said: “I do find the region’s growth figures to 2017 a little surprising as they don’t reflect the sentiment of many of the businesses EY engages with across Yorkshire and the Humber on a daily basis. However, it is pleasing to see that annual growth will be improving to 2020, and I’m hopeful that with the right focus on skills and the digital opportunity, Yorkshire and Humber can drive even greater gains than those predicted by this forecast.

“The employment figures indicate the beginnings of potentially radical changes in where Yorkshire’s future employment growth will come from and demonstrate the importance of having a good spread of different industry sectors. While manufacturing remains a strong and important contributor to GVA within our region, the digital revolution continues apace with marked changes to the make-up of our regional economy on the horizon.

“The national figures clearly show that the more a region is exposed to ICT (information and communications technology) and professional and financial services, the faster the growth tends to be, as those sectors continue to drive the economy.

“The digital and technology sector is growing across all parts of the country and is one of the biggest opportunities to create more diverse regional economies. However the report shows that Yorkshire has a lower share of ICT jobs than other comparable regions outside London so there is a serious need for us to focus on these skills.

“The Government’s investment in both training computer science teachers and digital skills – mentioned in last month’s Budget – is very welcome at this time of rapid change. Investment in digital skills is vital to building the right infrastructure, workforce and new technologies that can ensure the country remains competitive on the world stage.

“However, it is imperative that this investment is also made regionally, if the opportunity to rebalance the economy is to not be missed.”