The second RBS Regional Growth Tracker, looking at growth in Q2 2014, shows
that the recovery is proving to be a broad based one, with all nine English regions
growing for the sixth consecutive quarter. Our tracker shows that it is the East
Midlands that has been leading the way over the past 12 months. Despite a
recovery in UK output to its pre-crisis level, only four English regions have passed
this milestone. These are: London, the East Midlands, the South West and the
South East. We expect most other regions to follow suit in H2.
If the first three months of the year was a manufacturing story, the second has
been a services one with the top three service sectors being professional;
scientific & medical, administrative & support and distribution & transport
services. By our estimates it was the regions in which these sectors are very
important to the local economy that did particularly well.
But it has been the East Midlands that has been standing out from the pack in the
last 12 months. The region has shared in the recovery in professional, scientific
and technical services, but stood out from the pack thanks to the performance of
its retail and distribution industries. Its advanced manufacturing sector has also
been roaring along. The region also benefits from an inherent productivity
advantage over most of its peers, which has further boosted growth.
At a local area level, Hertfordshire took the top spot shared with the West and
North West outer boroughs of London. The success is not just confined to the
South. Areas such as Warwickshire, North Northamptonshire, Leicestershire,
Warrington and East Cheshire have all been among the very strongest growing in
England.
Key facts: Q2 2014
East Midlands is the top
performing region over the past
year
London, the East Midlands, the
South West and the South East
have seen their economies get
back to their pre-crisis levels
All nine English regions
continued their recovery
London was the fastest growing
region in Q2 2014
Service sectors top performers
in Q2 after manufacturing
driven growth in Q1
More growth has meant more jobs, with large falls in unemployment over the
past year in all UK regions, in particular in the Midlands. For regions such as the
North East, which has been growing more slowly than the UK average for the past
six months, the jobs are coming back, but the recovery is taking longer.
Rupert Seggins
Rupert Seggins is an economist
in the RBS Economics Team and
leads on the RBS Growth
Tracker. Prior to joining RBS he
worked at HM Treasury and
most recently at the British
Embassy in Tokyo.
Regions: North West; Yorkshire
& The Humber
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Contents
Contributing economists
3
North East
in search of faster growth
4
North West
Warrington out in front once again
5
Yorkshire & The Humber
a mixed bag
6
East Midlands
Stephen Boyle is Head of RBS Economics
and was educated at Glasgow and McGill
Universities. After a first stint from 1996 –
2001, Stephen returned to RBS in 2006,
after establishing Futureskills Scotland
and leading the economics and evaluation
functions of Scottish Enterprise. He has
also worked in universities and was
director of an economic consulting
business.
top of the table for growth
7
West Midlands
economic recovery on track
8
East of England
some of England’s fastest growing local areas
9
South West
Sebastian Burnside joined RBS in 2009.
Before joining the team he worked for
Ofcom, the communications regulator,
and in consultancy. He holds the
Chartered Financial Analyst designation
and degrees from the London School of
Economics and the University of
Edinburgh.
slightly slower, but still strong
10 South East
IT and professional services lift growth
11 London
a gold medal performance in Q2
The RBS Regional Growth Tracker is put together by
Royal Bank of Scotland economists to estimate and
track growth across nine regions of England as well
as smaller local areas.
We calculate our growth estimate by taking the UK
growth rate of each sector and weighting them by
the sector shape of each region’s economy. We
then make an adjustment for each region’s historic
competitiveness. This reflects each region’s
inherent strengths/weakness, and the fact that
some have tended to grow more quickly/slowly
than their sector shape implies they “ought” to
have done. Differences are small from quarter to
quarter, but can become large over time.
Stephen Blackman has over 12 years
professional experience as an applied
economist, working in both the private
and public sectors as well as academia.
His expertise includes UK
macroeconomics, household income
and the labour market, financial and
banking economics, demographics and
socio-economic trends.
Marcus Wright previously worked as
an economist for an investment trust
where he provided economic insight to
fund managers. Marcus has previously
worked for RBS in risk and has also
worked for a Scotland-based economic
development consultancy. Marcus
holds a first class degree in economics
from the University of Aberdeen.
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North East
The North East was one
of the UK’s slowest
growing regions in Q2
Northumberland and
Hartlepool & StocktonOn-Tees were the fastest
growing areas within the
region, growing in line
with the UK average
“The North East is growing and the unemployment rate is falling. Unfortunately, the
region has struggled to keep up with its peers of late and the North East’s recovery
may take a little longer than hoped. Electricity, gas steam and air conditioning supply
was the region’s standout performer, being the areas that grew considerably faster
than its peers in other regions. The other big contributor to growth was professional,
scientific and technical services. With the region enjoying a business start-up rate
second only to London, the recovering economy should help establish these
businesses and enable them to grow further.
“Northumberland and Hartlepool & Stockton on Tees were the fastest growing areas
in the region over the past 12 months. These regions benefitted in particular from
growth in business services and distribution and transport.”
Marcus Wright
Economist, The Royal Bank of Scotland
y/y growth – North East sub-regions (does
not include competitiveness adjustment)
Source: RBS calculations using ONS data
q/q growth
Source:
RBS
calculations
using ONS
data
View from the region
Richard Topliss, MD of Corporate &
Commerciall Banking, North
“While the growth here may be
slightly behind its peers, confidence
levels within our customer base is
rising and this is seeing its way
through to employment figures
which is great to see.
“The knock-on effect of higher
employment coupled with the high
business start-up rate bodes well for
the future prospects of the local
economy. We will ensure we play
our part in supporting our
customers’ aspirations.”
3
North West
The North West as a
whole grew at the same
pace as the UK average by
0.8%q/q
Warrington was once
again the North West’s
fastest growing region
“The North West grew by 0.8%q/q in the second quarter of 2014, which was the same
as the UK as a whole. Business services and wholesale and retail trade were the main
contributors, although there was notably above average growth in the basic
pharmaceutical products sector.
“Warrington once again led the charge in the North West, with business services the
major contributor. Other regions like East Cheshire and East Merseyside are hot on its
heels. Warrington and East Cheshire already have the region’s lowest rates of
unemployment and this recent growth will likely ensure that continues”.
Rupert Seggins
Economist, The Royal Bank of Scotland
y/y growth – North West subregions (does not include
competitiveness adjustment)
Source: RBS calculations using
ONS data
q/q growth
Source:
RBS
calculations
using ONS
data
View from the region
Richard Topliss, MD of Corporate &
Commercial Banking, North
“It's encouraging to see the diverse
business activity across the North
West is supporting a balanced
economic growth outlook.
Supplementing that are some key
areas of specialism and strength pharmaceuticals, business services,
advanced manufacturing are
examples of sectors that are
displaying really positive trends and
growing confidence among our
customers.
“With continued investment, a
proactive business agenda and
really strong public/ private
partnerships, the outlook for the
North West is exciting."
4
Yorkshire & The Humber
Yorkshire & the
Humber’s economy grew
by 0.6%q/q, below the UK
average
Growth in areas such as
York and North & North
East Lincolnshire remain
comparable to the UK
average
“A mixed bag for Yorkshire & the Humber in Q2, with the region’s growth slowing to
0.6%q/q, following Q1’s 0.8%q/q. This appears to have primarily been due to slower
manufacturing growth and the region’s lower reliance on the fastest growing sectors,
such as professional, scientific & medical. On the plus side, three sectors performed
better than their UK peers – retail and wholesale, transport and storage and electricity,
gas, steam & air conditioning supply.
“North and North East Lincolnshire continues to hold the region’s top spot and has
been rewarded with the region’s second largest unemployment rate fall, with only
York (among the next fastest growing group) seeing a bigger fall. Unlike the rest of
Yorkshire & the Humber, manufacturing was the standout performer”.
Rupert Seggins
Economist, The Royal Bank of Scotland
y/y growth – Yorks & Humber
sub-regions (does not include
competitiveness adjustment)
Source: RBS calculations using
ONS data
View from the region
Richard Topliss, MD of Corporate &
Commercial Banking, North
q/q growth
Source:
RBS
calculations
using ONS
data
“It is encouraging to see continued
growth across a range of sectors
throughout the Yorkshire and
Humber region. Areas including
manufacturing, retail and
wholesale, and transport are
examples of sectors that have
supported this sustainable growth.
“While the rate of growth has
slowed slightly, the economy
continues to expand, and we will
continue to support our customers’
business goals and aspirations.”
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East Midlands
The East Midlands
economy expanded by 0.9%
in Q2
“The East Midlands economy expanded by 0.9% in Q2, adding to the 1% growth seen
in Q1, meaning it is the fastest growing region in the UK so far this year. The economy
is now almost 4% bigger than a year ago and growing twice as fast as it was this time
last year.
Second quarter of strong
growth in 2014 means it is
the fastest growing region
this year
“The region’s retail and distribution industries, which together make up a fifth of the
economy, have contributed substantially to its success, seeing growth of 5.4% and
3.6% respectively. The benefits of this growth are being felt across the region with
unemployment falling by 1.3% in the last three months, the fastest fall of any UK
region. East Midlands businesses have created 104,000 extra jobs in the last year,
delivering a big confidence boost to the recovery.”
Growth is benefiting
region with biggest fall in
unemployment in UK
Sebastian Burnside
Economist, The Royal Bank of Scotland
y/y growth – East Midlands subregions (does not include
competitiveness adjustment)
Source: RBS calculations using ONS
data
q/q growth
Source:
RBS
calculations
using ONS
data
View from the region
Andrew Harrison, MD, Corporate &
Commercial Banking, Midlands
“It is fantastic to see the East
Midlands leading the way and this
confidence is echoed in our
conversations with clients. The
region benefits from a broad based
economy but the weighting towards
manufacturing has proven to be a
real strength as this important
sector has performed particularly
strongly over the last 12 months.
“The East Midlands has a strong
reputation for advanced
manufacturing in particular centred
around a number of globally
important OEM’s such as Rolls
Royce.”
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West Midlands
The West Midlands
economy expanded by 0.6%
in Q2
Three months to June
mark 6th consecutive
quarter of growth
Manufacturing growth
has slowed but still
expanding at 3.3%
“The West Midlands economy expanded by 0.6% in Q2, meaning it has now recorded
18 months of continuous growth. This means the region’s economy is now 2.9% bigger
than a year ago; a sharp improvement compared to the 0.9% growth we saw this time
last year.
“West Midlands manufacturing is performing strongly with growth of 3.3% on the year.
The retail and distribution industries are also doing well; seeing growth of 5.4% and
3.6% respectively. The benefits of this growth are being felt across the region with
unemployment falling by 2.2% in the last year, the second biggest fall of any UK region.
But with average pay up by less than 1% many households will still be feeling the
squeeze.”
Sebastian Burnside
Economist, The Royal Bank of Scotland
y/y growth – West Midlands sub-regions
(does not include competitiveness
adjustment)
Source: RBS calculations using ONS data
q/q growth
Source:
RBS
calculations
using ONS
data
View from the region
Andrew Harrison, MD, Corporate &
Commercial Banking, Midlands
“I sense a strong mood of
confidence building in the West
Midlands. The region has weathered
difficult times but with the
resurgence of manufacturing and
the rapid expansion of companies
such as JLR, the news flow is
increasingly positive.
“Investment in infrastructure and
connectivity to the rest of the UK
and, indeed, globally is critical to
maintaining positive growth. Whilst
HS2 divides opinion the business
community in Birmingham see
significant benefits from this major
infrastructure investment.”
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East of England
“Our Regional Growth Tracker estimates the East of England’s economy expanded by
East of England’s economy 0.8% in Q2. That makes the East the fourth fastest growing English region. Although
grew by 0.8% in Q2 – the 4th
professional services provided the largest contribution, the region’s owes a thank you
fastest growing English region. to its 13,000 wholesalers, 25,000 retailers and 10,000 firms involved in logistics and
Four of England’s fastest
growing local area economies
are in the East
Hertfordshire is the fastest
growing local area economy
in England
distribution. These sectors are more important to the East’s economy than they are
typically for the UK and have also grown faster than the UK economy on average.
“The real highlight is that many of England’s fastest growing local area economies are
in the East. Hertfordshire tops the table, with its economy the fastest growing English
local area, expanding by almost 4% annually. This is closely followed by Central
Bedfordshire, growing by 3.8%y/y, plus Thurrock and Luton, also 3.7%. In total, four of
the six fastest growing local area economies are in the East of England. “
Stephen Blackman
Economist, The Royal Bank of Scotland
y/y growth – East of England
sub-regions (does not include
competitiveness adjustment)
Source: RBS calculations using
ONS data
q/q growth
Source:
RBS
calculations
using ONS
data
View from the region
Andrew Harrison, MD, Corporate &
Commercial Banking, Midlands
“The East of England is emerging
from the economic downturn well
positioned to benefit from the
increasing pace of growth in the UK.
The region’s broad based economy
and proximity to London has
insulated the East of England from
the worst of the economic
conditions.
“The concentration of world leading
technology businesses in and
around Cambridge rightly receives
positive profile. It should not be
forgotten that more traditional
sectors such as agriculture and
manufacturing are also making a
significant contribution to wealth
creation in the region.”
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South West
The South West grew
by 0.7%q/q in Q2, a
slight slowdown on
Q1’s 0.8%q/q
Wiltshire was the
region’s best
performer, growing
comfortably above the
UK average
“The South West region grew by 0.7% between Q1 and Q2, just behind the 0.8%
recorded by the wider UK economy. It means the South West was a very respectable
mid-table performer for the quarter when compared to the UK’s other regions.
Growth was fairly balanced with business services, wholesale & retail, real estate
activities and the manufacture of transport equipment all making solid contributions
Additionally, unemployment is lower than the UK average and wage growth is second
highest among all UK regions. All in all, the South West is firmly in recovery mode.
“Wiltshire was the region’s star performer, as it was in the first quarter of the year.
Meanwhile, the region’s two major cities, Bristol and Bath, grew at about the same
rate as the UK average. Business services and transport and distribution provided the
bulk of the growth, although Wilshire slightly edged the cities on growth in real estate
activities and construction as well.”
Marcus Wright
Economist, The Royal Bank of Scotland
y/y growth – South West sub-regions
(does not include competitiveness
adjustment)
Source: RBS calculations using ONS data
View from the region
Chris Rowden, MD of Corporate &
Commercial Banking, South West
q/q growth
Source:
RBS
calculations
using ONS
data
“The South West feels like it is well
on the way to a full recovery with
high levels of confidence across a
broad spread of sectors.
“We have seen continued good
growth across many sectors with
particular buoyancy noted both in
the leisure sector in the south west
and also in the business services and
distribution sectors in Wiltshire.”
9
South East
South East economy grew
by 0.8% in Q3 – third fastest
of the English regions.
The region includes some
of the UK’s fastest growing
local areas, such as
Buckinghamshire, Surry,
Milton Keynes and
Oxfordshire
“We estimate the South East’s economy grew by 0.8% in Q2, matching the UK
economy overall and securing the region third place in our quarterly regional growth
tracker. That’s two positions higher in the regional rankings than in Q1. The solid
performance is thanks to the South East’s above-average share of IT, professional
services and sciences, all sectors that grew faster than the UK economy.
“The fastest growing local areas include Buckinghamshire, Surrey, Milton Keynes and
Oxfordshire, whose economies are over 3.5% larger than they were in Q2 2013. This
compares with 3.2% for the entire UK economy. It’s not surprising that these areas
also enjoy some of the UK’s lowest unemployment rates. For example, the
unemployment rate in Oxfordshire is just 4.1%, compared with an average of 7.2%
over the past year for the UK.”
Stephen Blackman
Economist, The Royal Bank of Scotland
View from the region
y/y growth – South East sub-regions (does
not include competitiveness adjustment)
Source: RBS calculations using ONS data
Tim Boag, MD, Corporate &
Commercial Banking, London &
South East
q/q growth
Source:
RBS
calculations
using ONS
data
“Since Q4 2013 our customers
appear more confident regarding
the economy than at anytime since
2008 and this has continued
throughout 2014 as demonstrated
by the investment in both premises
and equipment that we are seeing
here.
“Regarding sectors we have seen
increased activity across all sectors,
especially leisure where activity has
shown a marked increase since 2013
particularly in the Kent area.
Meanwhile manufacturing is seeing
growth and expanding at a
reasonable rate.”
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London
London’s economy
grew 1%q/q in Q2,
significantly faster than
the UK average
The outer boroughs of
London have been the
main drivers of
growth over the past year
“London was the UK’s economic growth gold-medallist between April and June this
year. The city grew by 1.0% compared with the UK average of 0.8%, a substantial gap.
This was London’s strongest performance in almost three years. Professional services,
outsourcing, and information and communications technologies led the way.
“Over the last year only East Midlands pipped London in the growth charts. While the
UK as a whole expanded by 3.1%, London managed 3.5%. As a result, the fall in
London’s unemployment rate has only been surpassed by the East and West Midlands.
For people beyond the capital, the fastest-growing places might be a surprise. It’s the
outer boroughs that have been in the vanguard, rather than traditional powerhouses
like the City, the West End and other parts of inner London.
Stephen Boyle
Economist, Royal Bank of Scotland
y/y growth – London sub-regions (does
not include competitiveness adjustment)
Source: RBS calculations using ONS data
View from the region
q/q growth
Source:
RBS
calculations
using ONS
data
Tim Boag, MD, Corporate &
Commercial Banking, London &
South East
“Across London our customers
continue to see an improving
economic horizon, with increasing
confidence leading to business
owners starting to take medium to
long term investment decisions to
fuel future growth.
“Some sectors are experiencing
greater improvement and activity
than others particularly in the
recruitment, leisure (restaurants)
and TMT where growth and new
opportunities are being visible.
Other sectors have seen an uplift,
but continue to face some
challenges to achieve the
confidence experienced before the
economic downturn.”
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