Tees Valley

Quarterly Economic Review

December 2015

1

An up to date analysis of economic, business and labour market trends across the Tees Valley

Contents

Summary

Economy and business

- Sectoral economic growth

- Global trade slowdown

- China and the UK economy

- Regional trade in goods (q)

Labour market

- Headline labour market (m & q)

- Unemployment focus

- New businesses (m)

- Business stock by size (a)

- Job Trends from 2010 to 2014 (a)

Further information

Underlined blue text is hyperlinked

Notes: (a) = data released annually, (q) = data released quarterly, (m) = data released monthly

• UK Service sector continues to drive the economic recovery

• Slowdown in global economic growth and trade impacting negatively on UK Manufacturing sector

• North East goods exports flat in 2015 after strong performance in 2014

• Unemployment picking up but still down on a year ago

• New business registrations surpass 3,000 in 2015

• Despite strong growth in company numbers the Tees Valley still has relatively few businesses across all sizes of firm

• Private sector employee increase dominated job growth in 2014

Summary

Key points

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Sectoral economic growth

Key points

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• Growth in the fastest growing EU country, Germany, has been driven by the Manufacturing sector which contributed 6.1% of the 10.7% increase in Gross Value Added between 2009 and 2014. In contrast, UK Manufacturing contributed just 0.6% to growth over this period

Sources/notes: Bank of England Inflation Report, November 2015

Output contributions to total GVA growth for major European economies from 2009 to 2014

(a) Chained-volume measure. Figures in parentheses are weights in nominal value added in 2012. Contributions may not sum to total as GDP is at market prices while industry output is gross value added at basic prices, and due to rounding. (b) Includes: mining and quarrying; electricity, gas and water supply; and agriculture, forestry and fishing.

Contributions to quarterly UK Gross Domestic Product growth by output sector(a)

The UK’s Service sector is the fastest growing in Europe

• Germany and the UK have seen the strongest economic growth rates in Europe over the past five years following the downturn of 2008/09

• UK GVA grew by 10.5% from 2009 to 2014 with Non-financial private services generating 9.3% of the total. Apart from Italy, this sector has made the largest contribution to growth across most EU countries. However, Manufacturing GVA has also grown contributing 2.0% of total EU GVA growth of 5.4%

Source: Eurostat, ONS National Accounts

Service sector continues to

drive UK GDP growth in 2015

Global trade slowdown

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GDP (US $

trillion)

% of World GDP

Real GDP growth (%)

2014 2015 2016 2017

USA 17.4 22.4 2.4 2.4 2.5 2.4

China 10.4 13.3 7.3 6.8 6.5 6.2

Japan 4.6 5.9 -0.1 0.6 1.0 0.5

Germany 3.9 4.9 1.6 1.5 1.8 2.0

UK 2.9 3.8 2.9 2.4 2.4 2.3

France 2.8 3.6 0.2 1.1 1.3 1.6

World GDP 77.9 100.0 3.3 2.9 3.3 3.6

And despite falling trade volumes both global growth and trade are expected to recover in 2016

Sources/notes: World Bank September 2015 and OECD November 2015 Economic Outlook database

Relationship between global trade and GDP growth

Largest six economies and forecast annual % change in real GDP

• Trends in global trade and world economic growth are closed correlated

• The present slowdown in import trade volumes - particularly in non-OECD countries such as China, Russia and Brazil – is not as yet impacting more widely with advanced economies such as the US, Germany and the UK so far remaining resilient

Key points • The United States remains the largest economy in

the world by some margin, accounting for 22.4% of global economic output in 2014

• Whilst a longer-term forecast is not made here, assuming a rough continuation of the present differential in growth rates between China and the US, China will become the world’s largest economy by 2030

• Despite some recent moderation in growth rates, China, the world’s second largest economy, is still forecast to grow at an annual rate of more than 6% in the coming years

China and the UK economy

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- China is the world’s largest goods exporter - In 2014, China was the 2nd largest economy in the world, accounting for 13% of global GDP (up from just 2% in 1990) - Chinese demand accounts for around 10% of global trade but only 3% of UK exports

For every 1% decline in Chinese growth, UK output could fall 0.1%

Sources/notes: OECD Economic Outlook November 2015. EME is Emerging Market Economy

Sources/notes: Bank of England Inflation Report, November 2015

UK trade with China The Bank of England have modelled the potential Impact of a 3% fall in Chinese GDP on UK GDP

It concludes that, given China’s present day importance to world trade, such a fall could result in a 0.3% decrease in UK GDP. However, given China’s ever strengthening global inter-linkages, this estimate may turn out to be an understatement

China’s global trade links are now wide ranging

Chinese import growth already weakening sharply

Primary impact (-0.3%) Reduction of UK export demand, directly and through negative impact on other trading partners

Potential impacts on the UK of an economic slowdown in China of 3%.

- Potential losses for UK banks with Chinese exposure & impact on financial market sentiment

- Positive impact from a fall in commodity prices resulting in a boost to real household incomes

- Falls in asset prices leading to heightened global uncertainty and increased cost of capital for UK companies

Other impacts (broadly neutral in aggregate)

• The sharpest contractions in GDP have been observed in those countries with intensive trade links and/or are net exporters of commodities to China

Helping to explain slowdowns in other EMEs

Regional trade in goods

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2014 North East export growth stalls in 2015

Annualised trade data

• Regional exports totalled £12.5bn for the four quarter period to September 2015.

• North East imports totalled £8.8bn and there was therefore a regional trade in goods surplus of £3.7bn. This trade balance was down by £0.8bn on the year to September 2014 because imports grew at a far faster rate than imports i.e. 13.7% up on the year compared to the 2.1% rise for exports.

• North East exports were up by 2.1% (or £252m) in the year to September 2015 compared with the year previously. This contrasts with a decrease of 1.9% for the UK as a whole.

• The graph above contrasts the region’s export performance with that of the country as a whole over the past two years.

• 2014 saw contrasting fortunes for UK and North East goods exports with regional exports increasing by 7.6% (Index 107.6 in 2014Q4) between December 2013 and December 2014. The UK goods export index fell to 96.1% (a 3.9% decrease) through 2014.

• Export performance, both regionally and nationally, has been broadly steady during 2015.

Key points

• Quarterly change estimates can be volatile so aggregated four quarter i.e. annualised data is generally used to compare performance over time.

UK index (LHS)

NE index (LHS)

NE exports (RHS)

Sectoral exports

• North East chemicals exports rose by £435m in the year to September 2015, a 13.0% increase compared to the 7.8% UK increase.

• This rise was offset by a £259m fall in exports of North East Manufactured Goods over the same time period.

Sources/notes: HMRC Regional Trade Statistics

Indicator Latest period Tees Valley United Kingdom

Level Rate (%)

Change on year

(level)

Change on qtr (level)

Level (000s)

Rate (%)

Change on year

(000s)

Change on qtr (000s)

Employment* Jul’14-Jun’15 289,900 68.0 3,100 4,000 30,783 72.9 596 152

ILO Unemployment** Jul’14-Jun’15 27,000 8.5 -5,300 -1,000 1,853 5.7 -366 -91

Economically active*** Jul’14-Jun’15 309,800 74.5 -2,700 2,200 31,484 77.4 178 57

Economically inactive*** Of which: • Doesn’t want a job • Wants a job

Jul’14-Jun’15

105,900 25.5 2,600 -1,800 9,190 22.6 -87 -32

82,500 23,400

77.9 22.1

1,300 1,300

-1,400 -400

6,991 2,199

76.1 23.9

-13 -74

-1 -31

Claimant unemployment* Nov 2015 14,859 3.6 -1,589 1,347 642 1.6 -206 -67

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Sources/notes: ONS, NOMIS, APS. *Numbers aged 16+ and rate of working age population between 16-64. **Numbers aged 16+ and rate of economically active. ***Numbers aged 16-64 and rate of working age population between 16-64.

Headline labour market Employment boosted by renewed fall in

economic inactivity • The latest Tees Valley employment rate stood at 68.0%, up by 0.6% on the previous period (Apr’14-Mar’15). This

compared to the UK rate of 72.9% and represents an employment ‘gap’ of 20,100 – that is the number of additional Tees Valley residents who would need to be in employment in order to match the present UK employment rate.

• The headline ILO (International Labour Organisation) unemployment rate is now 8.5%, down by 0.4% on the previous period (Apr’14-Mar’15). The UK rate fell by 0.3% to stand at 5.7%.

• There are around 12,000 more Tees Valley residents economically inactive than would be the case if the area could match the present national economic inactivity rate.

• Of the economically inactive population the four main components are looking after home/family (around 28,000 and up 5,000 on the year), long-term sick (24,000 and down 2,000 on the year), students (23,000) and retired (17,000), both little changed on the year.

Unemployment focus

Key points

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Regional unemployment increase indicates recent pick up in Tees Valley JSA is only part of the story

NE JSA (RHS)

TV JSA (LHS)

TV APS (LHS) NE APS (RHS)

NE LFS (RHS)

14,900 ILO/LFS unemployment

increase in the North East since the Summer

Increase in NE LFS unemployment (and pick up in TV JSA) suggests underlying TV ILO/APS

unemployment is likely to show significant increase during the latter months of 2015

International Labour Organisation (ILO) count

ILO unemployment is measured in two ways at

the national and regional (North East) level.

Quarterly LFS estimates are published every

month for the quarter ending two months

previously i.e. Aug-Oct15 estimate released

Dec15. The annual APS estimates (derived from

the LFS) are available down to LEP and district

level and are published every quarter for the

year ending four months previously i.e. Oct14-

Sep15 estimate due to be released in Jan16.

JSA/claimant

count published

every month for

the previous

month

LFS and APS

estimates -

see below

• Tees Valley JSA unemployment reached a low of 13,343 in September

and has since risen by over 1,500 to 14,859 by November.

• North East JSA has actually fallen by around 1,500 since June but the wider regional

LFS measure rose by almost 15,000 between the Apr-Jun15 and Aug-Oct15 quarters.

Sources/notes: ONS, LFS, NOMIS, APS & JSA

Unemployment measures compared

New businesses

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Over 3,000 new businesses have already registered in the Tees Valley in 2015

Further TVU analysis of business statistics is available here

• Companies House publish a database containing data on all live companies every month.

New registrations and stock of companies registered in Tees Valley, 2015

• For each company, the database contains details of the company’s registered address.

A district breakdown of this total is shown here.

• In Tees Valley there were 18,779 active enterprises registered at Companies House at the end of November 2015. Apart from July, this figure has grown every month this year with an average of close to 300 new registrations per month across Tees Valley as a whole. All districts have seen significant numbers of new companies registering at Companies House. The first eleven months of 2015 saw a total of 3,160 new enterprises register in Tees Valley.

• Based on the postcode of the registered address, we have analysed ‘active’ companies located within the Tees Valley. However, the registered address may not be same as the address of operation – the company may be registered at the home address of the owner or at the address of lawyers. Larger companies may have operations in the Tees Valley but be registered at a central address elsewhere.

New monthly registrations (RHS) Tax year ends

on 5 April Stock of companies (LHS)

Source: Companies House and TVU

Cumulative new company

registrations, 2015

Business stock by size

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Almost three quarters of Tees Valley businesses have fewer than five employees

Stock of registered business enterprises by employment size, Tees Valley, March 2015 Small & medium sized enterprises (SMEs)

Large

Total Small (< 50 employees) Medium SME

Micro (< 10 employees)

0 – 4

employees

5 – 9

employees

10 – 49

employees

50 – 249

employees

0 – 250

employees

250 +

employees

UK 1.87m 304k 228k 39k 2.44m 9k 2.45m

76.3% 12.4% 9.3% 1.6% 99.6% 0.4% 100%

Darlington 2,210 410 320 60 3,000 20 3,020

73.2% 13.6% 10.6% 2.0% 99.3% 0.7% 100%

Hartlepool 1,690 270 205 40 2,210 5 2,215

76.3% 12.2% 9.3% 1.8% 99.8% 0.2% 100%

Middlesbrough 2,125 395 345 65 2,940 15 2,955

71.9% 13.4% 11.7% 2.2% 99.5% 0.5% 100%

Redcar & Cleveland 2,275 405 305 60 3,045 10 3,055

74.5% 13.3% 10.0% 2.0% 99.7% 0.3% 100%

Stockton-on-Tees 4,010 595 510 130 5,245 15 5,260

76.2% 11.3% 9.7% 2.5% 99.7% 0.3% 100%

Tees Valley 12,315 2,075 1,680 355 16,430 70 16,500

74.6% 12.6% 10.2% 2.2% 99.6% 0.4% 100%

• Businesses in the Tees Valley are broadly similar to the UK in terms of the number of people they employ. However, the area is home to significantly fewer of the very smallest micro-enterprises that employ less than 5 employees – 74.6% of Tees Valley enterprises employ fewer than 5 employees compared to 76.3% nationally.

Number of employees

% of UK rate

‘Gap’

0-4 64.2 6,870

5-9 66.4 1,050

10-49 71.9 660

50-249 88.8 45

250+ 72.9 25

Total 65.6 8,640

Enterprise gaps by size of business, Tees Valley, March 2015

• There were 16,500 business enterprises registered in the Tees Valley in 2015. In terms of enterprise stock as a percentage of 10,000 adults (307 for Tees Valley versus 467 nationally), the Tees Valley rate was 65.6% of the UK rate. There were relatively few enterprises at all levels of company size with the largest gap in both numerical and percentage terms being the smallest micro-business (0-4 employees) sector at just 64.2% of the UK rate, accounting for 6,870 of the total gap of 8,640 i.e. the number of additional Tees Valley enterprises required to match the UK enterprise per 10,000 adults rate.

Sources/notes: ONS, NOMIS, UK Business Counts - Enterprises

Job trends from 2010 to 2014

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Private sector employee increase replaced self-employment as the main driver of job growth in 2014

There were 292,500 jobs in Tees Valley

in 2014. This figure was up by 8,500

on the revised 2013 estimate of

284,000.

Key points

Source: ONS, NOMIS and TVU

Total jobs by status,

Tees Valley,

2014

The modest total jobs increase between 2011 and 2013 was accounted for by higher

levels of self-employment. Private sector employee increases over this time were

broadly cancelled out by reductions in the number of public sector employees.

Whilst employee job growth in 2012 was dominated by part-time private sector

employment increase, 2013 saw part-time work reductions offset by increased full-

time working.

Rates of public sector employee job decline have moderated since 2012. Private

sector employee job increase has meant that total employee numbers surpassed

2010 levels in 2014. However, there were still fewer full-time employees in 2014

than there were in 2010.

The strong jobs growth in 2014 was driven by significant

increases in both full and part-time private sector

employee numbers.

By 2014 and following four years of declining public

sector employment, 79.3% of Tees Valley jobs were in

the private sector, up from 74.4% in 2010

More detailed TVU analysis of job trends is available here

Web links and data sources

Tees Valley Unlimited – Tees Valley Statistics

• Provides detailed economic, labour market, skills and demographic reports, including upcoming and recently published:

– Tees Valley Economic Assessment 2015

– Tees Valley Business Survey 2015

– Analysis of Apprenticeship starts

– Quarterly Apprenticeship vacancies

– Monthly Claimant Count unemployment

– Population projections to 2032

– Tees Valley GVA estimates 2014

– Enterprise births and deaths 2014

– Indices of Multiple Deprivation 2015

• Tees Valley Interactive Area Profile with detailed current and historic data on the economy and labour market by ward, output area and district (including 2011 Census data)

Bank of England Quarterly Inflation report

HMRC Regional Trade Statistics

Further information

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ONS, NOMIS Labour Market Profiles

Tees Valley

Darlington

Hartlepool

Middlesbrough

Redcar & Cleveland

Stockton-on-Tees

Next edition: March 2016 • Please contact us if you have any subject areas that

you would like to be considered for inclusion in the March edition.

For additional information please contact:

Will Haywood

Business & Economic Intelligence Officer

Tel: 01642 524414

Email: will.haywood@teesvalleyunlimited.gov.uk