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REGIONAL GROSS DOMESTIC PRODUCT

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NEW REGIONAL GDP FIGURES SHOW THE NEED FOR AN ACTIVE REGIONAL INDUSTRIAL STRATEGY - BYERS ...
NEW REGIONAL GDP FIGURES SHOW THE NEED FOR AN ACTIVE REGIONAL INDUSTRIAL STRATEGY - BYERS
Stephen Byers, the Trade and Industry Secretary, said that today's release by the Office of National Statistics of regional GDP figures for 1999 showed the need for an active regional industrial strategy.
The provisional figures from the ONS reveal that:
* Annual growth for the U.K. was 3.8% in 1999 with the south-east having the highest growth at 5.1%. The lowest was in the north-east at 2.3%.
* GDP per head in London was 30% higher than the UK average. In Northern Ireland and the north-east it was 23% lower.
* GDP per head for all regions was above£10 000 for the first time.
Commenting on the figures Stephen Byers said: 'These figures show why it is so important to have an active regional industrial strategy.
'Our regions were at the heart of the industrial revolution. They must now be at the centre of the knowledge based economy of the future.
'I welcome the fact that for the first time every region has its GDP per head over£10,000, showing that our economic policies have brought economic stability not just for the country as a whole, but for each part of it. But it is also clear that there are unacceptably wide econmic gaps between regions.'
'The challenge for government is to put in place the measures that will allow every region to prosper. Policies that will widen the winners' circle so that every region can benefit from our strong economic performance. 'This means that we must give particular attention and support to the needs of weaker regions. This must
involve allowing more strategic decisions to be taken at a regional level.
'Earlier this month we announced measures to support regional economic development. Today's figures show that the regional agenda will not go away and must be addressed in a positive and constructive way.'
Notes
Measures to assist regions recently announced include:
* the foundation of University Innovation Centres to create hubs for growth in the regions. The first five will involve companies like BAe and Proctor and Gamble in the North East and Hewlett Packard in Bristol;
* two new technology institutions in each region to produce a step change in the capacity of the regions to grow new dynamic businesses and hi-tech employment;
* a new£75 million incubator fund to support start-ups and growth businesses;
* a new early growth fund to make available up to£50 000 for business start-ups and small and medium enterprises;
* special support to manufacturing industry through a new Manufacturing Advisory Service.
The Office for National Statistics (ONS) is today publishing provisional estimates of regional gross domestic product (GDP) at basic prices for 1999. These estimates are consistent with the estimates of UK GDP published in the 2000 edition of the UK National Accounts - The Blue Book.
The estimates included in this release have been endorsed by statisticians within ONS, other government departments, and the devolved administrations as the best estimates that can be produced with the regional data currently available. The methodologies used to produce these estimates were published in an article in the December 2000 edition of Economic Trends.
The provisional estimates for 1999 show that:
* Annual growth for the UK, (excluding extra-region and the statistical discrepancy) was 3.8% in 1999. The south east had the highest growth at 5.1%. Annual growth was lowest in the north east at 2.3%.
* GDP per head in London was 30% higher than the UK average. In Northern Ireland and the north east it was 23% lower.
* GDP per head for all regions was above£10,000 for the first time.
Gross domestic product by region
In 1999, both the south east's and London's GDP were about£120bn, each accounting for about 16% of total UK GDP. The region with the smallest share was Northern Ireland, at just over 2% (£17bn).
Regional GDP estimates for years back to 1989 have been revised. These changes are described under Revisions below. Details of planned future changes are also given later in this release.
Treatment of commuting in regional estimates of GDP
Regional GDP can be calculated both on a workplace and a residence basis. Residence based GDP allocates the incomes of commuters to where they live, whereas workplace GDP allocates their incomes to where they work.
The main GDP estimates presented here are on a residence basis, and the breakdown of the totals by components of income and by industry are currently only available on a residence basis. However, workplace based estimates are also provided in Table 4. The residence and workplace estimates are different from each other only in London, the south east and east regions.
For all other regions it is assumed that the net commuting between regions is not significant, based on information from the Census of Population. The ONS is conducting research to test whether this assumption continues to be valid. All references in this news release to regional GDP refer to residence-based figures unless otherwise stated.
Regional GDP per head In 1999 London had the highest level of GDP per head, at just under£16,900, followed by the south east and east, both at£15,100. No other regions were above the UK average of£13,000. The north east had the lowest regional GDP per head in 1999,at£10,000, followed by Northern Ireland at£10,100 and Wales at£10,400.
GDP per head of population, relative to the UK average, was highest in London, at 30% above the UK average in 1999. This figure for London represents a slight fall from a peak of 32% above the UK average in 1998.
Between 1998 and 1999, the south east, east, Yorkshire & the Humber, West Midlands, and Wales all showed increases in terms of GDP per head, relative to the UK average.
Gross value added at basic prices Under the European System of Accounts 1995 (ESA95), the term gross value added (GVA) is used to denoteestimates that were previously known as GDP at basic prices.
Under ESA95 the term GDP denotes GVA plus taxes (less subsidies) on products, i.e. at market prices. Regional Accounts are currently only published at basic prices so should be referred to as GVA rather than GDP. To avoid confusion, the term GDP is used as synonymous with GVA at basic prices in this release, thereby maintaining continuity with the regional GDP release published in June 2000. From 2002, the term GVA will be used throughout.
Revisions
The estimates of GDP published today have been revised back to 1989. The revisions fall into four categories:
1. Revisions to national controls
2. Revisions to regional indicator data
3. The correction of errors in the accounts previously
published; and
4. A change to the methodology forregionalising household rent.
1. The regional estimates of GDP included in this release are consistent with the estimates of UK GDP at current basic prices published in the 2000 edition of the UK National Accounts - The Blue Book. The 2000 edition of the Blue Book included revisions to the UK estimate of non market capital consumption (NMCC) back to 1965. For 1989-1998 the revision to the UK was in the order of£1bn to£2bn.
Since NMCC is a measure of the depreciation of non-market organisations (central and local government, and non-profit institutions serving households NPlSHs), these revisions affect the public sector orientated service industries. UK estimates of the components of Income-based GDP were Input-Output balanced for 1998 for the first time as part of the Blue Book 2000. This led to an upward revision of£7.5bn for the UK, and significant revisions to individual industries. These revisions have fed through to the regional totals for 1998 depending on the industrial make up of each
of the regions.
2. As well as taking on regional indicators for 1999 where these data were available, revisions to regional indicators for years before 1999 have also been included. The major revisions have come from the short term employment survey (STES) and new earnings survey (NES) estimates for 1997 and 1998. These indicators are used to forecast inland revenue regional control totals (from 1996), and provide
region by industry shares for compensation of employees and, indirectly, profits.
3. The estimates of regional GDP published in June 2000 contained two errors that have since been discovered and corrected. These are:
(a) Industry G (Retail and Wholesale) - the correct regional estimates of STES employment for female full-time employees were not used in the previous calculations. Correction of this results in changes to estimates of the industry breakdown of compensation of employees, and to regional estimates of profits and holding gains for the nine English regions.
(b) Industry L (Public Administration and Defence) - previously, employment in the Northern Ireland Civil Service was not properly reflected in the employment data usedas a regional indicator for NMCC. Correcting for this has led to a significant upward revision to the estimate of GDP for Northern Ireland of about 1.5 percentage
points on a UK=100 index basis.
4. The final revision relates to a change in methodology for regionalising household rent, as pre-announced in a regional GDP methodology article, published in the December 2000 edition of Economic Trends.
For the estimates published in June 2000, household rent was regionalised on the basis of house prices from the Land Registry for England and Wales, and equivalent bodies in Scotland and Northern Ireland. These house price estimates have now been replaced by mix-adjusted house prices by region, produced by the Department of Environment, Transport & the Regions (DETR).
Mix-adjusted prices more accurately reflect the mix of housing within any particular region, rather than just that proportion of housing on the market. This has
resulted in significant revisions in the Renting & Real Estate industry (industry K).
Future changes
Regional Accounts are revised on an annual basis, taking account of revisions to the UK control totals included in the latest edition of the Blue Book, as well as revised regional indicator data where these are available. When regional estimates for 2000 (consistent with the Blue Book 2001) are published in 2002, it is expected that the following revisions will be included:
1. Significant revisions to UK totals for income components of GDP. The 2001 edition of the Blue Book will include a large number of revisions and methodological changes.
2. Regional estimates of wages and salaries for 1997 to 1999 are expected to be available from Inland Revenue for the first time. These will replace the employment and earnings survey estimates currently being used for these years.
3. The introduction of the new Annual Business Inquiry, replacing the Annual Employment Survey from April 2001 is expected to lead to revisions to UK and regional industry totals.
4. The availability of regional GVA data from the Annual Business Inquiry (replacing the Annual Census of Production) is expected to lead to significant revisions to regional profits totals.
An Economic Trends article giving details of forthcoming revisions and any methodological changes will be published in the autumn of 2001.
NOTES
Diversity of the regions
1. The regions of the UK are diverse in size and population, and in terms of their economic characteristics. Annex A shows this diversity.
Regional Accounts
2. The regional accounts presented in this article are consistent with the national accounts published in the 2000 edition of the UK National Accounts - The Blue Book, which also defines the terms used. Regional GDP figures for 2000 will be published in 2002.
3. An article describing the methodology used to produce the estimates presented here was published in the December 2000 edition of Economic Trends. A further article, outlining updates to themethodology and further details of the revisions to regional GDP will be included in the March 2001 edition of Economic Trends.
4. This release contains only some of the regional economic data available. Further information is available on request from: Regional Accounts Branch, Office for National Statistics, B4/10, 1, Drummond Gate, London, SW1V 2QQ, tel: 020-7533 5793, fax: 020-7533 5799, email: philip.papaiah*ons.gov.uk.
Accuracy
5. As with the national accounts, the regional estimates, although calculated as reliably as possible, cannot be regarded as accurate to the last digit shown. This is particularly relevant for later years, when the absence of key source data has resulted in estimates for 1997 to 1999 being marked provisional.
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