Research sheds new light on Sheffield City Region productivity gap

21st May 2020

Productivity in the Sheffield City Region could be closer to the national average than previously thought, according to a new report by Sheffield Hallam University.

The report, Productivity in the Sheffield City Region, found that although output per head and output per job in Sheffield City Region are both well below the UK average, the efficiency of production in the local economy is far closer to the average.

Professors Christina Beatty and Steve Fothergill from the University’s Centre for Regional, Economic and Social Research (CRESR) used innovative estimates of the efficiency of production in the local economy which adjust for the mix of industries, occupations and hours worked to measure productivity.

Productivity has become central to debates about regional and local differences in prosperity. The UK government’s aspiration to ‘level up’ the regions has become less about creating more jobs in the poorer parts of the country and more about raising productivity, by narrowing the gap with London and South East England.

On conventional measures of productivity, the city region achieves only 69 per cent of the national average Gross Value Added (GVA) per head and only 80 per cent of the national average GVA per job.

The new report found when GVA per job is adjusted for industry, occupational mix and hours worked, the city region moves substantially closer to the national average at 92 per cent and is not out of line with other urban areas outside London.

The researchers also compared Sheffield City Region with other parts of the country, looking at the trends over time and the differences between local authorities and industries within the city region.

Other key findings include:

  • In terms of efficiency, Sheffield City Region is not out-of-line with England’s other main urban areas outside London but there is no evidence it is catching up with the UK average.
  • Efficiency levels appear to be broadly similar across the larger local authorities within the city region.
  • There is substantial variation in productivity between industries within the city region, with some matching national levels but others far behind.
  • Sheffield City Region’s manufacturing sector has relatively low levels of productivity, which is concerning
  • Relative to the national average, productivity across Sheffield City Region as a whole has been broadly stable over the last decade and a half.

Co-author of the report, Professor Steve Fothergill said:

“For the moment, of course, concerns about productivity have been submerged by the coronavirus crisis and its damage to the economy.

“But as the UK emerges from the crisis there is no reason to suppose that the big local and regional differences in productivity will have gone away. The post-crisis world will inherit much the same capital stock, workforce and infrastructure that was previously in place across the country – and with it, no doubt, much the same gaps in productivity.

“Alongside interventions to mitigate the economic impact of the crisis, policies to address the long-term structural weaknesses of regions and local areas will still be needed.”

James Muir, Chair of the Sheffield City Region Local Enterprise Partnership, said:

“This new research is welcome. It underlines the fact that, collectively, we need to take a new approach to tackling and ultimately overcoming the fundamental challenges we face in our economy here in the Sheffield City Region.

“While this need for a new approach has become even greater due to the Coronavirus crisis, the underlying problems in our economy remain the same; and it is these structural problems that the Sheffield City Region will address in our forthcoming Strategic Economic Plan (SEP).

“With coal mining, steel production and rail engineering, our region powered the first Industrial Revolution. Now we’re embracing the Fourth Industrial Revolution, creating the industries and materials of the future. Our SEP sets out how will invest in innovation, in culture, in green transport solutions and in a vocational education system that will rival any in the world; putting people at the heart of what we do.

“Our ambition is great – but so is the size of the prize. If we get this right we will retain our talent, attract new people to our vibrant city and town centres, and lead the world in key sectors such as healthcare technology, education technology and advanced manufacturing.”

The full report can be accessed here - Productivity in Sheffield City Region.

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