Weakness in UK growth reflected in regional growth across the UK


Weakness in UK growth reflected in regional growth across the UK

By Stuart McIntyre

Data out last week from the ONS showed that the UK economy grew by 0.3% in the third quarter of 2019.

Data also showed that the UK economy grew by 1% relative to the same period the year before. On a four-quarter on four-quarter basis, growth was 1.45%.

As we have done for a year now as part of our ESCoE work, we use these latest data on the UK economy alongside our econometric model of regional growth to understand what the regional pattern implied by this UK growth is.

The table below presents our estimates of growth in the year to 2019 Q3 for each of the nations and regions of the UK.

  2019 Q3
London 2.32%
Northern Ireland 1.79%
North West 1.74%
Scotland 1.55%
East of England 1.49%
UK 1.45%
Wales 1.31%
Yorkshire and The Humber 1.30%
North East 1.18%
West Midlands 0.99%
South East 0.86%
East Midlands 0.67%
South West 0.41%

While London continues to grow the fastest, growth remains more muted than might otherwise be expected, reflective of the more muted growth across the UK as a whole.

Meanwhile the South West appears to have had a particularly challenging past year, with weak growth estimated at around 0.4%.

In our previous data release, we estimated that growth in the South West in the year to Q2 was a healthier 1.9%; but in Q2 itself quarterly growth was negative. This contraction appears to be continuing, pushing overall growth in the year to Q3 down to just 0.4%.

This weakness is consistent with other business survey-based evidence that the South West economy is struggling at the moment – the latest NatWest UK Regional PMI Index for the South West has a value of 48.2 (where values less than 50 suggest activity is falling). The average PMI score for the South West in Q2 was just above 49.

Our estimates also suggest that activity in the Midlands (both East and West) has continued to be somewhat muted over the last year.

Since our 2019 Q2 estimates were released we have received new data for Northern Ireland and Scotland on the performance of these economies over the year.

The Scottish Government published their GDP estimate for Q2, showing growth relative to the same quarter a year before was 0.6%, and growth on a rolling four-quarter basis was 1.3%. Our equivalent estimate (see here) was 1.4%.

The Northern Ireland Composite Economic Indicator put growth relative to Q2 a year before at 1.0%, while growth on a four-quarter on four-quarter basis was 1.5%. Our equivalent estimate (see here) was 1.0%.

Our latest estimates (in the Table above) suggest that Northern Irish growth has picked up since then, albeit given the heightened economic volatility at the moment, we emphasise the uncertainty around this estimate.

In addition, ONS have published the second in their series of Regional Short Term Indicators (RSTis) for the English Regions and Wales (the Northern Irish and Scottish data discussed above are the RSTis for these economies) covering the period to Q1 2019. These are ‘experimental statistics’ produced by ONS using VAT turnover data. We are currently working on incorporating these data into our model.

Next month we will get a further update from ONS on regional economic growth – with their regular publication of the annual regional growth data up to the end of 2018. We will incorporate these data into our model when we next update our regional growth estimates, which will be shortly after the next release of UK quarterly GDP data in February 2020.

We will review the implication of this for our estimates in our next blog in February.

You can access our full ‘UK Regional GVA Quarterly Estimates’ spreadsheet here.

ESCoE blogs are published to further debate.  Any views expressed are solely those of the author(s) and so cannot be taken to represent those of the ESCoE, its partner institutions or the Office for National Statistics.

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