Leap in productivity growth highest in Northern Ireland new research shows

Growth in productivity has accelerated at the fastest rate in Northern Ireland according to new analysis by PwC UK. The research shows that the increase in output per hour between 2011 and 2021 showed the greatest leap over the decade, in comparison to equivalent regions in the UK. The figures follow recent research from PwC which saw Belfast rank as one of the leading cities in the devolved nations based on measures including jobs, skills and business start-ups.

The new findings come as part of our tracking  of productivity across the UK, which analyses progress, with a focus on the key sectors that contribute to growth including manufacturing, construction, and services. 

The Industrial Manufacturing and Services Productivity Tracker shows:

• Northern Ireland has the highest productivity growth rate in the UK (increase in output per hour between 2011 and 2021). Northern Ireland's output per hour grew at 13.5% between 2011 and 2021, which was the fastest growth rate of any UK region. 

• At a more granular level, Derry City and Strabane in Northern Ireland saw the biggest improvement in productivity with a 65.9% uptick in output per hour from 2011 to 2021.

• Wales has seen a 10 year growth trajectory with output per hour growing by 9.7% over the period in question - the second fastest growth rate after Northern Ireland.

• Scotland is the UK’s most productive manufacturing region (output per hour).

• London remains the UK's most productive region overall. But strip out financial services and London’s lead over other regions narrows statistically.

• £71.6 billion boost to UK GDP if sectoral productivity in some regions is raised to at least the industry’s median levels.

Nick Atkin, Leader of Industrial Manufacturing and Services, said:

"Our Tracker underlines the close relationship between strong productivity growth, talent availability and high skills levels, and nowhere is this more evident than in the significant leap Northern Ireland has demonstrated.

"Despite historically low levels of productivity, our data shows that this region has had the largest hike, no doubt due to its relatively high share of sectors experiencing growth like construction.

"We know that boosting productivity can bring significant benefits. In fact by bringing production, services and construction productivity in under-performing regions up to at least the median sectoral levels, around £71.6 billion could be added to UK GDP.

“If Northern Ireland and Wales continue to prioritise investment and are successful in translating this funding into efficiency, they are likely to see their significant boost to growth manifest into long-term high productivity.

"The good news is that with burgeoning shoots of strong productivity growth in places like Northern Ireland and Wales, it's clear that the right mix of innovation, regeneration and development can transform regional productivity, boost prospects and tackle inequalities."

The potential of Northern Ireland and Wales has been buoyed by high performing cities such as Belfast and Cardiff. An important factor in Belfast’s and, more recently, Cardiff’s rising productivity is the presence of a City Deal, which gives local areas specific powers and freedoms to help them support economic growth, create jobs or invest in local projects.

The Tracker demonstrated that the regions with some of the highest productivity growth rates between 2011 and 2021 have benefited from some of the largest amounts of investment (measured by Gross Fixed Capital Formation as a share of GVA in 2020). If such regions continue prioritising investment and are successful in translating this funding into improved efficiency, they are likely to see significant boosts to their long-term productivity rates.

Despite being middle of the road for overall productivity, Scotland had the highest manufacturing productivity of any UK region in 2019 with an output per hour of £46. Some of this outstanding performance stems from hydrocarbon processing in the wake of high oil prices. Scotland’s productivity lead and future potential is also rooted in its strengths in high value sub-sectors - including pharmaceuticals with 8.4% of GVA, more than 150 companies and 9,000 skilled professionals. Overall, Scotland’s manufacturing sector accounts for just over half of international exports, and 47% business expenditure on Research & Development (R&D).

Cat McCusker, PwC Regional Market Leader, Northern Ireland, said:

“Whilst any growth in productivity is to be welcomed, Northern Ireland still has the lowest productivity of any UK region, around 17% below the national average. 

“This is due, in part, to Northern Ireland having fewer jobs in high-productivity sectors such as financial services. But even outside of this, Northern Ireland has a significant productivity gap in both the production sector - primarily manufacturing - and the services sector.

“It is important to recognise that the 2021 data is likely to be affected by the pandemic so it is too soon to draw clear policy conclusions. However, we do know that one of the most effective ways to accelerate future productivity growth is through investment in a broad range of skills, and in particular to target funding towards skills that will be of increasing importance in the years to come. That includes the priority clusters outlined in the ‘10x Economy’ vision. We continue to recommend increased investment in business-led reskilling initiatives to raise skills levels in NI, in the areas which have the greatest long term impact and contribute to productivity-led economic growth.”

“Getting this right could have huge economic benefits for the region. If Northern Ireland productivity was to catch up to the UK-wide sectoral medians, it could add £7bn to the local economy here.”

ENDS

Notes to editors 

The latest ONS all-sector regional data is from 2021, while the sector-specific data within regions is from 2019. The analysis was carried out before the 2023 Blue Book (national accounts) revision.

For all analysis, we have used the latest data available on ONS. Productivity data is typically lagged, even more so when you look at the regional level, and very much so when you look at the regional and sectoral view.

The  Industrial Manufacturing and Services Productivity Tracker aims to unpick the causes of the slowdown in UK productivity growth and draws upon PwC industry expertise.