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GVA growth in the Humber

Economy Briefing note for Humber Local Enterprise Partnership Board

The Logistics Institute Hull University Business School

University of Hull

March 2016

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Contents

1. Summary ............................................................................................................................. 3

2. Introduction: Updating the Humber Local Enterprise Partnership (LEP) Strategic Economic Plan .................................................................................................................... 4

3. Gross Value Added (GVA) .................................................................................................. 4

4. Key Economic Parameters .................................................................................................. 5

5. GVA trends .......................................................................................................................... 5

5.1 GVA per Head ............................................................................................. 5

5.2 Productivity: GVA per Job .......................................................................... 6

6. Sector composition ............................................................................................................. 9

7. Skills, qualifications and social mobility ........................................................................... 11

8. Entrepreneurship and small business growth .................................................................. 14

9. Innovation......................................................................................................................... 15

10. Recap of Main Points ........................................................................................................ 16

11. Conclusions and Recommendations ................................................................................ 17

DISCLAIMER

The paper was generated at the request of the Humber LEP over a period of 10 days for presentation at the April 8th Humber LEP Board Meeting. The intent is not to provide a comprehensive comparative analysis of the Humber with comparable regions, nor to identify all potential sectors of interest to the Humber. It mainly compares the Humber to the national average and whenever relevant to London for which data is readily available. This allows us to get an idea of a more vibrant and diversified economy. Using publicly available data, we have computed various metrics related to GVA and provided some commentary, and pointed to some obvious but much needed recommendations.

As such, this briefing is intended as in an initial overview of the state of the economy of the Humber and designed to stimulate thinking and debate among Humber LEP Board members. It does not present any forecasts, an activity that would require more time and resources.

The paper was prepared by Professor Amar Ramudhin, Professor Steve Johnson, and Ms Fiona Cox of the University of Hull.

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1. Summary

An analysis of the main metrics and trends of the economy, skills, employment, social mobility, entrepreneurship and innovation for the Humber reveals the following:

Economic Prosperity: GVA per head in 2014 at about £19,000 was nearly the same as in 2009, which was before the economic crash. This is £4000 lower than the national average, and the gap seems to be widening. The average yearly growth in GVA per head since 2007 is only 0.89% for the Humber while it is 1.92% for the nation.

Productivity: Measured by GVA per job in 2014 was between £38,394 and £41,800, depending on data sources and job classification. This is at least £2500 lower than the national average at best and the gap seems to be widening. Furthermore productivity in the City of Hull is about 20 points below the UK average.

Decline in Manufacturing Sector: At 24% of nominal GVA, the Humber economy continues to be reliant on Manufacturing although the total output from the later has fallen below 2009 levels and the trend continues to be flat.

Value-Added Jobs: GVA for manufacturing jobs in the Humber are valued at £70,000 per job whereas jobs for ‘Public Admin, Education and Health and Wholesale & Retail’, ‘Transportation & Storage’ are less than half this value at £32,600 and £31,800 respectively. By comparison, a job in Information & Communication for the Humber is valued at about £51,000.

Skills: The percentage of the population of the Humber with NVQ4+ qualification was well below GB’s average in 2014 and the gap with the national average may be widening. Similarly, the proportion of people with low or no qualifications is above regional and national norms and the gap might be widening.

Employment by Occupation: Employment continues to be dominated by elementary and related occupations, with managerial and professional occupations making up a much smaller proportion of the Humber labour market than the regional and national average.

Social Mobility: Hull ranked 200th in the nation and North Lincolnshire 237th. Furthermore Yorkshire and the Humber had no social mobility hotspots at all indicating the greater need to cater for people in the lower socio-economic groups.

Entrepreneurship: The formation and growth of small and medium sized enterprises (SME’s) in the Humber area is below the national average. Hull tends to find itself at the bottom end of the 10 UK cities with lowest start-up rates.

Innovation: Hull was among the 10 UK cities with the lowest number of patents in 2014.

The analysis shows that the Humber is below the nation’s average and nearly at the bottom portion of the league on most key metrics. While this may not be surprising for many, it does mean that the situation is crucial for the Humber economy is slipping, and if nothing is done the gap with the rest of the UK will widen. Hence, there is an urgent need for a concerted strategy and quick actions to reverse the current trends.

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2. Introduction: Updating the Humber Local Enterprise Partnership (LEP) Strategic Economic Plan

The current Humber LEP Strategic Economic Plan (SEP)1 focuses primarily on the creation of jobs in the local economy and the strengthening of key sectors, notably renewable energy. The SEP outlines the actions required in order to achieve this overriding objective, and is due for renewal in 2016. It is therefore an appropriate time to reconsider the objectives of the strategy, and in particular to broaden its focus to encompass wider factors impinging on the prosperity and competitiveness of the Humber, in the light of trends in Gross Value Added (GVA) and associated measures such as productivity. While jobs are clearly still important, the sustainability of the region’s long-term prosperity depends primarily on its ability to generate wealth and compete effectively with the rest of the UK and other parts of the world. The greater the capacity for wealth creation, the greater is our potential ability to invest further in initiatives, activities and infrastructure that enhance the well-being of the population of the Humber.

In the light of the above, the University was requested by the Humber LEP to provide a quick status update on state of the Humber economy, focusing on GVA, to be presented to the April 8th LEP Board to stimulate discussions. The scope of the document was discussed and finalised on March 16, 2016, which left a very short turn around time. This paper represents an initial step in considering the challenges of supporting the competitiveness and growth of the region’s economy, focusing on those factors that are known to influence GVA and productivity in localities. The paper is not intended to provide a comprehensive comparative analysis of the Humber with comparable regions, nor to identify all potential sectors of interest to the Humber. It mainly compares the Humber to the national average and whenever relevant to London for which data is readily available. This allows us to get an idea of a more vibrant and diversified economy. Using publicly available data, we have computed various metrics related to GVA and provided some commentary, and pointed to some obvious but much needed recommendations.

As such, this briefing is intended as in an initial overview of the state of the economy of the Humber and designed to stimulate thinking and debate among Humber LEP Board members. It does not present any forecasts, an activity that would require more time and resources. However, the metrics speak for themselves and confirm the fact that the Humber economy is slipping, and if nothing is done the gap with the rest of the UK will widen.

3. Gross Value Added (GVA)

GVA is an indicator that is widely accepted by economists as an appropriate measure of the total value of output produced in a country, region or locality. Effectively, it measures the value of output produced2 less the value of intermediate consumption3. Hence the term ‘value added’. At national level GVA is a component of the Gross Domestic Product (GDP) measure that is typically used to indicate the level of national prosperity.

While there are many technical issues with estimating GVA at the local and regional level, it is widely accepted as a key measure of overall economic activity, and when related to inputs used (notably labour) as an indicator of how productively the economy is utilising its resources. Despite these technical difficulties, trends in GVA and GVA per head provide a useful indication of the trajectory of the local economy.

1 http://www.humberlep.org/strategies-and-deals/the-humber-strategic-economic-plan/ 2 Obtained by adding up the value of output or income 3 Obtained by adding the cost of goods & services, excluding employee costs, that are used in the production of the output

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4. Key Economic Parameters

Table 1 compares some key statistics for the Humber, Greater Manchester, Liverpool City Region, London and Great Britain. With a population of circa 1 million (about 1.5% of the population of GB), the Humber nominal GVA for 2014 was estimated at £17.5bn, which corresponds to 1.2% of GB’s nominal GVA. By contrast, Greater Manchester’s population accounts for approximately 4.4% of the population of GB and nominal GVA for 2014 was estimated at £57.4bn (nearly 4% of GB’s nominal GVA). Liverpool City Region has a population of just over 1.5 million in 2014, accounting for 2.4% of GB’s population and nominal GVA for 2014 was estimated at £28.3bn, making up nearly 2% of GB’s nominal GVA.

Table 1: Key statistics for the Humber, Greater Manchester, Liverpool City Region, London and Great Britain

In comparison, London, with a population of circa 8.5 million (13.6% of GB Population) generated a GVA of £364.3bn representing 24.8% of GB’s GVA. Based on these values, in 2014, GVA per head for the Humber was £18,941, whereas it was 125% higher in London at £42,664. The average GVA per head for GB was about £23,424, which is 24% higher than the Humber. When considering the economically active population4, the GVA per job was £38,394 for the Humber, £42,623 for Greater Manchester, £39,371 for Liver pool City Region, £79,233 for London and £45,629 for GB. The gap with Greater Manchester is ~11% and 2.5% with Liverpool City Region. With London and GB, the gaps are respectively 106% and 19%.

In 2014, unemployment in the Humber was at 6% whereas unemployment in London was at 6.4%, 6.9% in Liverpool City Region and 7.1%. in Greater Manchester. In 2015, out of the 2,382,370 businesses in GB only 1.2% of them were located in the Humber, as compared to 3.6% in Greater Manchester and14.3% in London.

5. GVA trends

5.1 GVA per Head

While it is interesting to look at nominal GVA values, it makes more sense to compare regions on a GVA per head or per job basis. As can be seen from Figure 1, GVA per head has grown steadily for all selected regions since 1997 although there they all suffered a slowdown and even a dip during the 2008-2009 economic crash. Of the selected regions, London has the highest curve and Humber is below the values for Greater Manchester and the average for GB. Furthermore the gap that separates the Humber from the other regions seems to be growing.

The growth in GVA per head for the Humber in 2014 was 3.14% as compared to 5.04% for London and 3.05% for GB (Table 2). However, the average yearly growth in GVA per head since 2007 is only 0.89% for the Humber while it is 1.92% for GB.

4 The ONS defines ‘economically active’ as those in work plus those seeking and available to work

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Table 2: Year over Year Growth in GVA per head

GVA per head for the Humber started dipping after 2009 and saw negative growth in 2010 and 2011. It took 5 years, i.e. until 2014, for the Humber’s GVA per head to rise back to its 2009 level, which is longer than most regions. Figure 2 shows the gap that separates London and GB from the Humber. Here a value of zero means that there is no gap and, as can be seen, the gap between GB and the Humber is about 22% and the gap with London is more than 125% and growing.

Figure 3 shows the growth of GVA per head of selected regions when compared to their 1997 values. Again, the Humber started well below the selected regions but caught up and even surpassed GB in 2009 only to fall flat in the later years (2011 – 2014), while those of the other selected regions continued their growth. This suggests that if the trends continue, the Humber will continue its fall behind the other regions.

5.2 Productivity: GVA per Job

When comparing the productivity of various regions, a better measure is GVA per job, which is obtained by dividing the nominal GVA by the number of jobs for a particular region. Figure 4 shows the productivity of the same four regions (Humber: £41,800, London: £63,500, Greater Manchester: £41,300 and GB: £44,4005). The productivity of the Humber was comparable to that of Greater Manchester until about 2006 when it shot up and surpassed the productivity of GB in 2009. It has since fallen to about the same level as that of Manchester. This is a cause for concern. While the decline in productivity since 2009 has been reversed, it has flattened out in the recent years. This trend suggests that the Humber is not on track to catch up with the rest of GB, and indeed there is a danger that the gap will widen slightly should current trends continue.

Figure 5 compares productivity in the City of Hull, using the slightly different measure of GVA per hour worked, with selected Northern town and cities. The productivity of Hull is about 20 points below the UK average, while areas such as Cheshire East is 15 points above average. Serious thought should be given as to how to increase the productivity of the Humber.

The headline figures up to now suggest that the Humber appears to be falling behind a number of comparable areas and there is a danger that the ‘GVA gap’ will increase in the absence of actions to address the underlying factors influencing GVA and productivity at the local and regional level. Note that this analysis is based on 2014 figures and does not include the new developments around the Siemens investment in Hull, which in any case would not significantly affect GVA until production comes on stream.

5 Note that these numbers are different from those computed from Table 1 because of differences in data sources and job numbers. But what is important here is the various trends for the regions.

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Figure 1: Graph showing Nominal GVA per head for 1997 – 2014 for the Humber, London. Greater Manchester and GB

Figure 2: Graph of the gap separating the Humber from London and GB

Figure 3: Graph of the growth of GVA per head when compared to 1997 GVA per head

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Figure 4: Graph of GVA by jobs, which is a measure of productivity

Figure 5: GVA per hour - North of England - highest and lowest ranking NUTS3 sub-regions, 2014

(Source: Office for National Statistics)

60 70 80 90 100 110 120 130 140

Blackpool

Blackburn with Darwen

East Cumbria

Lancaster and Wyre

Chorley and West Lancashire

Kingston upon Hull, City of

Greater Manchester South East

West Cumbria

Hartlepool and Stockton-on-Tees

East Merseyside

Cheshire West and Chester

Cheshire East

UK=100

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6. Sector composition

GVA, GVA growth and productivity vary by sector; therefore the sector composition of a local economy (measured in terms of employment or output) can have a key influence on its overall GVA performance. Figure 6 shows that the Humber economy continues to be more reliant on four sectors that contributed to over 75% of its GVA in 2014. These are Manufacturing (24%), Public Admin, Social Security, Education, Social Work (20%), Wholesale & Retail, Transportation & Storage, Accommodations & Food Services (19%) and Real Estate Activities (10%). Information and Communication as well as Financial & Insurance Activities are quasi-inexistent at less than 3% of total GVA.

Although Manufacturing dominates the Humber economy, it can be seen from Figure 6 that this industry suffered greatly from the 2008-2009 economic slowdown and the GVA contribution in 2014 is well below the 2009 level. Moreover the trend is flat which is cause for concern. The same is true for the two other categories ‘Public Admin, Social Security, Education, Social Work’ and ‘Wholesale & Retail, Transportation & Storage’. Only the fourth category, ‘Real Estate Activities’ shows a consistent upward trend.

Figure 6: Sectorial distribution of 2014 nominal GVA for the Humber shows four categories contributing to nearly 75% of GVA. These are Manufacturing (24%), Public Admin, Social Security, Education, Social Work (20%), Wholesale & Retail, Transportation & Storage, Accommodations & Food Services (19%), Real Estate

Activities (10%).

By comparison, London’s economy is more diversified and service oriented, where more high paying jobs can be found. Six industry categories contribute to 86% of the GVA (see Figure 7). These are: Financial & Insurance Activities (19%), Professional and Administrative Activities (17%), Wholesale & Retail, Transportation & Storage, Accommodations & Food Services (15%), Public Admin, Social Security, Education, Social Work (13%), Real Estate Activities (13%) and Information and Communication (10%).

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Figure 8 shows the distribution of jobs in the Humber, compared to GB and North, Yorkshire and East Riding. Jobs in Public Admin, Education and Health represent 30% of employment, followed by wholesale and retail at 17% and Manufacturing at 16%. Conversely, the Humber is well below the GB average in terms of employment in some service sector categories such as ‘Accommodation and Food Services’ and ‘Information & Communication’. But in terms of value added, GVA for manufacturing jobs in the Humber is much better at £70,000 per job whereas jobs for ‘Public Admin, Education and Health and Wholesale & Retail’, ‘Transportation & Storage’ are less than half this value at £32,600 and £31,800 respectively. By comparison, a job in Information & Communication for the Humber is valued at about £51,000.

Figure 7: GVA Breakdown by Industry for Humber and London. Manufacturing makes up 24% of the Humber’s GVA whereas Financial & Insurance Activities contributes to 19% of London’s GVA.

Figure 8: 2014 Sectorial Distribution of the % of total employee jobs (Source: ONS business register survey). Job Categories G through S are grouped in the Service category as well as shown individually.

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7. Skills, qualifications and social mobility

The relationship between skill levels and local/regional competitiveness is well established. The fastest growing economies tend to be associated with higher skill levels, both in terms of the supply of and the demand for skills. Figure 9 shows that in 2014 the percentage of the population of the Humber with NVQ4+ qualification was well below GB’s average. Furthermore, Figure 10 shows that the gap with GB does not appear to have narrowed in 2011 and may have widened slightly. Similarly, although the Humber has witnessed a decline in people with low or no qualifications, the proportion still lies above regional and national norms and the gap might be widening (see Figure 11).

These suggest that addressing the skills gap should continue to be a key objective of Humber LEP policy.

Figure 9: Humber NVQ Qualifications: January – December 2014 (Source: ONS)

Figure 10: Graph showing % population with NVQ4+ qualifications.

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NVQ4 And Above

NVQ3 And Above

NVQ2 And Above

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Humber Yorkshire And The Humber Great Britain

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Figure 11: Graphs showing the % population with no qualifications

This pattern of qualifications is reflected in (and indeed may be to some extent caused by) the occupational structure of the local economy (see Figure 12). It is clear that employment continues to be dominated by elementary and related occupations, with managerial and professional occupations making up a much smaller proportion of the Humber labour market than the regional and national average. There is no sign of this pattern changing over time, indeed there are signs that the ‘occupational structure gap’ between the Humber and other areas is increasing and may well continue to widen in future.

Figure 12: Employment by occupation (Oct 2014 – Sept 2015) (Source: ONS)

‘Social mobility’ refers to the extent through which people born into lower socio-economic groups are able to move into higher social groups, for example through acquiring qualifications and/or higher-level jobs. A recent report by the Social Mobility and Child Poverty Commission6 ranked local areas according to an index of social mobility, and the

6 Social Mobility & Child Poverty Commission: The Social Mobility Index https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/496103/Social_Mobility_Index.pdf

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results for the Humber and other areas in Yorkshire & the Humber region are presented in Table 3. Hull ranked 200th in the nation and North Lincolnshire 237th. Furthermore Yorkshire and the Humber had no social mobility hotspots at all. These figures clearly show that, with the possible exception of East Riding, Humber LEP area performs relatively badly on social mobility, and this may provide part of the explanation for relatively poor qualification figures and employment structures that are dominated by elementary occupations. While impacting social mobility is known to be a long-term process, it is clear that helping and supporting people from disadvantaged backgrounds to improve their qualifications and skills must form part of a strategy to improve GVA and productivity performance.

Local Authority Name Overall Ranking Early years School Youth Adulthood

Craven 88 130 70 99 162

Kirklees 91 124 142 48 210

Calderdale 96 216 119 83 55

Selby 119 125 160 197 56

East Riding of Yorkshire 148 34 267 162 136

York 152 94 222 152 147

Rotherham 167 71 194 190 214

Harrogate 175 175 108 205 192

Ryedale 190 78 190 136 295

Kingston upon Hull 200 137 179 167 266

Sheffield 212 236 250 120 126

Leeds 224 206 195 291 105

North Lincolnshire 237 219 232 250 146

Richmondshire 259 61 273 220 312

Bradford 277 256 310 91 204

Wakefield 278 264 235 266 236

Hambleton 281 226 251 149 308

North East Lincolnshire 288 50 256 323 302

Barnsley 300 218 289 286 244

Doncaster 301 212 286 279 262

Scarborough 312 176 306 239 304

Table 3: Social mobility index: regional breakdown and ranking (Source: Social Mobility & Child Poverty Commission)

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8. Entrepreneurship and small business growth

New business formation, especially within dynamic new sectors and using innovative technologies, can be an important source of GVA and productivity growth in a local economy. In particular, rapidly growing businesses sometimes known as ‘gazelles’ can make a considerable contribution. The current evidence suggests that the formation and growth of small and medium sized enterprises (SME’s) in the Humber area is below the national average, for example Hull tends to find itself at the bottom end of the 10 UK cities with lowest start-up rates (see Table 4) and at the bottom of the enterprise league tables produced by the Centre for Cities7. In Table 4, the ‘churn rate’, which is the difference between business start-ups and business closures as a percentage of total business stock, is a good indicator of the dynamism of the local business population, and this is relatively low for Hull at 2.8%. Survival rates for new businesses in the Humber region are broadly consistent, although they appear to be especially low for North East Lincolnshire.

Region Business start-ups per

10,000 population, 2014 Business closures per

10,000 population, 2014 Churn rate

Exeter 36.6 31.4 1.7

Barnsley 36.6 25.4 4.8

Plymouth 34.0 31.0 1.4

Dundee 33.7 25.3 3.9

Swansea 32.5 26.2 2.8

Stoke 32.4 26.8 2.4

Mansfield 32.2 25.0 3.2

Hull 31.4 25.2 2.8

Sunderland 30.2 22.4 4.0

Belfast 28.8 25.4 1.2

Table 4: Entrepreneurships: 10 UK Cities with the lowest start-up rates (2014) (Source: ONS 2015: Business Demography, 2014 data)

Table 5: Entrepreneurships: Humber business survival rates

(Source: ONS 2015: Business Demography, 2014 data)

Entrepreneurship, new business formation and SME growth are not ‘magic bullets’ that will transform the local economy in the absence of wider changes. Nonetheless, this brief overview of the figures in Table 4 and Table 5 suggest that promoting and supporting entrepreneurship, perhaps with a focus on innovative and high growth sectors and activities, can make a contribution to improving the performance of the Humber economy. Ensuring that local SMEs are in a position to participate effectively in key supply chains, linked to growth sectors, will also help to promote GVA growth and productivity.

7 Centre for Cities: Cities Outlook 2016 http://www.centreforcities.org/wp-content/uploads/2016/01/Cities-Outlook-2016.pdf

Yorkshire and The Humber Region

1-year 2-year 3-year 4-year 5-year

East Riding of Yorkshire 92% 75% 63% 52% 44%

Kingston upon Hull 93% 74% 57% 49% 40%

North East Lincolnshire 45% 37% 30% 23% 20%

North Lincolnshire 92% 72% 58% 48% 42%

York 94% 80% 67% 54% 48%

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A key element of the ‘agglomeration’ process that is felt by many economic geographers to underpin local economic performance and productivity is the extent to which business are able to access financial and other business support services that can help them to grow and compete. Sometimes referred to as Knowledge Intensive Business Service (KIBS), they can play a key role in ensuring that businesses are able to improve their performance. This can cover a wide range of services, including accountancy, legal support, tax advice, venture capital, training, consultancy, IT services, technical testing, export support and so on. As can be seen from Figure 8, the Humber has a lower concentration of employment in the Financial and other business services (category K-N) than regional and national benchmarks.

9. Innovation

Innovation has long been recognised by economists as a key driver of productivity and economic growth. For example, the Centre for Cities states:

“The creation and absorption of new ideas and innovations increase productivity, and productivity is the driver of long-run economic growth. Those economies that are better able to create and commercialise new ideas are better placed to grow in the future.” 8

Unfortunately, evidence in the public domain to enable us to assess the relative position of the Humber in this regard is relatively sparse but one important measure of innovation is the number of patents issued. In this regards, Hull was among the 10 UK cities with the lowest number of patents in 2014 (see Table 6).

Table 6: Innovation: 10 UK cities with the lowest number of UK patents granted (2014)

(Source: Intellectual property office)

8 Centre for Cities: Cities Outlook 2016, p.33 http://www.centreforcities.org/wp-content/uploads/2016/01/Cities-Outlook-2016.pdf

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Digital connectivity and the Internet are enablers of innovations. Table 7 details the proportion of premises receiving Internet speeds of less than 10MBit per second. Unsurprisingly, the more rural East Riding of Yorkshire has a higher proportion of premises receiving speeds of less than 10MBit per second, but the city of Hull also ranks among the top and only two locations where more than 30% of premises are currently at speeds below 10MBit per second according to Ofcom’s analysis of operator data in the 2015 Connected Nations Report.

Table 7: Digital infrastructure: % of premises in England receiving speeds of less than 10Mbits/s, by Local

Authority (2015). (Source: Ofcom analysis of operator data: Connected Nations Report 2015 – England)

10. Recap of Main Points

The main points from the previous sections are:

Economic Prosperity: GVA per head in 2014 at about £19,000 was nearly the same as in 2009, around the time of the economic crash. This is £4000 lower than the national average, and the gap seems to be widening. The average yearly growth in GVA per head since 2007 is only 0.89% while it is 1.92% for the nation.

Productivity: Measured by GVA per job in 2014 was between £38,394 and £41,800, depending on data sources and job classification. This is at least £2500 lower than the national average at best and the gap seems to be widening. Furthermore productivity in the City of Hull is about 20 points below the UK average.

Decline in Manufacturing Sector: At 24% of nominal GVA, the Humber economy continues to be reliant on Manufacturing although the total output from the later has fallen below 2009 levels and the trend continues to be flat.

Value-Added Jobs: GVA for manufacturing jobs in the Humber are valued at £70,000 per job whereas jobs for ‘Public Admin, Education and Health and Wholesale & Retail’, ‘Transportation & Storage’ are less than half this value at £32,600 and £31,800 respectively. By comparison, a job in Information & Communication for the Humber is valued at about £51,000.

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Skills: The percentage of the population of the Humber with NVQ4+ qualification was well below GB’s average in 2014 and the gap with the national average may be widening. Similarly, the proportion of people with low or no qualifications is above regional and national norms and the gap might be widening.

Employment by Occupation: Employment continues to be dominated by elementary and related occupations, with managerial and professional occupations making up a much smaller proportion of the Humber labour market than the regional and national average.

Social Mobility: Hull ranked 200th in the nation and North Lincolnshire 237th. Furthermore Yorkshire and the Humber had no social mobility hotspots at all indicating the greater need to promote social mobility among people in the lower socio-economic groups.

Entrepreneurship: The formation and growth of small and medium sized enterprises (SME’s) in the Humber area is below the national average. Hull tends to find itself at the bottom end of the 10 UK cities with lowest start-up rates.

Innovation: Hull was among the 10 UK cities with the lowest number of patents in 2014.

11. Conclusions and Recommendations

The Humber is at a crossroads and there is an urgent need for a concerted strategy and quick actions as, unfortunately, the future is bleak if the current trends continue. Indeed the Humber is mostly in the bottom portion of the league in all key metrics related to economics, skills, employment, social mobility, entrepreneurship and innovation.

But there are areas of opportunity: GVA per job in manufacturing is high and the Humber should quickly diversify its economy by focusing on sectors with potential growth. Identification of these will require a deeper analysis, but it is clear that they should be built on the core strengths of the region which include: the Humber port complex; its marine and logistics history; the fact that it is the logical gateway for Europe; the growing renewable energy sector; the investment by Siemens in off-shore wind and the potential to develop the off-shore wind supply chain; certain key leading industries already present in the region; and the University and various colleges. But the challenges are enormous and one should start by developing an updated, ambitious and proactive skills strategy that will not only address social mobility issues, but also motivates people to continue on to further studies to redress the employment occupation issue, and/or be confident enough to stay in the region and start their own businesses for the new economy.

Among the recommendations are:

Develop the Humber into a truly integrated, multi-modal freight and passenger Gateway and work with Liverpool to develop efficient logistics services to serve businesses all along the M62 corridor and to supply the core cities of Manchester, Leeds and Sheffield in a cost and time effective and environmentally friendly manner.

Develop strategy for a thriving port-based economy in the region that will attract and support existing and/or new businesses to the Humber, in order to take full advantage of the connectivity to the Northern Powerhouse based on competitiveness and the carbon advantage.

Consolidate the Humber as the Energy Estuary and develop the Humber into a leader in this field.

Develop the renewable (especially the off-shore) energy sector to position the Humber as a World Class leader in this industry.

Continue to support and develop the chemical & processing industry.

Identify and develop other key sectors for the economic diversification of the Humber. These might include Information & Communication and Financial Services in specialised areas.

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Capitalise on City of Culture to popularise and enhance the image of the Humber and invest in making the Humber attractive for people to move into the region.

Work closely with the University and Colleges to address the skills gap for the chosen sectors.

Develop a plan to actively support entrepreneurship and innovation.

Develop a transportation and infrastructure plan to ensure initiatives that support growth.

Lastly, the Northern Powerhouse presents a unique opportunity for the Humber to shape its future. It should agree on a vision and a mission statement of what the Humber is about, speak with a common voice and elevate its game plan to shine and find its right place in the Northern Powerhouse and on behalf of the UK.

In conclusion, it is important to stress that this report has been generated over a very short lapse of time at the request of the Humber LEP to stimulate thinking and discussions among members of the Humber LEP Board on the future of the region. There is a need for a further evidence-based study to generate a common purpose for those people within and outside of the Humber, and thereby creating a common grand Humber vision to move forward. This study should identify the sectors that should be developed and the strategy to support their full development (in terms of innovation, skills, social mobility, entrepreneurship etc.), together with an integrated roadmap for execution. There is also a need to establish an economic intelligence and monitoring unit to monitor progress, for which the University is well positioned to help on both fronts.