What do new data reveal about the UK’s regional economic performance?

London was growing more quickly than elsewhere in the UK in the months before the pandemic. Yet by the middle of last year, the capital’s activity in hotels, restaurants and cafes remained far further below its pre-Covid-19 level than in most other parts of the country.

In the month in which the UK government launched its ‘Levelling Up’ White Paper, differences in regional performance as we emerge from the pandemic are of particular interest. The White Paper presented a detailed analysis of regional economies, setting out some of the key challenges for different parts of the country, but what of more recent economic performance?

Last week, the Office for National Statistics (ONS) published its latest Quarterly country and regional GDP, covering economic activity across the UK up to the end of the second quarter (Q2) of 2021 (April to June).

These data cover the nine regions of England (North East, North West, Yorkshire and The Humber, East Midlands, West Midlands, East of England, London, South East and South West) plus Wales, with data for Scotland and Northern Ireland provided by the devolved administrations. While there are differences in the methods used by the ONS and the devolved administrations to produce these data, they are broadly comparable as trackers of economic activity.

In this update, we look at these new ONS data in more detail, and highlight some key emerging insights.

What do these data show?

Figure 1 shows the performance of these different economies over the previous two years (2019 Q2 to 2021 Q2). A few things stand out.

First, London was growing more quickly over the immediate pre-pandemic period than other parts of the UK.
Second, the nature of the economic downturn, stemming from a synchronised closure of large parts of the economy in March 2020, resulted in economic activity declining rapidly at the same time and by a substantial magnitude.
Third, there are differences in the depth of the downturn across different parts of the UK. This can be seen more clearly in Figure 2 where we look at the change in economic output in each region between Q1 and Q2 2020.

Figure 1: Headline GDP in the regions and nations of the UK, 2019 Q2 to 2021 Q2

Source: Office for National Statistics (ONS)

Figure 2: Change in economic activity in the regions and nations of the UK Q2 2020

Source: ONS

One of the features of the pandemic was that the public health measures that were introduced affected some industries more than others.

We explore the change in economic activity across sectors of the economy in each region and nation in Figure 3.

Figure 3: Q2 2021 levels of activity relative to 2019, by region and industry (100 = back at 2019 levels of activity)

Source: ONS

Picking out a few of these data points:

Activity in Accommodation and Food Services in London was still around 60% of its 2019 level in Q2 2021. At the same time, in most other parts of the country, activity was closer to 80% of its 2019 level.

Public administration and defence, and Wholesale and retail: repair of motor vehicles and motorcycles in all parts of the country have recovered to their 2019 level – the only sectors of the economy where this had happened by Q2 2021.

What next?

The next update of these data is due in May 2022.

But later this week, the ONS will publish a set of early estimates (‘nowcasts’) for 2021 Q4 using a statistical model developed through the Economic Statistics Centre of Excellence (ESCoE). This will provide estimates for the regions and nations of the UK that match up to the time period over which equivalent UK data is currently available.

This release will be published here.