The State of Britain

Staff Writer

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Airlines, rail, film, airports, ships, legal firms, energy supply and banking – no sector seems off limits to state intervention

Reading Time: 5 minutes

Few would argue that where there is market failure then an intervention by the state can be justified, however, many would argue that the interventions of the 1970s were largely horror shows which dragged down the state itself, everything else lies in the middle.

First Carillion and Thomas Cook were batted away, then even British Steel (for now at least) did not receive largesse from the state, but since then a number of industries have seen interventions.

Early in the month ministers intervened in the airline sector, confirming that Flybe will receive state support because of its regional connectivity role. The rescue deal details are unclear, but appear to offer deferral on the firm’s Air Passenger Duty (APD) and a short-term loan. Connect Airways – the consortium that includes Virgin Atlantic, Cyrus Capital and Stobart Group – which owns Flybe, will also inject another £30m into the business.

On rail, the government’s nationalisation of Northern Rail has thrown the South Western Railway and Transpennine franchises into sharper focus. The service offered by Northern Rail appeared beyond the pale, but interventionists beware, more than a year after Transport for Wales took over the Welsh rail franchise, overcrowding and poor punctuality continue, with the firm admitting improvements have been slower than they would have liked. Transport for Wales is a not-for-profit company owned by the Welsh Government, which is no doubt glad the contract is managed at ‘arms length’ by its appointed board.

Still with Wales, but now on airports, a Welsh Government spokesman has said state owned Cardiff Airport adds c£250m GVA to the Welsh economy and sustains around 2,400 aviation related jobs.

Last year a new tax payer loan was announced bringing the total amount of cash the airport can borrow from the Welsh Government to £59.4m. Most of the original loan of £38.2 has already been drawn down according to officials, which suggests the new £21.2m blurs the line between investment and working capital. 

Its latest accounts show the airport made a pre-tax loss of £18.5m in 2018/19 and barely recorded a positive EBITDA figure. Welsh ministers paid another £52m in 2013 to buy the airport. At c£80m of public money already deployed to keep the airport operating, and with a further £21m now at risk, the economic case looks increasingly thin.

Also on airports, but this time in Scotland, additional loans of £33m to keep Prestwick Airport afloat are now worthless the Auditor General for Scotland has said. Last month Holyrood Transport Secretary, Michael Matheson, said he had accepted a recommendation from the airport’s operators to appoint a preferred bidder but was not able yet to disclose the identity of the purchaser involved.

From ships, to fabrication, to steel, Scottish taxpayers have had to recently write off nearly £140m in loans and guarantees largely to private companies according to Auditor General Caroline Gardner. They include a £45m loan to the Ferguson shipyard on the Clyde, a £21m guarantee repayment fee from Liberty Steel and a taxpayer loan of £37m to the BiFab fabrication company, which is now valued at £2m.

On banking, the Scottish government has committed £2bn of taxpayers’ money to fund the Scottish National Investment Bank over the next decade after MSPs passed the necessary legislation. Whether there is sufficient market failure to warrant state intervention in business finance on this scale remains a moot point.

In the semiconductor trade, Diodes Incorporated, which took over Texas Instrument’s Greenock site last year, is set to receive a £14m taxpayer inducement from Scottish Enterprise. The funds form part of a £47m investment in upgrading the site and training the 300-strong workforce. The company has also received funding from Inverclyde Council to assist with the development of the site.

In the film business, the Tynwald’s enquiry into the island’s foray into the industry has found the Isle of Man government gambled £60m of taxpayers’ money via the island’s Media Development Fund between 2007 and 2016; £32m has so far been returned from the investments.

On the legal sector, a law company set up by Northamptonshire, Central Bedfordshire and Cambridgeshire county councils has recorded a £1.2m loss. The firm, LGSS Law, is owned by the three councils and offers public sector legal services. It is understood that sizeable overdrafts offered by Northamptonshire and Cambridgeshire County Councils have been largely drawn down

A new energy supplier for London, backed by City Hall, has been launched. London Power is not a London Assembly owned business, however, although the exact details of the deal between the Mayor and Octopus Energy are not known.

Highlighting the problems which can occur when the state gets involved in energy businesses, Bristol City Council owned Bristol Energy lost c£10m last year. Bristol Energy was set up in 2016 to provide ethically sourced, low-cost power and return a profit for Bristol taxpayers; instead the venture has so far soaked up £37m of public funds. Nottingham council owned Robin Hood Energy has likewise required taxpayer bailouts.

Interventions’ with public money are a risky business.

The awfulness of the pre-1997 ‘golden age’ of British Rail has been all too quickly forgotten but the state must retain the right to intervene where the imperfect system which replaced BR fails.  On the other hand, whilst connectivity (Flybe) and inducements to win internationally mobile projects (Diodes Incorporated) might on the face of it warrant state intervention, forays into film, airports, ships, fabrication yards and the steel industry begin to ring alarm bells.

And then there was HS2.

National stats

UK GDP increased by 0.1% in the three months to November although there was a contraction of 0.3% in the month itself. Over the quarter, construction performed well and was up by 1.1% but production fell by 0.6%, with manufacturing down by 0.8%; services grew by 0.1%. Annual growth was 1.1%.

GDP rose by 0.1% in both the euro area and the EU28 during the fourth quarter of 2019, according to Eurostat. Annually GDP rose by 1% in the euro area and by 1.4% in the EU28.

Key European economies remain sluggish; over the quarter Germany has grown by 0.1% but France contracted by 0.1%, with Italy shrinking by 0.3%. Annually Germany grew by 0.5%, France by 0.8% but Italy was at a standstill.

The UK labour market was largely unchanged, with the level of employment increasing by 359,000 to a record high of 32.9m and the level of unemployment decreasing by 64,000 to 1.31m or 3.8%. Average earnings grew by 3.2% in the year to November or by 1.6% after inflation.

The euro area unemployment rate was 7.4% in December 2019, with the EU28 rate at 6.2%. The lowest unemployment rate in December 2019 was 2% in the Czech Republic and the highest was 16.6% in Greece.

The UK inflation rate was 1.4% in December 2019, down from 1.5% in November. Key downward contributions came from accommodation services and clothing with the biggest risers housing, water, electricity, gas and other fuels.

Euro area annual inflation was 1.3% in December, up from 1% in November. European Union annual inflation was 1.6% in December 2019, up from 1.3% in November. A year earlier, the Euro rate was 1.5%.

Public sector borrowing in December was £4.8bn, £200m less than in December 2018.

Debt at the end of December 2019 was £1,819bn, 80.8% of GDP, a decrease of 0.9% on December 2018.

The Channel Islands’ credit rating improves, Gibraltar passes the EU Withdrawal Bill and Flybe’s rescue welcomed on the Isle of Man

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Last month in the UK, the ONS published its 2018 full year estimate of economic activity by UK country, region and local area using gross domestic product. UK GDP per head was £31,976. In terms of extremes, GDP per head was £395,309 in Camden and the City of London and £15,034 in Ards and North Down in Northern Ireland. In comparison, Jersey GDP per head is £43,000, Guernsey £53,000, Isle of Man £57,000 and Gibraltar £70,000.

Channel Islands

Jersey’s Retail Prices Index (RPI), which measures inflation on the island, increased by 2.5% during the 12 months to December 2019; the lowest rate since June 2017 and down on the 2.7% in the previous quarter. Key drivers were tobacco, up 6%, plus alcoholic drinks and leisure services increased by 4.2%. Travel fares fell by 3.5% and household goods by 1.1%.

Inflation in Guernsey is measured by the Retail Price Index (RPIX), which excludes mortgage repayments. The island’s inflation rate was 2.4% to December 2019, up by 0.4% on the previous quarter. A 9.3% fall in travel fares did not offset a 5% increase in the cost of fuel or a 4.9% increase in the cost of alcohol, plus a 3.4% rise in tobacco prices amongst others.

New figures show Guernsey’s population reached 62,792 at the end of March 2019, the increase of 459 people was the biggest in 8 years. The most recent electronic census showed the employment rate had hardly moved with a decrease of 0.03% at the end of September 2019. Women were recorded as earning £30,578 on average, compared to £37,124 for men.

The Channel Islands’ credit rating has improved from negative to stable following Boris Johnson’s emphatic election victory. Credit rating agency Standard and Poor’s improved its outlook for Jersey and Guernsey, citing greater stability in UK politics and clarity over Brexit.

On transport, the UK government’s recue of Flybe avoided unwelcome disruption to the Island’s connectivity although Flybe did confirm Guernsey will be losing its air link to Heathrow from April. Last year, Guernsey paid Flybe a subsidy of £28 per passenger to keep the route running from March to October.

Also, Channel Islands-based airline Blue Islands has cancelled its routes from Guernsey to London Southend and Liverpool which began in May. Blue Islands blamed the deregulation of Guernsey’s airspace which means airlines do not need an air transport licence to fly to and from the island.

Guernsey’s new open skies policy is now similar to that in Jersey, where the number of passengers travelling through Jersey Airport reached 1.7m in 2019, the most since 1995. Numbers have increased by c275,000 in six years. Interisland services between Jersey, Guernsey and Alderney also saw a 17% rise in passenger numbers in 2019, the extra 15,000 passengers took the total to 105,328.

Gibraltar

Uniquely Gibraltar was the only British Overseas Territory in the European Union, consequently The Rock’s government passed the European Union Withdrawal Bill for Gibraltar, after the UK bill was approved by a large majority by Boris Johnson’s new government.

The law provides the mechanism to implement in Gibraltar the withdrawal agreement reached by the UK and the EU and covers the implementation period, citizens’ rights, and the retention and adaptation of EU law.

Following an initial delay caused by the formation of the new Spanish government, meetings in Madrid took place between the governments of Gibraltar, the UK and Spain to discuss the implementation of the Memorandums of Understanding (MoUs) which deal with the withdrawal.

The MoUs will apply throughout the Brexit implementation period from the start of February to the end of December, and that during this period, EU law will continue to apply to Gibraltar.

Gibraltar’s Legislative Reform Programme contained in the new Financial Services Act has come into force. The joint initiative between the Government and the Financial Services Regulator includes changes to enforcement, the engagement of inspectors, and restrictions on publication.

The new Act also gives the Minister for Commerce greater powers over the Financial Services Commission executive, including the power to remove its CEO, and sees the creation of an independent Decision Making Committee for disputes. It also aligns Gibraltar with UK regulators.

The reform follow a lawsuit against the FSC, it’s former CEO, and Director of Legal, Enforcement & Policy in 2018, relating to comments made in a press release issued on the Commission’s website, the day after Enterprise Insurance went into provisional liquidation.

IOM

Citing connectivity as the key reason why the UK government has kept Flybe airborne, nowhere is this more keenly felt than on the IOM, where the airline has a contract to transfer NHS patients from the island to medical facilities in Liverpool when specialist treatment is needed.

Last autumn Flybe announced plans to fly between the Island and London Southend for the first time in 2020. The airline also confirmed plans to end its service to London Stansted, less than a year since it was launched. In September the company announced it would shut down its Isle of Man base by this summer.

On development, work on a 55,000 sqm temporary silt lagoon to hold c44,000 tonnes of material from Peel Marina, including cadmium and lead, has started. The c£1m project will be undertaken in two phases.

The government has announced a plan to produce 75% of the island’s electricity from renewable sources by 2035 with most power likely to come from on and offshore wind turbines, although options for tidal and solar power energy generation will also be explored.

The plan includes a ban on all peat cutting, repairing up to 1,000 acres of peatland and the planting of an 85,000-tree woodland. At least £10m will be earmarked for the first phase in the 2020-21 budget with an estimated £25m of investment by the government each year matched by funding from the private sector. The Isle of Man’s should achieve net zero carbon emissions by 2050.

With the UK’s interventions in airlines and railways topical, the Public Accounts Committee’s enquiry into the Isle of Man’s taxpayers’ foray into the film industry rumbles on. The Isle of Man government put £60m into the film industry via the island’s Media Development Fund between 2007 and 2016; £32m has so far been returned from the investments.  This month treasury minister Alfred Cannan has rebutted accusations that the Manx government made mistakes when investing, stating that there was adequate due diligence.

The South Yorkshire devolution deal agreed, Northern Rail nationalised and Sirius Minerals salvaged

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In the ONS’s estimate of regional public spending and regional tax revenues in 2019, Y&H had a deficit of £11.3bn, a lower shortfall than the £11.9bn recorded in 2018. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the Y&H’s deficit was £2,063, lower than the £2,188 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in Y&H was £67.2bn or £12,278 per head, an increase on the 2018 figure of £65.9bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

Y&H collected £55.18bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in Y&H increased by 9,000 to 117,000 between September and November 2019; the increase of 0.3% took the overall rate to 4.3%, the joint second highest in the UK. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%.

The South West had the highest employment rate at 79.8% which compared with 73.4% in Y&H. UK employment was estimated at 76.3%.

Y&H average property prices fell the most in the UK during November 2019, the 1.0% drop to £165,642 reduced annual growth to 2.6%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

Four years after it was proposed, Barnsley, Doncaster, Rotherham and Sheffield councils along with Sheffield City Region, have agreed to move forward with a South Yorkshire devolution deal. The Sheffield City Region mayor’s remit will cover transport, strategic planning and skills, plus £900m over 30 years. Barnsley and Doncaster had favoured an all Yorkshire deal but this was vetoed by the government.

Anglo American has agreed to buy North Yorkshire based Sirius Minerals, owner of potentially the world’s largest mine for polyhalite, a naturally occurring fertiliser which is used in agriculture. The c£405m deal could safeguard thousands of jobs after the future of the mine was threatened after Sirius abandoned a $500m fundraising.

On transport, the Office of Rail and Road (ORR) is investigating Network Rail over its poor service on routes used by commuter favourites Northern and TransPennine Express. Network Rail owns and operates rail infrastructure in England, Wales and Scotland.

The ORR said the proportion of scheduled train stops made on time in the last 12 months up to 4 January by Northern was 55% and 41% by TransPennine Express. This compares to the national average of 65%.

Early in January, Transport Secretary, Grant Shapps, announced he was evaluating a proposal from Northern Rail for options for continuing its franchise after the minister said the firm had the finances to continue only for a number of months. Then he surprisingly followed through and nationalised the firm, which consequently threw the Transpennine franchise into sharper focus.

On HS2, the Department for Transport and HS2 Ltd did not allow for all uncertainties when estimating initial costs the National Audit Office (NAO) has said. In 2015, HS2 was due to cost £56bn but a leaked government report suggested the total could reach £106bn. At this cost the decision whether to proceed or not will be taken at Prime Ministerial level next month.

Administrators Deloitte have said 61 jobs will be lost in Scunthorpe, after they could not find a buyer for iron and steel castings producer the Bondshold Group. The firm was established in County Durham in 1868 and only two years ago was one of the UK’s fastest-growing for international sales.

WM sees the biggest increase in state spending in the UK, the region’s house prices rise the fastest in England and the UK’s largest ‘regeneration project’ approved

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In the ONS’s estimate of regional public spending and regional tax revenues in 2019, the WM had a deficit of £14.9bn, a larger shortfall than the £12.9bn recorded in 2018. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the WM’s deficit was £2,526, higher than the £2,209 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; all the other regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in the WM was £73.8bn or £12,503 per head, the increase on the 2018 figure of £69.4bn was the largest in the UK. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

The WM collected £58.8bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in the WM increased by 11,000 to 128,000 between September and November 2019; the increase of 0.3% took the overall rate to 4.3%, the joint second highest in the UK. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%.

The South West had the highest employment rate at 79.8% which compared with 75.4% in the WM. UK employment was estimated at 76.3%.

WM average property prices increased the most in England during November 2019, the 1.7% uplift to £204,238, increased annual growth to 4.0%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

On transport, the Office of Rail and Road (ORR) is investigating Network Rail over its poor service on routes used by commuter favourite West Midlands Railways. Network Rail owns and operates rail infrastructure in England, Wales and Scotland. The ORR said the proportion of scheduled train stops made on time in the last 12 months up to 4 January was 57%, this compares to the national average of 65%.

On HS2, the Department for Transport and HS2 Ltd did not allow for all uncertainties when estimating initial costs the National Audit Office (NAO) has said. In 2015, HS2 was due to cost £56bn but a leaked government report suggests the total could reach £106bn. At this cost the decision whether to proceed or not will be taken at Prime Ministerial level next month.

Work to extend the West Midlands tram network from Dudley to Wednesbury, incorporating 17 stops, has started. The Midland Metro, which currently connects Birmingham and Wolverhampton, is expected to carry passengers to Dudley and Brierley Hill by 2023.

The first phase of the project is to construct a £4.3m wall at Castle Hill. The tram extension in Birmingham opened from Grand Central station to the city’s library in December.

Plans for the UK’s biggest ‘regeneration project’ have been approved. The size of Birmingham’s Alexander Stadium for the 2022 Commonwealth Games will quadruple. Permanent capacity will increase to 18,000, with temporary seating taking it up to a limit of 40,000 spectators.

Birmingham was named as the host city for the games in December 2017, and it will be the UK’s costliest sporting event since London 2012. The 11-day games are budgeted at £778m, with £184m paid by Birmingham City Council and partners.

On infrastructure, funding for the Hereford bypass and southern link road has been withdrawn by the Marches LEP.  

The route of the £150m Hereford bypass and southern link road was approved in 2018, but a change in political control at the council led to possible alternatives being considered including building new bridges and a light railway on the Great Western Way.

As well as withdrawing the £27m the LEP is also seeking to claw back £3.8m already spent on the project.

The EE one of three UK regions to run a budget surplus and tensions between economic development and planning in evidence

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In the ONS’s estimate of regional public spending and regional tax revenues in 2019, the EE had a surplus of £4.1bn, a larger surplus than the £2.8bn recorded in 2018. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the EE’s surplus was £661, higher than the £459 recorded in 2018. London had the largest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall at £4,978.

The EE was one of three areas of the UK to run surpluses, along with London and the SE of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; all the other regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in the EE was £73bn or £11,772 per head, an increase on the 2018 figure of £71bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

The EE collected £77.1bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes, an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in the EE fell slightly by 2,000 to 106,000 between September and November 2019; the decrease of 0.1% took the overall rate to 3.3%. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%.

The South West continued to have the highest employment rate at 79.8% which compared with 78.5% in the EE. The UK employment rate was 76.3%.

EE average property prices fell by 0.7% during November 2019, the drop to £291,281, meant that annually prices also fell by 0.7%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

Away from the stats, the accepted tensions between a council’s economic development department and its planning arm were in evidence in the region this month.

Firstly, planning officers at Uttlesford District Council recommended proposals to increase the passenger cap at Stansted Airport to 43m pa. Plans for a new £150m arrivals terminal – part of a £600m plan to increase capacity and facilities – were put on hold last year.

The deal included up to £19.2m on community projects including sound insulation and homeowner relocation, as well as more than £15m for transport projects including work on Junction 8 on the M11. But the council’s special planning committee rejected the scheme.

Then in Suffok, a Scottish Power renewables project to build two wind farms, a cable route through Thorpeness, as well as three substations in Friston, was vetoed by councillors who cited concerns about damage to the Suffolk coast. A final recommendation to the secretary of state is not expected until early 2021.

In Essex, the proposed £50m development of Seaway Car Park in Southend was delayed after councillors deferred their decision on planning permission. The development would see a cinema, restaurants and a new car park built on the site.

More positively in Norfolk, Great Yarmouth Borough council has £2.5m in place for a market redevelopment project aimed at replacing the existing facilities on the Market Place with a timber-framed covered hall and new stalls. The council hopes the balance of the £3.6m investment could come from the government’s new Future High Streets Fund.

Also in Norfolk, Norwich-based gift and toy chain Hawkin’s Bazaar has entered administration, putting c180 jobs at risk. Administrators will continue to trade from the firm’s 19 shops in the hope that a buyer can be found.

Regional interventions were in the spotlight this month after it emerged that a law company set up by Central Bedfordshire and Cambridgeshire county councils and one other local authority has recorded a £1.2m loss. The firm, LGSS Law, is owned by the three councils and offers public sector legal services. It is understood that an overdraft offered by Cambridgeshire County Council has been largely drawn down.

London continues to bankroll the UK, house prices still stalled and London Power launched

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In the ONS’s estimate of regional public spending and regional tax revenues in 2019, London had a surplus of £38.8bn, the biggest in the UK and a larger surplus than the £33bn recorded in 2018.

On a per person basis, London’s surplus was £4,369, higher than the £3,752 recorded in 2018. This was the largest per person surplus in the UK whereas Northern Ireland had the biggest shortfall at £4,978.

The capital was one of three areas of the UK to run surpluses, along with the SE and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in London was £123bn or £13,826 per head, an increase on the 2018 figure of £121.8bn. This was the biggest spend in the UK; Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

London collected £162bn in taxes in 2019, the largest contribution to the Exchequer, this compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes, an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in London fell by 11,000 to 214,000 between September and November 2019; the drop of 0.3% took the overall rate to 4.3%, still the joint second highest in the UK. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%.

The South West continued to have the highest employment rate at 79.8% which compared with 75.6% in London. The UK employment rate was 76.3%.

London average property prices fell by 0.5% during November 2019, the drop to £475,458, reduced annual growth to 0.2%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

Away from the stats, staff costs at City Hall under Boris Johnson’s final budget for 2016-17 were £36m, while the proposed budget for 2020-21 under Sadiq Khan proposes £65.5m. Headcount has risen during the four-year period from 897 in 2016 to a proposed 1,300 by 2021.

A spokesperson for the mayor said extra responsibilities which have been devolved to the mayor will mean more costs. Opponents of Mr Khan suggest bureaucratic inefficiencies.

Mr Khan has had to deal with Brexit uncertainty but Mr Johnson had to guide the capital’s economy post-financial crash. It’s still too early to gauge which mayor will have the best record on London’s economy, but increasing the number of bureaucrats and economic growth tend not to go hand in hand.

A new energy supplier for London, backed by City Hall, has been launched. London Power is not a London Assembly owned business although the exact details of the deal between the Mayor and Octopus Energy are not known.

Highlighting the problems which can occur when the state gets involved in energy businesses, Bristol City Council owned Bristol Energy lost c£10m last year. Bristol Energy was set up in 2016 to provide ethically sourced, low-cost power and return a profit for Bristol taxpayers; instead the venture has so far soaked up £37m of public funds. Nottingham council owned Robin Hood Energy has likewise required taxpayer bailouts.

The objectives of London Power are to keep energy bills low rather than make a profit. If any profit is made, City Hall will invest this into community projects. 

On jobs, Facebook will create 1,000 new roles in London over the course of 2020.  Most jobs will be technology-focused, with roles in software engineering, product design and data science. It will take Facebook’s UK workforce to c4,000.

The firm has decided to invest more in policing online content so most of the new roles will be in Facebook’s ‘community integrity’ team, which designs tools to monitor posts on Facebook’s platforms including Messenger, Instagram and WhatsApp.

The gap between the NE’s tax take and public spending increases, the unemployment rate still a UK outlier, and trains dominate economic developments

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In the ONS’s estimate of regional public spending and regional tax revenues in 2019, the NE had a deficit of £10.7bn, a larger shortfall than the £10.2bn recorded in 2018. The North West, at £20.1bn, had the largest deficit in the UK which compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the NE’s deficit was £4,027, larger than the £3,852 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall per person at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in the NE was £36bn or £13,560 per head, an increase on the 2018 figure of £34.8bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

The NE collected £25.2bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in the NE increased by 5,000 to 80,000 between September and November 2019; the jump of 0.4% took the overall rate to 6.2%. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%. The NE rate of 6.2% is a UK outlier with the next nearest at 4.3% in London, the West Midlands and Yorkshire and the Humber.

The South West had the highest employment rate at 79.8% which compared with 71.4% in the NE. UK employment was estimated at 76.3%.

NE average property prices recovered after a big fall last month. Prices increased by 0.7% during November 2019 to £130,712, which took annual growth to 1.4%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

On transport, the Office of Rail and Road (ORR) is investigating Network Rail over its poor service on routes used by commuter favourites Northern and TransPennine Express. Network Rail owns and operates rail infrastructure in England, Wales and Scotland.

The ORR said the proportion of scheduled train stops made on time in the last 12 months up to 4 January by Northern was 55% and 41% by TransPennine Express. This compares to the national average of 65%.

Early in January, Transport Secretary, Grant Shapps, announced he was evaluating a proposal from Northern Rail for options for continuing its franchise after the minister said the firm had the finances to continue only for a number of months. Then he surprisingly followed through and nationalised the firm, which consequently threw the Transpennine franchise into sharper focus.

On HS2, the Department for Transport and HS2 Ltd did not allow for all uncertainties when estimating initial costs the National Audit Office (NAO) has said. In 2015, HS2 was due to cost £56bn but a leaked government report suggested the total could reach £106bn. At this cost the decision whether to proceed or not will likely be taken at Prime Ministerial level next month.

Still on trains, Darlington council wants to highlight the town’s rail heritage ahead of Stockton and Darlington Railway’s bicentennial celebrations in 2025. The railway was the world’s first passenger line to use steam locomotives when it opened in 1825. Funding of £20m from the Tees Valley Combined Authority to create a world-class visitor attraction has been secured.

Further north along the line in Newton Aycliffe less positive train news, up to 250 jobs could be lost at the Hitachi plant which makes intercity trains for Avanti West Coast. Opened in 2015, the facility employs c900 people and was awarded a £350m contract to assemble 23 trains last month but earlier lost out on a contract for the Tyne and Wear Metro.

Administrators Deloitte have said 53 jobs will be lost in Crook, County Durham, after they could not find a buyer for iron and steel castings producer the Bondshold Group. The firm was established in County Durham in 1868 and only two years ago was one of the UK’s fastest-growing for international sales.

The closure of a Nolato Jaycare factory in Portsmouth with the loss of 115 jobs is likely to benefit the firm’s other plant in Newcastle. The medical packaging firm said the relocation would cost c£2.8m.

Tesco Bank is to create 20 jobs in Newcastle as part of an investment in online banking. This adds to 20 roles created when the bank announced Newcastle as the home for a technology hub in November. The company is recruiting test, software and systems engineers, systems architects, solution designers, project managers, and IT and business analysts.

NI improves its fiscal deficit and boasts the lowest jobless rate in the UK but the economy stalls

Reading Time: 3 minutes

In the ONS’s estimate of regional public spending and regional tax revenues in 2019, NI had a deficit of £9.4bn, a smaller shortfall than the £9.7bn recorded in 2018. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the NI deficit was £4,978, lower than the £5,169 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in NI was £27.9bn or £14,821 per head, an increase on the 2018 figure of £27.4bn. London had the biggest spend of £123.9bn or £13,826 per head whereas at £27.9bn Northern Ireland had the lowest. NI will receive a funding boost following the restoration of devolved government. Total government spending was £853bn or £12,835 per head.

NI collected £18.5bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution which was from the Province. Overall the state raised £811.3bn or £12,213 per head in taxes, an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in NI fell by 5,000 to 21,000 between September and November 2019; the substantial drop of 0.6% took the overall rate to 2.3%, the lowest in the UK. The national rate is 3.8%.

The South West had the highest employment rate at 79.8% which compared with 72.6% in NI. UK employment was estimated at 76.3%.

NI average property prices increased by 2.3% during Q3 2019, the uplift to £139.951, increased annual growth to 4.0%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

Figures from the official Northern Ireland Statistics and Research Agency showed output fell 0.1% over the quarter to September which meant the economy had expanded by 0.3% in the 12 months to September 2019.  The comparative UK figures for the same periods were 0.4% and 1.1%.

Over the quarter, construction was up by 0.2% but production fell by 0.4%. Overall the private sector was 0.3% smaller than earlier in the year.

The NI figure was poorer than the more volatile nowcast estimate from ESCoE in November. Part of the gap can be explained by slightly different methods of calculation but it is clear that the economic picture is deteriorating.

On development, listed Belfast-based IT firm Kainos has been valued at more than £1bn. Kainos specialises in digitalising its clients’ operations. Kainos employs 1,550 people across 12 offices and is planning to develop a new headquarters in Belfast over the next two years.

Planning has been approved for a new 276-bed hotel in the Titanic Quarter in Belfast. The hotel will be the third to open recently. A Premier Inn was part built as part of the first phase of the development and the boutique Titanic Hotel opened in 2017. The Titanic centre generates c£160m in economic benefit, in 2017 it had c770,000 visitors.

Coleraine-based Armstrong Medical is investing £8m in an expansion project which includes new machinery and a new 26,000 sq ft warehouse. The firm specialises in respiratory products for use in healthcare and exports to 60 countries. Invest NI has offered £800,000 to support the creation of 24 new jobs.

In Carrickfergus, Sensata Technologies is to close its factory with the loss of 270 jobs. The firm makes tyre pressure sensors and will wind down on a phased basis before closing in early 2021. The firm will retain its Antrim factory although some operational support roles there will also be cut.

East Belfast based Crane Stockham Valve, part of Connecticut-based Crane Co, is closing its factory next year, 63 jobs will be lost. The firm makes valves and pipe fittings. The NI operation has a total headcount of 89 of which some will move to a smaller office and others will be redeployed to other factories.

The NW records the largest fiscal deficit in the UK, the region’s property prices jump and mini nuclear power stations in Cumbria

Reading Time: 3 minutes

In the ONS’s estimate of regional public spending and regional tax revenues in 2019, the NW had a deficit of £20.1bn, a lower shortfall than the £21.7bn recorded in 2018 but still the largest deficit in the UK. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, the NW’s deficit was £2,762, lower than the £2,988 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in the NW was £94.4bn or £13,560 per head, an increase on the 2018 figure of £92.7bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

The NW collected £74.1bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in the NW increased by 6,000 to 154,000 between September and November 2019; the increase of 0.1% took the overall rate to 4.2%. Northern Ireland had the lowest rate at 2.3%, the North East the highest at 6.2% with the UK rate at 3.8%.

The South West had the highest employment rate at 79.8% which compared with 76.2% in the NW. UK employment was estimated at 76.3%.

NW average property prices jumped by 1.1% during November 2019 to £169,362, which took annual growth to 3.8%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

On development, Rolls-Royce plans to install and operate factory-built mini nuclear power stations by 2029. The power plants can be mass manufactured and delivered in sections by road.

The firm is confident that mini reactors can compete on price with renewables such as offshore wind and that between 10 and 15 of the stations in the UK could be viable. Former nuclear sites in Cumbria would be suited to build the small modular reactors (SMRs) which are about 1.5 acres in size.

A £13m museum highlighting Blackpool’s role in British entertainment will be based within the Sands Venue Resort Hotel – the town’s first five-star hotel – on the Golden Mile. The regeneration project hopes to attract c300,000 visitors annually and create the equivalent of 40 full-time jobs. Funding has come from the Northern Cultural Regeneration Fund (£4m), from the Coastal Communities Fund (£1.75m) and the Lancashire Growth Deal (£1.5m) amongst others.

On transport, the Office of Rail and Road (ORR) is investigating Network Rail over its poor service on routes used by commuter favourites Northern and TransPennine Express. Network Rail owns and operates rail infrastructure in England, Wales and Scotland.

The ORR said the proportion of scheduled train stops made on time in the last 12 months up to 4 January by Northern was 55% and 41% by TransPennine Express. This compares to the national average of 65%.

Early in January, Transport Secretary, Grant Shapps, announced he was evaluating a proposal from Northern Rail for options for continuing its franchise after the minister said the firm had the finances to continue only for a number of months. Then he surprisingly followed through and nationalised the firm, which consequently threw the Transpennine franchise into sharper focus.

On HS2, the Department for Transport and HS2 Ltd did not allow for all uncertainties when estimating initial costs the National Audit Office (NAO) has said. In 2015, HS2 was due to cost £56bn but a leaked government report suggested the total could reach £106bn. At this cost the decision whether to proceed or not will be taken at Prime Ministerial level next month.

On Merseyside, Jaguar Land Rover is cutting 500 jobs at its Halewood plant when it moves from three shifts to two a day. The factory makes the Evoque and Discovery Sport models and currently employs c4,000.

Administrators Deloitte have said 55 jobs will be lost in Alston, Cumbria, after they could not find a buyer for iron and steel castings producer the Bondshold Group. And in Nelson, Lancashire, packaging firm Mondi has announced plans to close its factory in the second half of 2020; 41 staff are affected. The plant creates bags, pouches and laminates for the consumer industry.

Scotland’s fiscal deficit eases, no clear way to measure the value of City Deals and well-being vs GDP

Reading Time: 4 minutes

In the ONS’s estimate of regional public spending and regional tax revenues in 2019, Scotland had a deficit of £14.8bn, a smaller shortfall than the £16bn recorded in 2018. On a geographic rather than a population basis the deficit fell from £15.1bn in 2018 to £13.5bn in 2019. This compared with London, which had the highest surplus of £38.9bn.

On a per person basis, Scotland’s deficit was £2,713, lower than the £2,964 recorded in 2018. London had the highest surplus of £4,369 per person whereas Northern Ireland had the biggest shortfall at £4,978.

The only areas of the UK to run surpluses were London, the SE of England and the East of England. The West Midlands and the North East were the two regions in the UK to increase their net fiscal deficits over the year; the other seven regions reduced their shortfalls.

At a national level, the UK had a deficit of £623 per person which splits into deficits of £68, £2,713, £4,289 and £4,978 for England, Scotland, Wales and Northern Ireland respectively.

Public spending in Scotland was £78.8bn or £14,497 per head, an increase on the 2018 figure of £77.2bn. London had the biggest spend of £123.9bn or £13,826 per head whereas Northern Ireland had the lowest at £27.9bn or £14,821 per head. Total government spending was £853bn or £12,835 per head.

Scotland collected £65.4bn in taxes in 2019. London contributed the most to the Exchequer at £161.9bn, compared with the lowest contribution of £18.5bn which was from Northern Ireland. Overall the state raised £811.3bn or £12,213 per head in taxes, an uplift of £34.1bn or £461 per head compared with 2018.

More data from the ONS showed unemployment in Scotland fell by 7,000 to 105,000 between September and November 2019; the decrease of 0.3% took the overall rate to 3.8%. Northern Ireland had the lowest rate at 2.3% with the UK rate at 3.8%.

The South West had the highest employment rate at 79.8% which compared with 74.3% in Scotland. UK employment was estimated at 76.3%.

Scotland’s average property prices increased by 0.4% during November 2019, the uplift to £154,798, increased annual growth to 3.5%. In comparison, UK prices increased by 0.4% to £235,298 an annual growth rate of 2.2%.

Away from the stats, a report by Audit Scotland says there is no clear way to measure the success of Scotland’s £5.2bn city deals. City region deals are collaborations between the UK and Scottish governments plus local councils and are designed to promote economic growth and create jobs. Deals have been agreed in Glasgow, Aberdeen, Inverness and Highland, and Edinburgh and south east Scotland plus another eight deals are in development.

The watchdog says the Scottish government has not outlined how it will measure the programme’s value for money and it found that it was not clear why some projects were approved for funding over others.

One way value for taxpayers’ money can be measured is via improvements in GDP, however, quality of life should be as important as economic growth, according to Scotland’s First Minister. She argued in a speech in Edinburgh that creating an economy where collective wellbeing is as fundamental as GDP.

Scotland has fallen five places from 16th to joint 21st in the latest Scottish Trends Index Of Social and Economic Wellbeing. The index uses OECD data from 2006 to 2018 based on a range of measures.

Scotland and Wales were the joint biggest fallers over the 12-year period whilst the biggest risers were Estonia and Poland. The report said the fall in Scotland was mainly due to declining GDP and education scores.  

On interventions, the Scottish National Investment Bank should be operational by the end of 2020. The state bank is designed to make long-term investments in Scottish firms over a period of 10 to 15 years.

The Scottish government committed £2bn of taxpayers’ money to fund the bank over the next decade after MSPs passed the necessary legislation. Whether there is sufficient market failure to warrant state intervention in business finance on this scale remains a moot point.

Also on interventions, semiconductor manufacturer Diodes Incorporated, which took over Texas Instrument’s Greenock site last year, is set to receive a £14m taxpayer inducement from Scottish Enterprise. The funds form part of a £47m investment in upgrading the site and training the 300-strong workforce. The company has also received funding from Inverclyde Council to assist with the development of the site.

Robert Burns is worth £203m pa to the Scottish economy according to a Glasgow University study. Burns-related tourism brings in c£155m, largely benefiting Ayrshire and Arran where the poet was born and lived most of his life.

The V&A Dundee had a £75m impact on the Scottish economy last year, according to research by the museum’s consultants. Of this, museum visitors alone were found to have been worth £21m to the Dundee economy.

On jobs, a £2m Business Growth Fund investment in the Livingston-based Window Supply Company, a window manufacturer and supplier, should see its workforce grow from 40 to 125 over the next three years.

TSB and Tesco Bank will each create 100 new technology jobs in Edinburgh. Tesco is recruiting software and systems engineers, systems architects, solution designers, project managers, and IT and business analysts. TSB has announced a new IT centre in Edinburgh as part of a £120m three-year plan announced in the wake of the bank’s 2018 IT failure.

Administrators say c100 jobs have been saved following the purchase of car sales company Leven Car Company in Edinburgh. Twenty three staff at the Borders branches of the firm were made redundant last week.

But in Dumfries, 44 staff have been made redundant by administrators after armoured vehicle firm Penman Engineering folded; 17 workers have been retained to assist the administration process. The company dates back to 1859 and specialises in armoured military and security vehicles.