East Midland’s property prices increase the most in England but economic growth slows and a new ‘Minister for the Midlands’

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Growth in the East Midlands was 1.2% in the year to June 2019 according to estimates from ESCoE. The drop from the previous quarter’s growth of 1.8% ranked the East Midlands third worst overall (out of twelve UK ‘regions’) and suggests the region’s economy is contracting. At 2.3%, London had the best performance with Northern Ireland at 1% the worst. The national growth rate for the same period was 1.5%. With the UK economy contracting by 0.2% in the quarter, falling growth in the East Midlands is similar to other regional economies which have also shrunk.

Unemployment in the East Midlands increased by 7,000 to 106,000 between April and June, an uplift of 0.3% to 4.3%. The South West had the lowest rate at 2.7%, the North East had the highest at 5.3% with the UK rate at 3.9%. The South West also had the highest employment rate at 80.5% which compared with 76.9% in the East Midlands. UK employment was estimated at 76.1%, the joint highest since comparative records began in 1971.

In June, the East Midlands was one of only three regions to see a drop in average earnings; from £574 to £564 per week. London had the highest average earnings of £831; the North East had the lowest at £537. In the UK average earnings grew by 3.7% or by 1.8% after inflation.

The East Midland’s average property prices increased during the month, the 1.6% uplift to £195,344 took the annual growth rate to 3.3%; the best in England. In comparison UK prices grew by 0.7% to £230,292 during June, which left the annual growth rate unchanged at 0.9%.

The government has launched a review of the proposed high speed rail link (HS2) with a decision promised by the end of the year. With £7.4bn already spent, Transport Secretary, Grant Shapps, has refused to rule out scrapping it entirely. Phase 2 (Birmingham to York via the East Midlands) is due to open at the end of 2033. Once the new Phase 1 line from Birmingham is completed, the line will head northeast and form the proposed East Midlands Hub located at Toton, which will serve Derby, Leicester and Nottingham. The line then connects into the northbound East Coast Mainline south of York. A parallel spur to the northbound HS2 track will use the Midland Main Line before rejoining the HS2 track east of Grimethorpe. Chesterfield and Sheffield will be served by HS2 classic compatible trains on this spur. In July, the current chairman of the project warned that the total cost could rise by £30bn to £86bn, putting the projects value for money into question.

There may be less shale gas in the Bowland geological formation, which runs through large parts of the East Midlands, Lancashire, Yorkshire, and into North Wales, than previously thought. The University of Nottingham and the British Geological Survey (BGS) have developed a new method for analysing the gas content of shale, which queries a 1,300 trillion feet of gas estimate in a 2013, suggesting instead that there may only be 200 trillion feet; 5-7 years’ of gas at the current rate of consumption instead of 50 years. Experts at the BGS were cautious in their interpretation of the study, however, even though several of their own scientists were involved in the paper. Cuadrilla, also rejected the new paper and other academics suggested the only way to provide accurate estimates of how much gas is likely to be produced is to drill, hydraulically fracture and test many wells. Another energy firm, Ineos, has successfully appealed to the Planning Inspectorate to look for shale gas near Eckington, north of Chesterfield.

On regional transport, Abellio has taken over the running of the East Midlands railway after it was awarded an eight year franchise in May. The East Midlands line operates trains between Norwich, Nottingham and Liverpool. The Dutch state-owned firm already operates five other rail franchises and has promised £600m of investment, £400m of which will be spent on 33 five-carriage trains, which will include air conditioning, wi-fi and plug sockets for passengers. The former franchisee, Stagecoach, was disqualified from re-bidding after a row with the government over pension liabilities. Abellio, has promised to install an extra 80% of capacity on morning peak services into Nottingham, Lincoln and St Pancras.

A report by an All-Party Parliamentary Group (‘APPG’) of MPs which looks at Post-Brexit Funding for the nations and regions has found that the UK would receive additional EU funding in the 2021-27 spending round. Three additional sub-regions are likely to slip below the threshold of 75% EU average GDP per head that would qualify them for ‘less developed region’ status. Existing less developed regions like Cornwall and West Wales & the Valleys, will be joined by Lincolnshire, as well as South Yorkshire and Tees Valley & Durham. These areas would likely have received at least €500 per head in EU regional development funding over 2021-27 which adds up to an extra £950m. Additionally, the EU has proposed that ‘transition region’ status should be extended to cover all regions with a GDP per head between 75 and 100 per cent of the EU average, compared to 75-90 per cent at present.

Seven additional sub-regions are likely to slip below the threshold of 100% EU average GDP per head qualifying them for ‘transition region’ status. Leicestershire, Rutland & Northamptonshire fall within this category, as well as East Anglia, East Wales, Greater Manchester, Outer London South, North Yorkshire and South Western Scotland. It is not clear how much extra funding these areas would have received from the EU, or but €50 per head over the next EU spending round would equate to £560m.

The UK government has promised to replace EU funding to the regions with a new UK Shared Prosperity Fund. If the new sub regions are added, the APPG calculates this amounts to c£1.8bn pa, on top of the c£2.2bn pa already committed as part of Local Growth Fund. Integrating the Local Growth Fund into the UK Shared Prosperity Fund could be problematic. The Local Growth Fund allocates funding to LEPs via competitive bidding whereas the allocation of EU funds uses a fixed formula. How the Shared Prosperity Fund will be allocated and mesh with other pots like the City Deals is yet to be determined.

Newark MP, Robert Jenrick, is the new ‘Minister for the Midlands’. The Local Government Secretary says he will work to develop a refreshed Midlands Engine strategy. Jenrick’s job as Local Government Secretary makes him a Cabinet Minister, one rung up from Northern Powerhouse minister, Jake Berry, who is a Minster of State. To avoid the impression of favouritism, Berry is entitled to attend Cabinet.

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