North East average property prices increase the most in the UK and Tees Valley & Durham defined as a less developed region by the EU

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Growth in the North East was 1.3% in the year to June 2019 according to estimates from ESCoE; similar to the previous quarter’s growth of 1.4%. This ranked the North East ninth out of the twelve UK ‘regions’. At 2.3% London had the best performance with Northern Ireland at 1% the worst. The North West was the most improved region with growth accelerating from 1.0% to 1.6%. The national growth rate for the same period was 1.5%. With the UK economy contracting by 0.2% in the quarter, most regional economies have shrunk with the North East too close to call.

Unemployment in the North East fell by 1,000 to 68,000 between April and June, a drop of 0.1% to 5.3%. This was highest unemployment rate in the country. The South West had the lowest rate at 2.7% with the UK rate at 3.9%. The South West also had the highest employment rate at 80.5% which compared with 70.8% in the North East. UK employment was estimated at 76.1%, the joint highest since comparative records began in 1971.

In June, average earnings in the North East fell from £560 to £537 per week, the lowest in the UK. London had the highest average earnings of £831. In the UK average earnings grew by 3.7% or by 1.8% after inflation.

North East average property prices increased the most in the UK during the month, a 1.7% uplift to £130,342 took the annual growth rate to 1.8%. In comparison UK prices grew by 0.7% to £230,292 during June, which left the annual growth rate unchanged at 0.9%.

On employment, the 800 British Steel jobs on Teesside could be safeguarded after Atear Holdings, which owns nearly 50% of Erdemir, Turkey’s biggest steel producer, said it was in advanced talks with the Official Receiver. British Steel was put into compulsory liquidation in May. Atear Holdings is the investment vehicle of the Turkish military pension fund.

It was a month of mixed messages from the Government on regional transport. In July, Boris Johnson used his first major policy speech in Manchester to promise a high speed rail link between the city and Leeds. High speed rail is expected to arrive in Leeds and the rest of northern England by 2033. This tied in with Northern Powerhouse Rail’s plan to link Leeds to Newcastle via an HS2 junction and upgrades to the East Coast Main Line. But now the government has launched a review of the 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 1 of the development between London and Birmingham is due to open at the end of 2026. 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.

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 the Tees Valley & Durham, as well as Lincolnshire and South Yorkshire. 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 75-100 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. They are East Anglia, East Wales, Greater Manchester, Leicestershire, Rutland & Northamptonshire, 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 to the devolved nations and mesh with other pots like the City Deals is yet to be determined.

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