The Great Divide: Why the North East's Economy Lags Behind

The North East is a region of enormous potential, with world-class industries, proud communities and real economic strengths. Yet it remains, by many measures, one of the least prosperous parts of the country, held back by a persistent gap in productivity and prosperity that has proved stubbornly hard to close.

A Stark Prosperity Gap.

The figures tell a sobering story. The North East has the lowest level of disposable household income of any region in the country, with the average person here having considerably less money to spend or save than the national average, and far less than in London.

This gap in everyday prosperity reflects deeper differences in the regional economy. While the region has genuine strengths, its overall economic output per person lags well behind the more prosperous parts of the country.

The Productivity Problem.

At the heart of the gap lies productivity, a measure of the economic value generated for each hour worked. Productivity in the North and the North East has long trailed the rest of England, and despite the efforts of recent years, the gap has proved difficult to close.

Indeed, by some measures the gap has widened rather than narrowed, as more prosperous regions have pulled further ahead. Closing this productivity gap is widely seen as the key to lifting the region's prosperity and living standards.

A Widening Regional Divide.

The North East's challenge is part of a wider story of regional inequality in the UK, in which the South of England, and London in particular, has pulled ahead of the rest. Forecasts suggest this divide is set to widen further, with growth concentrated in the South and in high-value sectors such as technology and professional services that cluster there.

Without action, the regions outside the South risk falling further behind, deepening the imbalance in the national economy. Rebalancing growth across the country is a long-standing ambition that has so far proved elusive.

The Roots of the Gap.

The reasons behind the North East's economic position are complex and deep-rooted. The decline of the heavy industries that once powered the region left a legacy that has never been fully overcome, while the region has a lower concentration of the high-value sectors that drive growth elsewhere.

Other factors compound the challenge, including the region's significant health inequalities, which contribute to high levels of economic inactivity, and gaps in skills and connectivity. These are not problems with quick or easy solutions, but the product of decades of economic change.

Signs of Strength.

Yet the picture is far from wholly bleak, and there are real signs of strength to build on. The region is home to world-leading industries, from advanced manufacturing and electric vehicles to one of the country's great clusters of renewable energy, and its business base has been growing even as other regions have seen decline.

The North East has genuine advantages, including its people, its universities, its natural assets and its emerging strengths in the industries of the future. The challenge is to build on these strengths to lift the wider economy.

The Health Connection.

One factor increasingly recognised as central to the region's economic challenge is health. The North East's significant health inequalities and high levels of long-term sickness keep many people out of work, reducing the size of the workforce and weighing on the economy.

Improving the region's health is therefore not only a matter of wellbeing but of economic necessity, with research suggesting that closing the health gap between the North and the rest of England could add billions to the economy each year. Health and prosperity, in this sense, are deeply intertwined.

The Devolution Opportunity.

There is, however, a sense of opportunity in the region, driven in part by the arrival of devolution and a regional mayor with powers and funding to shape the area's economic future. The hope is that decisions made closer to home, tailored to the region's particular strengths and needs, can do more to drive growth than those made in distant offices.

Backed by major investment in industries such as renewable energy and electric vehicles, there is optimism that the region can begin to close the gap. Realising that potential is the central economic challenge facing the region.

A Region of Potential.

The North East's economic position, lagging behind the more prosperous parts of the country on prosperity and productivity, reflects deep-rooted challenges that have proved hard to overcome. Yet the region also has genuine strengths and real reasons for optimism, from its world-class industries to the opportunities of devolution.

Closing the gap will require sustained effort across many fronts, from health and skills to investment and connectivity. But for a region of such potential, the prize, a more prosperous future for its people, is one well worth striving for.

Beyond the Averages.

When discussing the regional economy, it is important to look beyond the headline averages to the real variation that lies beneath them, both within the region and in the experiences of its people. The North East is not a single, uniform economy but a patchwork of different places, from prosperous suburbs and thriving business districts to communities that have borne the brunt of industrial decline, each with its own challenges and strengths.

The headline figures, which place the region at the bottom of various league tables, can obscure both the genuine prosperity that exists in parts of the region and the acute deprivation found in others. They can also obscure the lived reality behind the statistics, the difference that a good job, a decent wage or the lack of them makes to people's lives and to the communities they live in.

Understanding the regional economy therefore means looking not just at the aggregate figures but at how prosperity and opportunity are distributed across the region's different places and people. It also means recognising that the goal of economic growth is not an end in itself but a means to improving people's lives, through better jobs, higher incomes and greater opportunity.

A growing economy that leaves communities behind, or that fails to translate into better living standards for ordinary people, falls short of what economic success should mean. For the North East, the challenge is therefore not only to grow the economy in aggregate but to ensure that growth is felt across the region and in the everyday lives of its people, narrowing the divides within the region as well as the gap with the rest of the country.

Building a more prosperous North East means building one in which opportunity and prosperity reach all of its communities, not just some.

Share your thoughts.

The North East has the lowest disposable household income of any UK region, and the productivity gap with the South has been hard to close.

What do you think would do most to grow the North East's economy?