The Economics Story: … Structure of the Dorset economy

Fortnightly insight into the current state of the economy and how it relates to Dorset

by Nigel F Jump, Chief Economist of Strategic Economics Ltd (a Dorset Company)

and Visiting Professor in Economics at the Universities of Bath and Plymouth.

See: www.strategiceconomics.co.uk

The ONS has just released its latest annual regional data on income-based Gross Value Added (GVA). It shows that, in 2012, the SW economy produced £101.5 billion of total value, equivalent to £19,023 per head at a rate of 89.3% of the national average. The data reflects the subduing effects of the downturn and a widening of the inter-regional differentials.

At a local level, the area covered by the Dorset Local Enterprise Partnership (LEP) contributed 13% of the SW total GVA. In detail, Bournemouth and Poole produced £6.9bn of GVA in 2012 and the rest of Dorset £6.5bn. The former was 3.8% above the 2011 level whereas the latter was 1% lower. This reflects a general trend that urban areas did better than rural ones last year. 

In workplace terms, GVA per head in the two Dorset areas were £20,537 and £15,723 respectively, showing that the more urban areas are more productive than the rest of the County. It has to be remembered, however, that while this partly reflects different economic structures, it also indicates the impact of commuting in and out of Bournemouth and Poole from their hinterlands. Reflecting this, on a residence basis, the gap would not be so wide. 

The 2012 Bournemouth and Poole GVA per head figure is 96.4% of the national average. The Dorset figure is 73.8%. Overall, despite year-by-year differences, there has been little change in these comparative ratios over the last 16 years. Reflecting sector structural factors in each spatial area, it is very hard to shift relative economic performance because productivity and competitiveness gaps tend to persist.

In structural terms, the latest industry data is for 2011. The table below shows the local sector levels of GVA and the share of each industry’s contribution to those local totals. The significant differences between the two unitary authority areas and the rest of Dorset are the relative strength of financial services in the former and the relative importance of production and construction in the latter. Of course, the structural differences of our economy are more complex than this. The industrial, business and demographic conurbation spreads across administrative borders and the supply and demand chains form complicated networks that affect local agglomeration in a way that the basic numbers cannot reveal.

Dorset GVA by Industry (2011)

These GVA numbers can seem difficult to understand and interpret. They are important, however, because they form a key component of the local evidence base of Dorset’s absolute and relative economic performance. For the next twelve months, this new data will be the latest and best photograph on the structure of our economy that is available. Most of the time, the economics story is about the trends within or around these structures but it is also important to understand the ‘once-a-year’ revision to the structural foundation itself.

Professor Nigel Jump,