Why Derry is the UK's new productivity capital . . .

Derry City & Strabane district council area had the UK's highest growth in real output per hour (OPH) between 2011 and 2021, according to PwC
Gary McDonald Business Editor

GROWTH in productivity has accelerated faster in Northern Ireland than any other region in the UK in the last decade.

And the Derry & Strabane council area has had by far the highest growth in real output per hour (OPH) in that time, rising by 65.9 per cent - the most of any single local authority in the UK.

To put that in context, that is well over double the figure for Belfast (24.5 per cent), while the nearest OPH region to Derry was Wolverhampton at 37.4 per cent followed by Lancaster and Wyre at 35 per cent. Best OPH in London was in Croydon at 22.6 per cent.

An important factor in Derry’s rising productivity is the presence of a City Deal, a bespoke package of funding and decision-making powers agreed between it and central government, aimed at helping to create new jobs, harness additional investment and accelerate economic growth.

The figures are contained in PwC’s latest Industrial Manufacturing and Services Productivity Tracker, which analyses productivity progress across the UK, with a focus on the key sectors that contribute to overall growth including manufacturing, construction, and services.

The tracker shows Northern Ireland has experienced the highest productivity growth rate in the UK, with overall output per hour growing by 13.5 per cent between 2011 and 2021.

Yet the region’s overall productivity levels remain the lowest in the UK - around 17 per cent below the national average.

The research highlights that Northern Ireland’s high productivity growth rates can be attributed in part to the region receiving some of the largest amounts of investment as a share of gross value added in 2020.

And PwC predicts that if Northern Ireland continues to prioritise investment and is successful in translating this funding into improved efficiency, it could see further significant boosts to long-term productivity rates.

Caitroina McCusker, PwC regional market leader in Northern Ireland, said: “Whilst any growth in productivity is to be welcomed, we still have the lowest rate of any UK region, due in part to having fewer jobs in high-productivity sectors such as financial services.

“But even outside of this, Northern Ireland has a significant productivity gap in both the production sector - primarily manufacturing - and the services sector.

“It is important to recognise that the 2021 data is likely to be affected by the pandemic, so it is too soon to draw clear policy conclusions.

“But we do know that one of the most effective ways to accelerate future productivity growth is through investment in a broad range of skills, and in particular to target funding towards skills that will be of increasing importance in the years to come.

“Getting this right could have huge economic benefits for the region. If Northern Ireland productivity was to catch up to the UK-wide sectoral medians, it could add £7 billion to the economy here.”