Productivity and economic growth

Economic prosperity

• Gross Domestic Product (GDP) is an internationally recognised measure of relative economic prosperity and growth.
• In 2021, Herefordshire’s Gross Domestic Product (GDP) at current prices was £4,729 million.
• Adjusting for inflation (chained volume measure), this represented an increase of 8.69% from the previous year as the economy recovered from the COVID-19 pandemic.
• In real terms, in 2020 Herefordshire’s economy shrank to it’s smallest level since 2013 as a result of the pandemic. While it yet to recover fully, in 2021 it was larger than it was in 2017.
• In 2021 per capita GDP at current prices in Herefordshire was £25,214 compared to £32,763 in England and £26,134 in the West Midlands: 23% lower than England and 4% lower than the West Midlands.
• Looking at the change over time in real terms, i.e. adjusting for inflation (chained volume measures in 2019 value), per capita GDP in Herefordshire has consistently lagged behind that of both England and the West Midlands region and the gap is currently wider than it was in 1998 (see chart).

Source: Office for National Statistics

The value of Herefordshire's economy

• In the mid 2000s, Herefordshire’s Gross Value Added (GVA) across all industrial sectors together declined relative to England and the West Midlands region. Thereafter it increased fairly consistently in line with the national trend until 2016 when it dipped again. Although it increased again subsequently, increases were lower than nationally and regionally.  In 2020 the economy was seriously impacted by the pandemic and GVA contracted to less than the level seen in 2014.
• In 2021 (the latest year available) Herefordshire’s total GVA at current prices was £4.141 million.
• Adjusting to remove the effects of inflation (i.e. using the chained volume measure), as a result of the pandemic GVA shrank by 11% in 2020 compared to the previous year. This followed an 8% increase in real terms between 2015 and 2019 and mirrored the national trend (8% increase in real terms 2015-2019 then a 10% fall 2019-2020). In 2021, again reflecting the national trend, Herefordshire’s GVA increased by 8.5% in real terms.

Source: Office for National Statistics

Labour productivity

The level of labour productivity is determined by how efficiently and effectively labour is utilized in an economy. Comparing labour productivity (measured as Gross Value Added (GVA) per hour worked [1]) provides an indication of the relative competitiveness of a local economy.

The level of labour productivity is one of the key determinants of wages and poor labour productivity can act as a barrier to social mobility.

• In 2021, Herefordshire GVA per hour worked (smoothed) was £27.5: significantly lower than England (£38.9) and the West Midlands (£33.4).
• Using the GVA per hour worked measure, in 2021 Herefordshire one of the lowest levels labour productivity of any International Territorial Level (ITL) 3 area of the UK (ONS), ranking 176th out of 181.  The reasons for this are complex but are likely related to Herefordshire’s rurality, the composition of its economy, and the associated over-representation of low-skill occupations.

Source: Office for National Statistics

The relative contribution of industrial sectors to the economy

The relative contribution of different industrial sectors to the value of goods and services produced (GVA) in Herefordshire is significantly different to nationally and regionally, partly reflecting the rurality of the county.  Manufacturing, real estate activities and agriculture make up a much greater proportion of GVA, while sectors such as financial and insurance activities, information and communication, and professional, scientific and technical activities are all under-represented.

Source: Office for National Statistics

[1] GVA(I) (Income) per head can be a useful way of comparing regions of different size, comparisons can be affected by commuting flows into or out of the region

[2] Following the UK's withdrawal from the EU on 31 December 2020, International Territorial Levels (ITLs) , were introduced as a replacement to the Eurostat geographical classification, the Nomenclature des Unités Territoriales Statistiques (NUTS) and adopt a convention used by the Organisation for Economic Co-operation and Development (OECD) member countries. These ITLs therefore align with international standards, enabling comparability internationally. – ONS.