Most of Britain is poorer than the European average, and other things we learned from this map

Mmmmm. Statistic-y. Image: Eurostat.

So there’s a map of Europe doing the rounds on the Twitters this morning, one which never ceases to fascinate me. There’s an extract of it above; the whole thing is shown below. It's from Eurostat, the European statistical agency, and it shows, basically, which bits of Europe are the richest.

The map breaks most of the continent into regions known as “NUTS 2 statistical units” (or, “Nomenclature of Territorial Units for Statistics 2 statistical units” for long), and colour codes them by a measure of economic activity, using data for 2014. In this case it’s GDP per capita (how much wealth is produced), expressed in purchasing power standards, or PPS (basically, how much that wealth will buy you in that bit of the world).

All of which is a long way of saying that the blue-ish bits of the map are generating enough money to be richer than the EU-28 average, while the red-ish bits of the map are poorer than it.

Some caveats, before we look at the map. Firstly, in some ways, NUTS 2 regions are bloody stupid. London is split into five of the things, while the whole of the Republic of Ireland gets just two.

This isn’t as silly as it first sounds – the former has nearly twice the population of the latter – but it’s probably a bit misleading to imagine that the British capital can be broken down into five discrete economic units, or that the Republic of Ireland contains just two. So we should be wary about how literally we take this colour-scheme.

The other thing to remember is: GDP per capita doesn’t tell us everything. Transfer payments exist. Rich regions can and do support poorer ones – through the EU structural funds (we’re going to miss those), and through things like welfare systems within countries. What’s more, a region composed entirely of loaded retired people would, I suspect, look pretty bad on this map, while actually having fairly good living standards.

But that’s enough caveats spoiling our fun, what can we learn from the map?

Let’s start with the “well, duh” stuff. Firstly, there’s a definite east/west divide: the ex-communist countries of eastern Europe are by-and-large poorer than the capitalist ones of the west.

There’s possibly a north/south divide too, but this is less pronounced than you’d expect: parts of northern Spain and Italy are doing alright, while parts of the Nordic region, and – especially – large chunks of the British Isles, are not.

Some of this can be explained by the second predictable element: cities are, mostly, richer. In those southern countries, it’s the regions around Madrid, Barcelona and Rome that are doing best. In France it’s Paris, in Finland it’s Helsinki, in east Germany it’s Berlin. That blue island in the red sea of Romania is Bucharest.

So far, so predictable. But other things are more surprising.

For one thing, there’s a sort of arc of prosperity reading from Italy northwards. At first this looks like the blue banana megalopolis we’ve banged on about before – except it isn’t, because the reason it’s called a banana is it curves past the low countries into Britain. Which this doesn’t.

In fact, Britain doesn’t come out that well on this map. South central England, East Anglia, Cheshire and the north East of Scotland (Aberdeen, basically) are the only bits of the UK above the EU average. Even Essex and Kent – places not short of rich London commuters – come in more at than 10 per cent poorer.

The UK is not alone in division. Italy’s north-south divide is as well known as ours (only upside down), but we talk rather less about the fact France and Spain also have radically different economies depending on which bits of them you go to.

Oh, and it’s very sweet the way they’ve boxed out Liechtenstein just so they can tell us they don’t have any data.

As I said at the top, we should be wary of over-interpreting this, for all sorts of reasons. But is clear is that, for all the government’s talk of booming Britain and sclerotic Europe, the UK is substantially poorer than large chunks of the continent: western Germany, northern Italy, Scandinavia and the low countries.

But it’s fine because Brexit means Brexit and we’re apparently going to make a success of it.

So anyway, to sum up, I think you ought to know I’m feeling very depressed.

You can see the whole map, with commentary from Eurostat, here.

Jonn Elledge is the editor of CityMetric. He is on Twitter, far too much, as @jonnelledge.

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“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.

You can read the Centre for Cities’ full report here.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

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