The Northern Powerhouse initiative, which was initially the brainchild of former Chancellor George Osborne, is finally beginning to deliver economic results, with prominent cities like Manchester and Liverpool enjoying exponential growth and continuing to entice top talent from the capital.
While the North West is often considered to be the poster boy for the Northern Powerhouse project, however, it’s important that we don’t lose sight of less prosperous regions like the North East.
After all, economies of this type are reliant on high rates of home-ownership and strong construction output, and recent figures suggest that a great deal of work is to be done if the North East is to realise its potential.
We’ll explore this further below, while asking what the future holds for the North East in the near-term.
The State of Home-Ownership in the North East
When considering the rate of home-ownership, it’s important to note that this has been in decline over the last decade or more.
In fact, the rate of home-ownership in the UK was estimated at 72.5% back in 2008, but this has slumped to 63.4% in the 10 years since.
The rates in the North East have followed a similar path, with this region now boasting a home-ownership rate of 62% (which is slightly below the national average).
At the heart of this issue is a shortage of housing, as the construction industry lacks the productivity or skilled labour to meet the demand for property that exists in the UK.
This market imbalance has sent prices soaring at a disproportionate rate to earnings, preventing individuals from taking their first steps on the property ladder and hindering the growth of the local economy in the process.
What This Tells us About Construction Output in the North East and the Economy as a Whole
So while the emergence of bad credit has empowered some first-time buyers and contributed to an incremental increase in the rate of successful mortgage applications, this has not been enough to counter the demand and supply issues in the housing market.
This issue betrays the challenges facing the construction market in the UK and regions like the North East, with a chronic shortage of skilled labour making it impossible for the government to meet its annual building targets.
This is placing a strain on both the public and private sector, both in terms of labour market shortage and a fundamental lack of productivity. As a result, the GDP of economies like the North East are unable to realise their full potential, while the workforce is also suffering thanks to a lack of defined and relevant skills.
Even when construction output rose nationwide during the first quarter of 2018, the North East bucked this trend against the backdrop of ailing demand and significant gaps in the skilled workforce.
According to the CITB, the North East is required to recruit at least 840 skilled workers into this sector every single year, but it’s failing to achieve this aim on a regular basis and this remains a serious cause for concern among economists.
The Last Word
Ultimately, this is the type of issue that the Northern Powerhouse was built to overcome, as it serves to connect industrious regions and regenerate ailing economies.
Clearly the North East fits this description, with significant investment required to boost the level of housing in the region and retrain a struggling workforce.
Over time, this will deliver a much needed shot in the arm to the North East economy, while also laying the foundations for sustainable and long-term growth.