The nature of the UK economy has changed significantly in the last 20 years as different global forces and trends have steadily eroded some of our nation’s core competencies. As a result of this the economy has reacted by moving from manufacturing into the higher value added service sector, this has been followed by a change in the national skills profile.

The North East has struggled to match this rapid change and the manufacturing sector remains a large part of regional employment and GVA, when compared to the UK levels, whether this is a positive or negative issue is open to debate. The more worrying aspect of the trend is perhaps the North East’s under representation in the rapidly expanding service sector.

One area of concern in the region is the relatively high reliance on the public sector for employment. Whilst some worry that this is a result of an over active public sector, the evidence suggests that it is result on and underperforming private sector. It is estimated that in order to operate at the UK average output levels the region would require an additional 32,000 businesses, if this was achieved the reliance on the public sector would be greatly reduced and be closer to the national averages.

In the future, the region may benefit from a focussed approach when trying to generate growth. Recent initiatives have seen emphasis placed on certain sectors. The Regional Economic Strategy (RES) identifies 9 key sectors for the future; Chemicals & Pharmaceuticals, Automotive, Commercial Creative, Defence & Marine, Energy, Food & Drink, Health, Knowledge Intensive Business Services and Tourism & Hospitality. The aim is to provide specialist support in these potentially high growth areas.

Fact File

• Manufacturing employment is expected to fall below 140,000 by 2014
• Growth in business is expected to be good, around 22,000 by 2014, an annual growth rate of 0.9%. However, this is still below the UK average rate of 1.2%, the NE will continue to under perform in this sector and the gap will become wider.
• Another strong sector for growth will be Distribution & Transport with an additional 22,000 jobs expected to be generated by 2014.
• There will be small falls in the Primary & Utilities and Construction sectors, 3,000 and 2,000 respectively. 
• Overall employment in the North East is projected to increase by 31,000 by 2014.
• All major occupation categories are expected to experience some job losses due to structural change in the economy, the available labour force will grow but only at a rate of 0.2% p.a., well below the national average.