Gross domestic product

Summary 

Lancashire has a peripheral geographical location with respect to the European Union, potentially putting the area at an economic disadvantage. In terms of comparative rates of gross domestic product per head, from 1998 to 2004, the Lancashire-14 area's rate was between 94-95% of the EU average, but it suffered a noticeable downward trend over more recent years. The 2013 to 2015 results however have seen a small but welcome improvement in the Lancashire-14 area's position relative to the EU average, which was 83% in 2015.

Croatia became the 28th EU member on 1st July 2013, and all the yearly figures have been revised to include backdated results for all 28 EU members. 

Introduction

The Eurostat website aims to provide the European Union with a high quality statistical information service that allows comparisons to be made between countries and regions.  At the sub-national level there is a range of data sets that provide information for the Lancashire-14 area level. This short article highlights one of the available data sets, and looks at how the local Lancashire economy (in terms of Gross Domestic Product GDP) compares with other areas across the 28-member European Union. The information has been downloaded from the Eurostat website under the general and regional statistics theme.

GDP figures measure wealth by where it is generated and not by place of residence. This can lead to very high figures for some major European cities. For instance, the extremely high rate for Inner London is achieved by very substantial levels of inward commuting that give a GDP figure that could not possibly be achieved by the resident population alone. 

What is gross domestic product?

Gross domestic product (GDP) is a measure of the sum of economic activity within an area and is derived by adding the total value of an area's annual output of all goods and services produced less the value of goods and services used for intermediate consumption in their production.

Our website has a complementary research article that measures Lancashire's economic position in a UK context in terms of gross value added (GVA). In essence, the link between GVA and GDP can be defined as GVA plus taxes on products, less subsidies on products equals GDP.

The measurement of GDP does have its limitation, and it cannot for instance be used to measure quality of life, income inequalities, job security, the local infrastructure, public services, and the balance between paid work and leisure time.  It does not capture the benefits of the internet, increased life expectancy, the rise in obesity, changes in pollution, crime levels, and educational attainment etc. The GDP measure is unable to take into account so many of the demographic, social and environmental factors that fall within the scope of the Lancashire Insight website.     

Methodology

The GDP results used in this report are calculated by Eurostat, and based on data from the European System of Accounts ESA 1995, using a harmonized methodology.

The figures are per inhabitant and the values generated are expressed in the form of PPS (purchasing power standard). This is an artificial currency that reflects differences in national price levels that are not taken into account by exchange rates, and allows easier comparisons between countries. The figures are also expressed in the form of a rate that measures the results for each area relative to the EU average of 100. 

Geographic areas (NUTS classifications)

For statistical purposes, the 28-member European Union is geographically divided into different levels of statistical units – the so-called nomenclature of units for territorial statistics (NUTS). NUTS level one areas are regions such as the North West of England, whilst the Lancashire-14 area, which includes the 12-district councils along Blackburn with Darwen and Blackpool, is a NUTS level-2 region. Table 1 details selected figures at the NUTS-2 area level. In total, the 28-member EU contains 276 NUTS level-2 areas.

The European perspective

Table 1 displays the range of disparities in per capita GDP between a selection of European areas. Inner London-West, with its large international financial and commercial base, was by far the wealthiest region of Europe, with a GDP per capita figure equivalent to an enormous 580% of the EU average. This was by far in excess of any other EU NUTS level 2 areas. The results emphasise how an area of central London underpins the overall prosperity of the South East in England and even the UK as a whole.

It is important to note that in some regions, the GDP per capita figures are significantly influenced by commuter flows. Net commuter arrivals push up production to a level that could not be achieved by the resident active population on its own. Much of the value generated in Inner-London West, and the other most affluent regions, will be achieved by commuters travelling in from other localities.

The small but strategically located country of Luxembourg was in second place with a figure of 264, whilst Germany's second city Hamburg, a centre of banking, aerospace and other industries and having a major port, was third with 206. Table 1 lists the three NUTS-2 regions in Bulgaria, and the French overseas department of Mayotte, that had the lowest GDP figures per inhabitant in the EU.

Table 1 Gross domestic product per inhabitant for selected areas in the EU28, 2015

  Purchasing power standard (PPS) PPS, EU28=100 Rank out of 276 EU areas
Inner London-West (UK) 167,500 580 1
Luxembourg (Grand Duché) 76,200 264 2
Hamburg (DE) 59,500 206 3
Brussels-Rég (BE) 59,200 205 4
       
Lancashire-14 area 23,900 83 162
       
Yuzhen tsentralen (BG) 9,600 33 273
Severen tsentralen (BG) 9,500 33 273
Mayotte (FR) (French overseas department) 9,100 32 275
Severozapaden (BG) 8,400 29 276

Source Eurostat. The European Union code number for the Lancashire NUTS-2 area is UKD4. 

The UK NUTS-2 area with the second highest ranking was Inner London-East (175), followed by North Eastern Scotland (155) which is underpinned by north-sea oil and gas. Ranked just below was the Berkshire, Buckinghamshire and Oxfordshire sub-region (150). In comparison, the lowest UK NUTS-2 level rates were recorded in West Wales and the Valleys (68), and Tees Valley and Durham (74).

The Lancashire perspective 

The Lancashire-14 area recorded a gross domestic product (GDP) per capita (per resident) figure in 2015 equal to just 83% of the EU average. From 1998 to 2004, the Lancashire rate was between 94-95% of the EU average, but it then commenced a downward trend. Between 2006 and 2014, the Lancashire-14 area recorded rates of 90, 87, 84, 83, 83, 83, 78, 79 and 82 respectively. Therefore the area has maintained a rate in the narrow range from 82 to 84 inclusive for 6 of the last 10 years.

Within Northwest England, Lancashire has the second lowest rate. The other results were Merseyside (81), Greater Manchester (91), Cumbria (95) and Cheshire (127).

Regional Statistics Illustrated on the Eurostat Website  

The Eurostat website includes an interactive tool, 'Regional Statistics Illustrated', to visualise regional data. It has more than fifty constantly updated indicators at the European Union NUTS 2 level, and the Lancashire-14 area is one of the EU NUTS 2 areas. Through an interactive map, selected regions can be analysed and compared through different visualisation options.

Page updated May 2017