Gross domestic product across the European Union
Summary
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.
The Lancashire-14 NUTS 2 sub-region recorded a GDP per head of population figure in 2018 equal to just 83% of the former EU-28 average, or 84% of the new EU-27 average.
The Lancashire-14 NUTS 2 area has the second lowest figure out of the five NUTS 2 sub-regions in the North West of England. The percentages for the four other NUTS 2 sub-regions in the North West were Merseyside (79% or 80%), Greater Manchester (92% or 93%), Cumbria (88%) and Cheshire (128% of the EU-28 average or 129% of the new EU-27 average).
Croatia became the 28th EU member on 1st July 2013, while the UK ceased to be a member on 31st January 2020. All the yearly figures have been revised to include backdated results for all 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 27-member European Union is geographically divided into different levels of statistical units – the so-called nomenclature of units for territorial statistics (NUTS). Other states which belong to the Single Market, such as Norway, Iceland, Liechtenstein and Switzerland, or are candidates for membership of the EU, such as Turkey, Serbia, North Macedonia, Montenegro and Albania, and the UK itself, now in a transition period, are also covered by the NUTS classifications. For the purposes of this article however, we do not include NUTS 2 areas in non-EU states for comparison with those within the EU. NUTS 1 level areas are regions such as the North West of England. The Lancashire-14 area, which includes 12-district councils, along with the two unitary authorities of Blackburn with Darwen and Blackpool, is a NUTS 2 level sub-region. Table 1 details selected figures at the NUTS 2 sub-regional level. In total, the 28-member EU contained 281 NUTS 2 level areas. The term used by Eurostat for the new configuration of the EU is 'EU27 (from 2020)' because before Croatia became a member it was also EU27 from 2007 to 2013.
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 620% 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, although this would not appear to be the case in the Irish areas now occupying third and fourth highest places.
The small but strategically located country of Luxembourg was in second place with a figure of 261 (263), Southern Ireland, a physically large area covering Limerick, Clare, Waterford, Kerry and Cork, was third with 223 (225). Eastern and Midland was fourth. This is the part of Ireland that includes Dublin. Table 1 lists the French overseas department of Mayotte and the three NUTS 2 regions in Bulgaria that had the lowest GDP figures per inhabitant in the EU.
Table 1: Gross domestic product per inhabitant for selected areas in the EU28, 2018
| Area | Purchasing power standard (PPS) | PPS, EU28=100 | PPS, New EU27=100 | Rank out of 281 EU NUTS 2 areas |
|---|---|---|---|---|
| Inner London-West (UK) | 190,500 | 615 | 620 | 1 |
| Luxembourg (Grand Duché) | 80,900 | 261 | 263 | 2 |
| Southern (IE) | 69,200 | 223 | 225 | 3 |
| Eastern and Midland (IE) | 64,600 | 209 | 210 | 4 |
| European Union (28 members) | 31,000 | 100 | 101 | - |
| European Union (27 members) | 30,800 | 99 | 100 | - |
| Lancashire-14 area | 25,200 | 83 | 84 | =155 |
| Yuzhen tsentralen (BG) | 11,100 | 36 | 36 | 278 |
| Severen tsentralen (BG) | 10,700 | 35 | 35 | 279 |
| Severozapaden (BG) | 10,300 | 33 | 34 | 280 |
| Mayotte (FR) (French overseas department) | 9,200 | 30 | 30 | 281 |
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 (164% or 165%, rank 13), followed by the Berkshire, Buckinghamshire and Oxfordshire sub-region (144% or 145%, rank 24) and North East Scotland (136% or 138%, rank 30). The latter sub-region is underpinned by North Sea oil and gas. In comparison, the lowest UK NUTS 2 level rates were recorded in Southern Scotland (62% or 63%, rank 235) and West Wales and The Valleys (66% or 67% of the EU28 or EU27 averages and ranked 223rd).
The Lancashire perspective
The Lancashire-14 NUTS 2 sub-region recorded a GDP per head of population figure in 2018 equal to just 83% or 84% of the EU28 or new EU27 averages. This figure changes very little from year to year, being somewhere in the 83% to 88% range for most years except 2007, when the sub-region exceeded 90% of the new EU27 average.
Within the North West region of England, the Lancashire-14 NUTS 2 area has the second lowest figure out of the five NUTS 2 sub-regions. The percentages for the four other NUTS 2 sub-regions in the North West were Merseyside (79% or 80%), Greater Manchester (92% or 93%), Cumbria (88%) and Cheshire (128% of the EU-28 average or 129% of the new EU-27 average).
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. This GDP purchasing power standard is one of the indicators, and is the source for the figures relating to the EU28 area used in this article.
Page updated June 2020