Productivity and Economic Growth: East Midlands

Steve Yemm Excerpts

Tuesday 17th March 2026 Westminster Hall

[Steve Yemm (Mansfield) (Lab)]

It is a pleasure to serve under your chairmanship, Dr Huq.

We must confront honestly the challenge of productivity in the east midlands remaining well below the UK average, currently at around 85% of it. Our constituents’ wages reflect that gap entirely, and if we are serious about raising living standards in the region, we have to close it. Investment drives productivity, enabling businesses to purchase better equipment, adopt new technologies and expand production. Such investment is not an abstract concept for my constituents and their wages.

Transport is a clear example. For too long, the east midlands has been under-invested in compared with other regions. Transport spending per head is shockingly now only around 54% of the UK average, which is the lowest of any region in the nation. That matters. Transport is not a luxury, but the infrastructure that allows firms to move goods, people to reach jobs and businesses to operate efficiently. Investment in skills is also critical, and my constituency is fortunate to have great educational institutions. On a broader structural point, public investment in the UK follows behind private investment, in great contrast to other European countries, particularly Germany.

We must recognise that economic growth should be spread across the country. Our national conversation too often focuses on a small number of already prosperous areas, such as Oxford, London and Cambridge. Those places are important, but economic growth has to go further. If we get this right, by combining public sector ambition with strategic private investment in infrastructure, transport and skills, places like my constituency of Mansfield, as well as other communities in north Nottinghamshire and right across the region, can play a central role in driving our future economic growth.

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[James Wild]

If hon. Members want to intervene, they are welcome to do so. As my right hon. Friend said, small and medium-sized businesses across the east midlands and beyond are having to cope with those costs, making it harder for them to invest and grow. The Government should listen to them.

Fundamentally, the problems that the east midlands and the UK face in relation to growth are around productivity. Investment has been too low. The UK has trailed the G7 average over the last 30 years, not just the last 14 years. Our infrastructure ambitions are often buried under red tape and excessive costs. Colleagues have spoken about energy costs. The hon. Member for Amber Valley (Linsey Farnsworth) spoke about Denby and the ceramics sector, and we hope that a solution is found for that workforce. But by linking us to the EU emissions trading scheme, the Government will be driving up costs for our industry.

The sparks of business dynamism have dimmed. Office for National Statistics data shows that firm entry and exit rates have reduced, particularly compared with the United States. That leads to a less competitive, dynamic and innovative economy. The east midlands has consistently been ranked among the least productive regions in the UK, but that is not inevitable and nor should it be, because if it stays like that, living standards will not increase.

[Steve Yemm]

Does the hon. Member recognise the fact that, in 2010, productivity in the east midlands was at 92% of the national average, but by the time the previous Government left office it was at 85%? Actually, the region went steadily backwards under the Conservative Government. Does he recognise that?

[James Wild]

I am looking at the House of Commons Library brief on the average productivity level. I cannot quite see the hon. Member’s point reflected in the chart that I am looking at, but I will look at it again afterwards, when there is more time, and see whether that is the reality.

As I said, it is not inevitable that the productivity level is lower, and it cannot be accepted if we want living standards to rise. The Productivity Institute did a study looking particularly at the region, which identified some of the challenges around skills shortages, infrastructure and under-investment in research and development. Many Members have spoken about transport spending in particular. The briefing note for the debate from East Midlands Councils talks about a period of 20 years in which there has been a lack of investment. I understand the importance of improving investment; if I was speaking in an east of England debate, I and other colleagues would be pointing out that we also do not get our fair share.

The east midlands is a region of makers, and manufacturing makes up a greater part of the economy there than in any part of the UK other than Wales. In terms of productivity, the 2023 output was 14.7% below the recent UK average. Boston Consulting Group has just published a report on productivity, which I commend to Members, that looks at the underlying factors for this national challenge. The sectors that historically have driven productivity—manufacturing, information and communication technology, and financial services—accounted for 84% of the positive increase in the pre-crisis decade, but since then, that figure has fallen to just 34%. While those are still key sectors that are important for the economy, they are performing less well than previously.

What do we do to change that? We need to look at policies that boost productivity, including focusing on incentivising R&D spending in advanced manufacturing, reducing the barriers to commercialising innovation, and building on the full expensing introduced by the last Conservative Government to boost investment. Sadly, in the Finance (No. 2) Bill, which I have just gone through in Committee, some of the incentives on capital allowances have been reduced. We also need to promote a culture of enterprise, not one that is focused on regulatory compliance. We certainly need cheaper energy in order to compete. We need to scrap some of the bureaucracy around planning, and boost competition and skills.

The east midlands is a region with assets, and it is a strong driver of national growth. It has the companies, the geographic position, the people, and the small and medium-sized businesses to make a change. By pursuing reforms—the hon. Member for Rushcliffe outlined a number of recommendations in the APPG report that seemed sensible and well worth considering—the east midlands can be helped to maximise its potential.