Transcript Add Title

Challenges of the ‘new normal’
economy
Neil Gibson, Director of Regional Services
Oxford Economics
[email protected]
15th February 2011
Prepared for Salford City Council
Contents
About us
Recovering into headwinds
Salford and Greater Manchester outlook
Implications for policy
2
About us
About us
 Founded in 1981 as a joint venture with
Oxford University, Oxford Economics has
since grown into the world’s foremost
independent provider of global economic
research and consulting.
 Oxford Economics is a global company with
offices all over the world, Europe, America,
and emerging markets in the East. Our
country coverage accounts for over 99% of
world business. Recent clients include
central banks, governments and multinational companies
 The Regional Team is based across
Belfast, Oxford and London, led by Neil
Gibson, and provides forecasts and
consultancy services. These services are
centred around n in-house suite of complex
economic models covering the whole of the
United Kingdom.
4
 Oxford provide forecasting services to the
Greater Manchester are via the Greater
Manchester Forecasting Model (GMFM)
 This model was developed 4 years ago to
assist in the pathfinder initiatives and has
been developed since
 The model provides forecasts at a Local
Authority level and for the wider region
 The model incorporates economic and
demographic variables, a housing and land
use model and basic environmental
forecasts
 It has been used in land use studies, policy
work, skills forecasting, transport studies
and as part of the evidence base for
reviews, policy workshops and
 The model has been developed with the
help of an engaged steering group and
continues to evolve to meet needs (the
deliver team remains identical to that at the
model's inception)
Recovering into headwinds
The macro context
Trade led recovery underway
GDP change year on year, World, 1995 - 2015
6
Forecast
5
4
% change year on year
19
95
3
2
1
20
15
20
13
20
11
20
09
20
07
20
05
20
03
20
01
19
99
-1
19
97
0
-2
-3
-4
-5
7000
Trade flows, World, 1990 - 2020
Forecast
World trade flows ($bn)
6000
5000
4000
3000
2000
1000
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
0
6
The world emerged
from recovery in Q4
2009 but modest
slow down projected
in 2011
No country has escaped – some still contracting
Annual GDP change (real), selected countries, 2008 - 2020
US
Japan
China
Eurozone
Germany
France
Italy
Ireland
Greece
Spain
UK
Brazil
OPEC
2008
0.0
-1.2
9.6
0.3
0.7
0.1
-1.3
-3.6
1.3
0.9
-0.1
5.2
5.9
2009
-2.6
-6.3
9.2
-4.0
-4.7
-2.5
-5.1
-7.6
-2.3
-3.7
-4.9
-0.7
3.2
Annual GDP % change
2010
2011
2.9
3.3
4.1
1.4
10.3
9.8
1.7
1.5
3.5
2.3
1.5
1.8
1.0
1.0
-0.8
-2.3
-4.1
-3.8
-0.2
0.6
1.4
1.9
7.6
4.6
3.9
4.9
Source: Oxford Economics
Note: Shading: Red indicates negative growth; blue indicates growth above 5%.
7
2012 - 2017
3.2
1.6
8.4
1.9
1.9
2.0
1.4
2.7
1.6
1.8
2.7
4.3
4.7
2017 - 2022
2.6
1.0
7.1
1.6
1.5
1.7
1.2
2.8
1.3
1.4
2.2
3.7
4.1
But debt still an issue
Gross government debt as a % of GDP, selected countries, 1990 - 2020
US
Japan
China
Germany
France
Italy
Greece
Spain
Ireland
UK
Brazil
Source: Oxford Economics
8
2007
62
163
11
64
70
114
103
44
25
44
46
2010
90
190
8
69
91
132
132
69
79
73
41
2017
108
212
6
64
93
122
148
85
110
74
34
Commodity prices continue to rise
World: Oil, food and metals prices
160
Forecast
140
120
100
World food prices
(2007=100)
What of post
2015, scare
resource a
critical
challenge
function
80
60
World base metal
(2007=100)
40
20
Oil price
(US$ pb)
0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013
Source : Oxford Economics
9
Corporate position strong (and leads optimism)
UK: Stockmarket
World: Purchasing managers' indices
Index level
70
Expansion
65
3600
Services
3200
60
2800
55
50
2400
45
2000
40
Manufacturing
FTSE All share
1600
35
Contraction
30
Jul-98
Jul-00
1200
Jul-02
Jul-04
Source : Oxford Economics/Haver Analytics
10
Jul-06
Jul-08
Jul-10
1994
1996
1998
Source: Haver Analytics
2000
2002
2004
2006
2008
2010
UK rebalancing underway, against ‘surprising’ recovery
-6
50
-8
40
-12
Debt
(RHS)
-14
1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
Source: Oxford Economics
30
0
-0.5
20
15
60
20
11
-4
20
09
70
20
07
-2
0.5
20
05
80
Forecast
1
20
03
90
0
-10
1.5
100
20
01
Forecast
19
99
Government budget
(LHS)
GDP change quarter on quarter, UK, 1995 - 2015
19
97
2
% of GDP
% change quarter on quarter
19
95
% of GDP
4
20
13
UK: Government balance and debt
-1
-1.5
20
10
-2
-2.5
Source: Oxford Economics
A surprise but not
expected to be sustained
11
The labour market looks extremely challenging
Total employment, UK, 1990 - 2020
8.5
Forecast
Forecast
Employment (millions)
33
31
29
8
7.5
7
6.5
25
6
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
27
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Employment (millions)
35
Public sector employment, UK, 1990 - 2020
Unemployment rate, UK, 1990 - 2020
Unemployment (millions)
3.5
Forecast
3
2.5
2
1.5
1
0.5
12
0
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
Source: Oxford Economics
And what
of welfare
reform?
Sectoral outlook becomes even more service orientated
Employment by sector, UK, 2010 - 2020
Agriculture
Extraction
Manufacturing
Utilities
Construction
Distribution & retail
Hotels & restaurants
Transport & communications
Financial services
Business services
Public admin.
Education
Health
Other personal services
Total
Source: Oxford Economics
Note: Red shading indicates a fall
13
2010 - 2020
000s
%
-94
-15.8
-14
-23.6
-521
-18.8
-17
-10.4
240
11.9
477
9.9
242
12.6
191
10.8
70
6.3
1722
30.8
-219
-14.2
-118
-4.5
71
1.8
329
17.8
2355
7.6
Salford and Greater Manchester outlook
What Salford does
Sectoral employment, Salford, 2010
Agriculture
Other personal
Utilities
services
Transport &
Extraction
communications
Financial services
Business services
Hotels & restaurants
Public admin &
defence
Manufacturing
Distribution & retail
Construction
Education
Source: Oxford Economics
15
Health
Steady progress in previous decade
Employment, Salford and Greater Manchester, 1991- 2020
145
Salford (LHS)
140
Greater Manchester (RHS)
Forecast
1450
1400
1350
130
1300
125
1250
120
1200
115
1150
110
1100
105
1050
100
1000
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
135
Source: Oxford Economics
16
1500
Employment (000s)
Employment (000s)
150
Public services a major factor in recent job growth
Employment change, Salford, 1998 - 2008
12,000
10,000
Employee job change, Salford, 1998 - 2008
8,000
6,000
Human health activities
Labour recruitment and provision of personnel
Legal, accounting, book-keeping and auditing activities
Insurance and pension funding, except compulsory social security
Canteens and Catering
Social work activities
Architectural and engineering activities
Monetary intermediation
Primary education
Real estate activities on a fee or contract basis
2,000
0
-2,000
-4,000
-6,000
-8,000
Source: Oxford Economics
17
Manufacturing
Distribution & retail
Public admin.
Agriculture
Extraction
Utilities
Other personal services
Education
Transport & communications
Hotels & restaurants
Construction
Financial services
Health
-10,000
Business services
Change
4,000
Source: ABI
3700
2630
2130
1970
1580
1570
1440
1350
1270
1200
Big employers – not the ‘economic drivers’
Sectoral employees, Salford, 2009
General cleaning of buildings
Hospital activities
Primary education
General public administration activities
Tertiary education
Temporary employment agency activities
Private security activities
Other social work activities
Retail sale (non-specialised)
Event catering activities
Number
7,150
5,270
4,260
3,520
3,210
3,190
3,190
2,940
2,940
2,590
LQ, Salford, 2009
Non-life insurance
General cleaning of buildings
Private security activities
Non-specialised wholesale trade
Event catering activities
Management of real estate on a fee or contract basis
Development of building projects
Fire service activities
Post-secondary non-tertiary education
Compulsory social security activities
18
LQ
8.2
4.2
4.2
3.4
3.0
2.3
2.3
2.1
2.0
1.9
Source: BRES (SIC 07)
Note: A location quotient (LQ) is a specialisation index that measures the performance
of an area against the whole of Great Britain. An LQ of greater than 1 means that the
area has a greater share of employment in that sector than the UK . Sectors with less
than 500 in Salford and 5000 in GB have been removed.
A Developed professional services base
Key Indicators, Greater Manchester, latest data
Bolton
Bury
Manchester
Oldham
Rochdale
Salford
Stockport
Tameside
Trafford
Wigan
Unemployment
rate (%)
4.2
3.3
4.9
4.6
5.0
4.6
3.0
4.1
3.0
4.1
House prices (£)
131,800
146,700
141,400
120,700
124,200
128,500
185,300
124,600
224,700
122,600
Emp. In prof.
services (%)
17.2
12.7
28.7
12.5
12.3
29.9
24.1
10.9
30.5
16.6
Sources: Nomis, DCLG, Oxford Economics, ASHE, APS
19
Emp. In public
services (%)
26.5
31.9
29.8
27.4
26.8
26.9
24.2
28.1
16.9
25.7
Median weekly
wage (£)
430
519
439
433
459
444
510
425
536
470
% self employed
9.5
13.1
10.9
13.2
12.4
11.1
12.0
11.0
12.7
11.9
% Managers and
professionals
13.7
17.9
13.6
14.8
13.0
14.3
19.2
11.8
20.1
12.0
Employment rates returning to 1990s levels
Resident employment rate, Salford and Greater Manchester, 1994 -2010
Resident employment rate (%)
72
70
68
Salford
66
Greater Manchester
64
62
20
10
20
08
20
06
20
04
20
02
20
00
19
98
19
96
19
94
60
Source: Oxford Economics
Note: The resident employment rate is calculated as Oxford Economics' resident
employment estimate as a % of working age population, scaled to the regional resident
employment rate. The APS resident employment rate trend is similar.
20
As unemployment climbs (though fell in 2010)
Employment, Salford, January 2000 – December 2010
9000
January 2010
Unemployment at
8190, 5.4%
8000
7000
Unemployment
6000
December 2010
Unemployment at
6880, 4.6%
5000
4000
3000
November 2004
Unemployment at
3150, 2.2%
2000
1000
Source: Nomis
21
Jan-10
Jan-09
Jan-08
Jan-07
Jan-06
Jan-05
Jan-04
Jan-03
Jan-02
Jan-01
Jan-00
0
Could we be looking at a lost generation?
Unemployment by age band, Salford, December 2010
1,600
December 2010
1,400
Unemployment
November 2004
1,200
1,000
800
600
400
200
Source: Nomis
Note: Diamonds indicates number of claimants in November 2004
22
Over 60
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
Under 19
0
Public sector ‘about turn’ will have major impact
Public services employment, Salford,
1991 - 2020
40
30
25
20
15
10
5
Trafford
Stockport
Wigan
Bolton
Rochdale
Salford
Oldham
Tameside
Manchester
0
Public services employment (000s)
UK average = 26.4%
38
36
34
32
30
28
26
24
22
20
Source: Oxford Economics
Public admin employment
1998-2008: 400
2010-2020: -1,100
Public services employment
1998-2008: 6400
2010-2020: -1,200
23
Forecast
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
35
Bury
% of employment in public services
Public services employment share, Greater
Manchester, 2010
Retail exposure not significant, but still a concern
20
UK average = 15.5%
15
10
5
Retail employment, Salford, 1991 - 2020
20
Retail employment (000s)
% of employment in retail
25
Retail employment share, Greater Manchester,
2010
Forecast
19.5
19
18.5
18
17.5
Source: Oxford Economics
24
17
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
Manchester
Salford
Rochdale
Stockport
Bury
Wigan
Bolton
Tameside
Trafford
Oldham
0
Acute local pressures (as remains the cases across the UK)
Unemployment rates, Salford wards, December 2010
Ward
Broughton
Langworthy
Little Hulton
Walkden North
Ordsall
Irlam
Walkden South
Swinton South
Claremont
Worsley and Boothstown
Unemployment rate
(%)
8.5
8.0
7.5
6.5
6.3
Percentage point rise
from trough
4.2
3.8
4.2
4.0
2.8
3.3
3.2
3.1
2.8
1.7
2.5
2.0
1.9
1.5
1.1
Source: Nomis
Salford unemployment
rate: 4.6% (Dec 10)
25
Reversal in population – will it continue?
Population, Salford, 1991 - 2020
270
Forecast
Population (000s)
260
250
240
230
Oxford Economics
220
Official estimates
210
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
20
23
20
25
20
27
20
29
200
Source: Oxford Economics
26
A stagnant labour market is a distinct possibility
Indicative scenario, Salford, 1991 - 2030
160
Total employment, 000s
150
140
130
120
110
100
Base
90
Lower scenario
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
20
21
20
23
20
25
20
27
20
29
80
Source: Oxford Economics
Note: This is based on Core Cities scenario work
27
But overall the forecast is strong
Financial and business services employment, Salford, 1991 - 2020
60
Forecast
Employment (000s)
50
40
Employment
return to 2008
peak: 2012
30
20
10
19
91
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
0
Source: Nomis
28
Return to total employment peak,
Greater Manchester areas
Bolton
Bury
Manchester
Oldham
Rochdale
Salford
Stockport
Tameside
Trafford
Wigan
Greater Manchester
Return to peak
Beyond 2025
2017
2013
Beyond 2025
2019
2013
2015
Beyond 2025
2016
2016
2014
Source: Oxford Economics
With professional services key to recovery
Sectoral employment, Salford, 2010 – 2030
Media city
classification
unclear
Agriculture
Extraction
Manufacturing
Utilities
Construction
Distribution & retail
Hotels & restaurants
Transport & communications
Financial services
Business services
Public admin & defence
Education
Health
Other personal services
Total
2010 - 2020
000s
%
-0.1
-15.2
0.0
-26.0
-1.8
-21.6
0.0
-1.9
2.1
24.8
1.5
8.4
1.1
16.4
0.3
5.0
1.3
22.6
12.9
41.2
-1.1
-16.8
-0.5
-4.8
0.4
2.8
0.5
9.5
16.7
13.5
Source: Oxford Economics
Note: Shading indicates the top 3 growth sectors in percentage terms
29
2010 - 2030
000s
%
-0.1
-30.8
0.0
-49.8
-3.3
-39.9
0.0
-13.5
3.2
37.5
1.4
7.9
1.3
19.5
-0.1
-1.2
2.1
37.3
18.8
59.9
-1.1
-16.9
-0.4
-3.2
1.7
11.2
0.6
11.9
24.3
19.6
Why such professional services optimism?
Top exporting sectors by value, UK, 2008
Banking and finance
Other business services
Motor vehicles
Auxiliary financial services
Oil and gas extraction
Coke ovens, refined petroleum & nuclear fuel
Pharmaceuticals
Aircraft and spacecraft
Medical and precision instruments
Water transport
Hotels, catering, pubs etc
Non-ferrous metals
Iron and steel
Organic chemicals
Office machinery & computers
Mechanical power equipment
Computer services
Recreational services
Special purpose machinery
Insurance and pension funds
Total
Total exports of
goods and
services (£m)
33060
27366
26106
21794
18920
18657
18112
14279
9965
9580
9142
8939
8821
8128
7860
7668
7495
7420
6681
6477
422905
Source: UK I-O tables, 2008
Note: Shading denotes private services sectors
30
% of total
demand for
products
25.1
22.9
26.7
68.8
26.2
22.0
47.4
43.1
33.0
55.5
7.7
48.2
41.3
40.2
26.8
43.3
9.5
9.9
52.4
11.5
12.9
Top sectors by graduate concentration,
UK, 2009
Higher education
R&D on natural sciences & enginring
Management consultancy activities
Secondary education
Computer programming and consultancy
Legal activities
Creative, arts and entertainment
Business and membership organisations
Architectural and engineering activites
Other membership organisations
Accounting and auditing activities
Primary education
Publishing of books and other publishing
Other education
Activities auxiliary to financial services
Other human health activities
Medical and dental practice acts
State admin and social / economic policy
Hospital activities
Social work without accommodation
Monetary intermediation
% grad
concentration
(UK)
65.8
62.4
60.2
57.8
56.2
55.7
52.8
51.2
49.5
45.2
41.3
40.7
40.1
36.9
36.5
36.5
36.4
36.2
33.6
29.8
28.5
Source: LFS
Note: Shading denotes private services sectors
Despite strong forecasts – unemployment to remain a concern
Unemployment, Salford, 1991 - 2020
14
Forecast
Unemployed (000s)
12
Unemployment
more than
doubled
between
November 2004
and August
2010
10
8
6
4
2
(from 3150 to
7330)
19
93
19
95
19
97
19
99
20
01
20
03
20
05
20
07
20
09
20
11
20
13
20
15
20
17
20
19
19
91
0
Source: Oxford Economics
31
Implications for policy
Global world presents real opportunity
World GDP and trade, 1995 - 2015
25
20
World GDP
Forecast
World trade
% change year on year
15
10
 UK inbound travel and domestic travel
spend is forecast to grow by £62 billion
over the next decade. If Salford could
attract 0.5% of this, it would generate
an additional £310 million, representing
7% of the economy.
5
0
-5
-10
-15
-20
Source: Oxford Economics
Travel spend (domestic and inbound), UK, 1990 - 2020
160
Tourism spend (£bn)
140
120
100
80
Forecast
 There are opportunities for expansion in
emerging sectors such as envirotech,
niche engineering, and outsourcing
from London (such as BBC relocating
as part of the Mediacity:UK project)
60
40
20
0
33
 World GDP is forecast to grow by £13.7
trillion by 2020. If Salford could attract
0.0001% of this, it would equate to
£1.4bn, or 31% of GVA in 2010
Source: Tourism Economics
 Professional services, care for the
elderly, medical research, IT sectors,
creative and cultural, tourism are all
potential sources of growth (there are
many others)
Summary – an economic crossroads?
 The economy may be recovering, but it is fragile
 The urban threats from reduced public sector employment and reduced consumer spending are
both serious and prolonged
 Pressure on welfare budgets also a major concern
 However professional services continues to have high potential for job creation
 Skills base and improvement in city infrastructures have increased the competitive offer (but also
the running costs)
 Will niche industry return to cities, care for the elderly, environmental science and services, energy
production?
 Sustainable growth and the environment – can cities unique strengths be harboured (or could policy
hinder?). Will media city define Salford?
 The scale of the problem has presented a unique opportunity to make changes in governance and
action, no longer ‘because we did it before’
 Cities are expected to lead the way economically given the unique skills and expertise, but the
global threats are real and any reduction in competiveness from local policy actions (or inaction) will
have more impact than ever before
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So what must ‘we’ do?
 Co-ordination in a new policy environment will be crucial, coming at a time of cuts and low confidence
will require strong leadership and enlightened staff in public service
 Keeping staff motivated against back drop of cuts, job fears and little obvious career progression will
be hard – not an easy environment for collaborative and innovative working
 A new era of policy action not policy statement, time for us all (including economists!) to raise their
game
 You know area better than anyone else – use advice at key points, not all points!
 Don’t abandon things that have been working
 Get ‘out and about’, meet business, understand issues
 Young people very vulnerable (student placements, graduate recruitment etc)
 Preparing for the jobs ahead (skills, land, infrastructure)
 Not everywhere can do everything
 Write more flexible ‘modular’ strategies
 Accept compromises and reality of ‘new normal’
 Tough times, but also a unique opportunity to redefine role and powers
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Contact Details:
Oxford Economics
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Lisburn
County Antrim
BT27 4AB
UK
Tel: 028 9252 8240
Fax: 028 9267 0895
[email protected]