Transcript Re-balancing the Yorkshire and Humber Economy * opportunities

Re-balancing the Yorkshire and Humber
Economy
Opportunities and Challenges
Chief Economist Unit
Objectives
Our key objectives for this report are:
•
To show the differing impacts of public sector contraction on the districts of Yorkshire and
the Humber.
•
To explore the impact on localities and households.
•
To show that there are still opportunities for growth in the region and its local areas.
•
To ensure that policy makers in the region are fully informed of the scale of challenge so
that action can be taken in good time.
Rebalancing the Yorkshire Economy –
Opportunities and Challenges
Introduction
Conclusions
and Policy
Implications
Public and
Private Sector
Analysis
Quantifying
the Cuts
Opportunities
Household and
Localised
Effect
Rebalancing the Yorkshire Economy –
Opportunities and Challenges
Introduction
Public and
Private Sector
Analysis
Quantifying the
Cuts
Conclusions
and Policy
Implications
Opportunities
Household and
Localised Effect
Introduction
The Labour Market
• The ILO unemployment rate in Yorkshire and Humber now stands at 8.6% in the three
months to May, one of four regions significantly higher than the UK average (7.7%).
• The employment rate declined again to 68%, also significantly below the UK (70.7%) in
the three months to May.
• May claimant count rate at 4.4% is less than peak of 6.1% last year but more than the
2.9% of November 2007 (lowest point before the recession).
• There were 21,765 vacancies notified to Jobcentre Plus in May 2011, down from 33,654
in the same month the previous year. The largest decreases in vacancies notified were
among Elementary Occupations, Associate Professional and Technical Operatives and
Sales and Customer services.
Introduction
Rebalancing the Economy….
Differing views of what ‘rebalancing’ encompasses:
• Reducing the size of the public sector
• Reducing public sector debt and domestic debt
• Reducing the reliance on London and the Greater South-East area
• Reducing the reliance on the financial sector
• Move towards export-led growth
• Creating the environment for the private sector to grow
Introduction
310,000
1000
305,000
900
800
Quarterly GDP (£m)
300,000
700
295,000
600
290,000
500
285,000
400
300
280,000
200
GDP
275,000
100
PSND
2010 Nov
2010 Aug
2010 May
2010 Feb
2009 Nov
2009 Aug
2009 May
2009 Feb
2008 Nov
2008 Aug
2008 May
2008 Feb
2007 Nov
2007 Aug
2007 May
2007 Feb
2006 Nov
2006 Aug
2006 May
2006 Feb
2005 Nov
2005 Aug
2005 May
0
2005 Feb
270,000
Key message: Public Sector Net Debt began to rise sharply after the onset of the recession
Public Sector Net Debt (£m)
UK GDP and Public Sector Net Debt
Introduction
%
UK Net Debt as a proportion of Gross Domestic Product
180
Source: Office for National Statistics
Public Sector Finances First Release
160
Series HF6X and RUTO
140
www.statistics.gov.uk/statbase/tsdlistfiles.asp
120
100
80
60
40
20
0
Dec 1975 Dec 1980 Dec 1985 Dec 1990
Excluding financial interventions
Including financial interventions
Dec 1995
Dec 2000
Dec 2005
Dec 2010
Key message: Most UK debt is due to governmental financial intervention in Autumn 2008.
However, even excluding this, it is at its highest level for over 35 years.
But national debt did exceed 100% of GDP before 1850, and from 1918 to 1963.
(www.statistics.gov.uk/downloads/theme_other/GSSMethodology_No_12_v12.pdf)
Introduction
Source: Yorkshire Business Survey 2011, BMG
Key Message: Looking forward over the next 12 months businesses expect staff numbers to remain
stable but more than a third do expect to pass some costs on to customers through higher prices
Introduction
Source: Yorkshire Business Survey 2011, BMG
Key Message: Businesses have started to feel more positive when asked to look at the next 12 months, however
there has been a dip in businesses expecting to export more since Nov 2009. It is also worth noting that employers
expect staff numbers to be stable but sill expect falling staff costs.
Rebalancing the Yorkshire Economy –
Opportunities and Challenges
Introduction
Public and
Private Sector
Analysis
Quantifying the
Cuts
Conclusions
and Policy
Implications
Opportunities
Household and
Localised Effect
Public and
Private Sector
Analysis
The Public and Private Sectors – a brief analysis
This section presents a brief insight into the state of the public sector in Yorkshire and
Humber, how it compares with the private sector and the nature of the challenge any rebalancing of the economy would present. The section is split into three parts:
•
•
•
Where is the public sector – spatial spread
What is the public sector – its component parts and characteristics and comparison
with the private sector
Changes in the public sector – how has the sector changed over the last decade
and the key challenges for the future
Where is the Public Sector in the Region?
Key Messages:
There are 14,700
registered public
sector work places in
Yorkshire and Humber
employing 500,000
people. These include
local authorities, civil
servants, public health
agencies, defence and
education
There are 40,000 civil
servants currently
based in Yorkshire
and Humber; 9,000 in
Leeds alone.
Job losses in these
locations will have an
impact on other
sectors and trades,
especially retail.
Source: MINT, October 2010
Public and
Private Sector
Analysis
What does the Public sector look like in the Region?
Public and
Private Sector
Analysis
Public sector components as a proportion of
all workforce jobs, headcount, Q3 2008
East Riding
Hull
NE Lincs
North Lincs
York UA
Craven
Hambleton
Harrogate
Richmondshire
Ryedale
Scarborough
Selby
Barnsley
Doncaster
Rotherham
Sheffield
Bradford
Calderdale
Kirklees
Leeds
Wakefield
Local Govt
Civil Service
Other public sector
Armed Forces
Private sector
Sources:
ONS Public Sector Employment Survey,
ONS Workforce Jobs,
North Yorks CC, ONS Annual Business Inquiry,
DASA TSP10
North East
Yorks. & H.
London
0
20
40
%
60
80
100
Key Message: The Civil Service is less than 2% of jobs in the region and never more than 3% for any authority. The Armed
Forces are 0.5% of jobs in the region, but because of Catterick Garrison, 23% in Richmondshire. Hambleton has the highest
proportion in local government, 17% because of North Yorkshire County Council being based in Northallerton.
What does the Public sector look like in the Region?
Public and
Quantifying
Private
Sector
the Cuts
Analysis
Source: ONS
What does the Public sector look like in the Region?
Public and
Private Sector
Analysis
Key Message: There is significantly more female employment in the public sector compared to the private sector
proportionately (66% v 40%). Thus any job losses in the public sector could disproportionately affect females.
Source: ONS
What does the Public sector look like in the Region?
Public and
Private Sector
Analysis
Part-Time Employment
Female
Private Sector
Male
66
Public Sector
34
83
0
10
20
30
40
17
50
60
70
80
90
100
Key Message: A much greater proportion of part-time employees in the public sector are females, compared to the
private sector. This could further compound the challenge facing females in public sector as they seek alternative
employment in the private sector. In Yorkshire, 70% of part time employees in the private sector are female but the
public sector proportion is similar to England.
What does the Public sector look like in the Region?
Public
Publicand
and
Private
PrivateSector
Sector
Analysis
Analysis
Source: ONS
Key Message: Private sector employees work significantly longer hours compared to public sector employees.
In the private sector 67% of employees work over 40 hours a week compared to 54% in the public sector. This
could be because 31% of public sector workers are part-time employees compared to 25% in the private sector.
Public Sector Employees in Yorkshire and Humber
by Shift Share
Public and
Private Sector
Analysis
Key Message: in the last decade public sector jobs growth has
been more important to Sheffield, Wakefield, York and Bradford
than Leeds, Hambleton, Kirklees and Harrogate. Please see
glossary for explanation of shift-share analysis.
Source: BIS Analysis of ONS ABI 2008
Private Sector Employees in Yorkshire and Humber
by Shift Share
Public and
Private Sector
Analysis
Key Message: Leeds, East Riding, Wakefield and Doncaster have performed
well in attracting and growing private sector jobs whereas Barnsley, York and
Hull have fared less well.
Source: BIS Analysis of ONS ABI 2008
Public and Private Sector Job Creation in the UK
Public and
Private Sector
Analysis
UK public/private sector employment (millions)
24
7
23
2010 Q3
2009 Q3
2008 Q3
2007 Q3
2006 Q3
2005 Q3
2004 Q3
2003 Q3
2002 Q3
2001 Q3
Seasonally adjusted.
Source: Labour Force Survey, and returns from public sector organisations. (ONS Time Series
data, www.statistics.gov.uk/statbase/tsdtimezone.asp)
2000 Q3
22
6
Public Sector
Public sector, right axis
1999 Q3
Private Sector
Private sector, left axis
5
Key message: Private sector gains over 2005, 2006 and 2007 were wiped out in 2008; some recovery in 2010.
Public sector gain in 2008 due to reclassification of Royal Bank of Scotland and Lloyds Banking Group.
Change in employment in the UK
Public and
Private Sector
Analysis
UK employment: Quarterly change (seasonally adjusted)
400
300
Private sector
200
Public sector
100
0
-100
2010 Q3
2009 Q3
2008 Q3
2007 Q3
2006 Q3
2005 Q3
2004 Q3
2003 Q3
2002 Q3
2001 Q3
-400
2000 Q3
-300
Source: Labour Force Survey, and returns from public sector organisations.
(ONS Time Series data, www.statistics.gov.uk/statbase/tsdtimezone.asp)
Royal Bank of Scotland Group plc and Lloyds Banking Group plc reclassified as public sector from 13 Oct 2008.
1999 Q3
-200
Key message: Private sector employment started to recover but will need a few more years to make up for 2008
losses.
Changes in the Public Sector
Public and
Private Sector
Analysis
NVQ level of highest qualification, UK, 2000 to 2009
4 and above
1 or other
None
44.1
Public sector: 2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
52.5
22.0
Private sector: 2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: ONS
2009
Annual Population
Survey bespoke
analysis
2 or 3
29.4
0
20
40
60
80 Per cent
100
Key Message: In the public sector, 52 per cent have degree-level qualifications, compared with 29 per cent in the
private sector. Could be an opportunity for the private sector to employ new highly skilled staff.
Changes in the Public Sector?
Public
Publicand
and
Private
PrivateSector
Sector
Analysis
Analysis
Average (mean) weekly earnings
400
Private sector
300
Public sector
200
100
2010 Oct
2009 Oct
2008 Oct
2007 Oct
2006 Oct
2005 Oct
2004 Oct
2003 Oct
2002 Oct
2001 Oct
2000 Oct
0
Source: ONS Time Series Data, Labour Market Statistics Integrated First Release,
www.statistics.gov.uk/statbase/tsdtimezone.asp, series KAC4 and KAC7
Key message: October 2010 public sector wages are 4% more than private sector (were 3% less, ten years earlier).
The public sector has a larger proportion of graduates as the previous slide shows. However, that doesn’t explain the
higher public sector wage growth – the graduate proportion isn’t increasing faster than in the private sector. Private
sector wages dipped from 2007 due to the recession.
Public and
Private Sector
Analysis
In summary…
•
Public sector employment (Excluding the Armed Forces) ranges from 26% of the working age
population in Hambleton to 11% in Craven. The regional average is just over 21%.
•
Wakefield, Doncaster, Barnsley and Hambleton have one-third more public sector employment
than the England average. These local authority areas could thus be disproportionately
affected as the public sector shrinks.
•
Sheffield has benefited the most in this region from the expansion in public sector employment.
•
Leeds, on the other hand, has created by far the most private sector jobs in this region.
•
The public sector sustained the labour market during the recession but the private sector has,
since the beginning of 2010, had to shoulder the burden.
Public and
Private Sector
Analysis
In summary...
•
Public sector job growth and the proportion of the workforce employed in that sector varies
greatly across the region. Thus the impact of spending cuts will not be uniform and some local
authority areas, like Sheffield, Hull, York and Hambleton, could be disproportionately affected.
•
Private sector job creation increased significantly in the second quarter of 2010 but fell
drastically in the next quarter. Thus it is too early to assume that the private sector will be able
to fully bear the burden of job creation.
•
Females are more likely to be at risk of job losses than males as they outnumber men 2:1 in
the public sector.
•
Public sector employees are on average better qualified their counterparts in the private
sector which could have some critical implications in terms of salary expectation, position,
and level of seniority if they transfer into the private sector.
Rebalancing the Yorkshire Economy –
Opportunities and Challenges
Introduction
Public and
Private Sector
Analysis
Quantifying
the Cuts
Conclusions
and Policy
Implications
Opportunities
Household and
Localised Effect
Quantifying
the Cuts
Section objectives
This section will:
• Quantify at the district level the direct public sector job losses
• Quantify the impact of this in terms of jobs and output within
sectors and across the Yorkshire and Humber economy
• Explore scenarios in terms of the future state of the economy at
district level across the region
Quantifying
the Cuts
Direct Job Losses
Office for Budget Responsibility (OBR), Nov 2010
•
•
330,000 – Net Public Sector Jobs Lost in England (2011-15)
36,000 – Public Sector Jobs Lost in Y&H
Chartered Institute of Personnel & Development (CIPD)
•
•
583,000 – Net Public Sector Jobs Lost Nationally
64,000 – Public Sector Jobs Lost in Y&H
Key Message: CIPD is far more pessimistic than OBR regarding jobs anticipating
almost twice as many public sector jobs will be lost within the Region. Within this
report we have focused on the official OBR projections.
Annual Percentage Decline in
General Government Employment - OBR
Quantifying
the Cuts
60.0%
50.0%
40.0%
30.0%
53.1%
20.0%
25.0%
10.0%
12.5%
9.4%
0.0%
2011-12
2012-13
2013-14
2014-15
Key Message: Whilst the public sector is already contracting particularly with reductions in employment within
QUANGO’s and local councils the figures produced by OBR anticipate that job losses will not peak until 2014-15
when over 50% of the total job cuts are expected.
Quantifying
the Cuts
UK Employment 2010 – 2015 (OBR)
Numbers
Employed
(millions)
Decline in Public
Sector
Total Change in
Private Sector to
Achieve Growth
Forecast
2010-11
2011-12
2012-13
2013-14
2014-15
Total
29.1
29.3
29.6
29.8
30.1
-
-40,000
-30,000
-80,000
-170,000
-320,000
240,000
330,000
280,000
470,000
1.32m
Key Message: Anticipated growth in employment numbers combined with the reduction in employment in the
public sector means that the private sector will have to create an additional 1.32 million jobs. To place this in
context the private sector created 866,000 jobs in the five years before the recession.
Quantifying
the Cuts
Job Losses 2011 - 2016
Y&H
OBR
CIPD
2011/12 2012/13 2013/14 2014/15 2015/16
Total
Total
Public
3,800
3,000
7,600
16,000
7,600
38,000 67,400
Private
1,500
1,200
3,000
6,300
2,900
14,900 26,300
Total
5,300
4,300
10,600
22,300
10,500
53,000 93,700
Estimate of direct FTE reductions from Experian baseline forecasts – due to OBR estimation of
job losses over the next 5 years. CIPD total for comparison.
Key message: Using data from OBR the REM predicts that 53,000 jobs will be lost to the
Region over the next 5-years.
Yorkshire & Humber Total Employment (FTE)
Scenarios 2002-2016
‘000
Quantifying
the Cuts
2180.000
Baseline Employment
OBR Scenario
CIPD Scenario
2160.000
2140.000
2120.000
2100.000
2080.000
2060.000
2040.000
2020.000
2000.000
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Key message: Anticipated employment levels in 2016 will be significantly effected by the levels
of reduction in public sector jobs.
Section outline
•
•
•
•
•
Quantifying
the Cuts
Employment
Output
Industrial Sectors
Comparison to 2016 baseline forecast
Comparison between 2010 baseline and 2016 scenario
forecast
Net Change in District Employment (Absolute) 2010-16
Quantifying
the Cuts
14000
12000
10000
8000
6000
4000
2000
0
-2000
-4000
-6000
Baseline
Scenario
Key Message: Within the scenario the districts suffering the most are Sheffield, Hull and York – reflecting, to varying
degrees, a combination of reliance on the public sector and relatively weak private sector economy. However, relative
impacts in terms of difference from the baseline are more apparent in Leeds, Wakefield and Bradford.
Net Change in District Employment (%) 2010-16
Quantifying
the Cuts
Stable or stagnating?
Still growing but restricted employment
Declining employment
Key Message: There seems to be a 3-way split across the region with some districts still growing albeit relatively
more muted, others stable, if not stagnant, and others declining rather sharply. Overall, FTE employment in the
region declines by 5,000 jobs (0.3%)
Net Change in District Output (£m) – 2010 - 2016
Quantifying
the Cuts
2000
£m
1800
1600
1400
1200
1000
800
600
400
200
0
Baseline
Scenario
Key Message: Even with the cuts there will continue to be absolute growth in the Regional economy. Comparing
the size of output in 2016 with 2010 it is evident that there will be absolute growth in all districts. For instance
Leeds’ annual output will grow by £1.5bn over the period.
Net Change in District Output (%) – 2010 - 2016
Quantifying
the Cuts
16%
14%
12%
10%
8%
6%
4%
2%
0%
Baseline
Scenario
Key message: When looked at proportionately districts within North Yorkshire actually outperform
Leeds. At the other end Hull, Sheffield and York perform the worst.
Forecast Employment Change by Sector (%)
2010 – 2016
Quantifying
the Cuts
Business Services
Transport
Construction
Retailing
Metals
Machinery & Equipment
Hotels & Catering
Banking & Insurance
Communications
Wholesaling
Other Financial & Business Services
Industry Total
Health
Other Services
Transport Equipment
Other Manufacturing NEC
Chemicals
Food, Drink & Tobacco
Electrical & Optical Equipment
Education
Public Admin & Defence
-30%
Baseline
Scenario
-20%
-10%
0%
10%
20%
Key message: The absolute job losses are also reflected in the proportionate figures with job losses in some
private sector areas especially some manufacturing sub-sectors. Overall employment within the region is
expected to remain largely stagnant in the medium term.
Forecast Output Change by Sector (%)
2010 – 2016
Quantifying
the Cuts
Business Services
Chemicals
Other Services
Construction
Retailing
Communications
Transport
Machinery & Equipment
Metals
Banking & Insurance
Electrical & Optical Equipment
Transport Equipment
Hotels & Catering
Industry Total
Wholesaling
Health
Other Manufacturing NEC
Food, Drink & Tobacco
Other Financial & Business Services
Education
Public Admin & Defence
-30%
Baseline
Scenario
-20%
-10%
0%
10%
20%
30%
Key message: : Percentage change reflects the shrinking of the public sector and relative
growth in the private sector which reflects a rebalancing of sorts.
Quantifying
the Cuts
In summary...
•
The Governments policy to reduce public sector spending will result in a reduction of 53,000
jobs and a loss of £7bn from regional output compared to the baseline over the next 5-years.
•
When expected private-sector job growth is taken into account the region will lose 5,000 jobs
and it’s economy grow by almost £6bn between 2010 and 2016.
•
Significant reductions within public sector employment will be accompanied by growth in
business services, retailing and construction.
•
The positive and negative impacts will not be evenly spread across the Region. Hull, Sheffield,
York and NE Lincolnshire will face the greatest challenge in terms of both employment and
output with North Yorkshire districts generally performing the best. New jobs will largely be
concentrated around Leeds and North Yorkshire.
•
Sectors with growth, particularly retail, are likely to generate jobs which will be relatively less
well paid, less secure and part time.
•
Unemployment will rise and is likely to remain high in the short to medium term in some
districts. Even though the net jobs lost may be relatively low it should be noted that the regional
working age population is likely to grow by over 100,000 (3%) over this period.
Rebalancing the Yorkshire economy –
opportunities and challenges
Introduction
Conclusions
and Policy
Implications
Public and
Private Sector
Analysis
Quantifying the
Cuts
Opportunities
Household and
Localised
Effect
Household
and
Localised
Effect
Section Objectives
This section will:
• Explore the current financial challenges facing households
• Look at how the cohort of unemployed people has shifted during
and after the recession in terms of demographic profile
• Present the potential impact of net changes in employment levels
as a result of cuts in public spending on household income
Rebalancing the Yorkshire economy –
opportunities and challenges
Introduction
Conclusions
and Policy
Implications
Public and
Public Sector
Analysis
Quantifying the
Cuts
Opportunities
Household and
Localised
Effect
Opportunities
Sector opportunities in era of structural change
This section will:
•
Examine the nature of sectoral and local business responses to falling sales
into the public sector
•
Consider those sectors likely to benefit from higher private sector growth and
the effects of government policy objectives outlined in CSR 2010
•
Consider the resilience of sectors to broader re-balancing – “stress-testing”
sectors in Yorkshire and Humber
How businesses plan to respond to lost public sector markets
Source: Yorkshire Business Survey 2011, BMG
Key Message: seeking new markets is the most cited action for businesses that are heavily reliant on the
public sector, across all the city regions and sub regions in Yorkshire and Humber.
Opportunities
How businesses plan to respond to lost public sector markets
Opportunities
1003 businesses
Source: Yorkshire Business Survey 2011, BMG
Key Message: With the expected exception of the public/personal services sector, there is no significant difference in
sectoral response
Business Investment in Y&H in the Next 12 Months
Source: Yorkshire Business Survey 2011, BMG
Key Message: It is, however, evident that several business still face considerable challenges to stay afloat.
More business are applying for funding for cash flow purposes than for investment
Opportunities
Comparative advantage and relative specialisation...
Opportunities
Key Message: Yorkshire and Humber undoubtedly has key specialisms and strengths in manufacturing but also in wholesaling
and retailing. The region also has strengths in the public sector, especially in Health and thus spending cuts will need to be very
carefully managed in order for the economy to retain and indeed build on its inherent strengths and comparative advantages
Opportunities
In summary...
•
Up to 16,500 regional businesses believe they will have to make business changes due to
public sector cuts, with highest concentration of such businesses in the Leeds City Region.
•
Equally our research suggests that up to 134,000 regional businesses do not believe they
will have to make direct changes to their business, with firms in manufacturing most likely
to agree with this (85% of sector businesses).
•
Of those firms that say they will have to make changes to their business over 59% rely very
heavily on the public sector (75% or more of their turnover comes from sales into the public
sector), we estimate that this equates to some 9,750 regional firms.
•
With the expected exception of the public/personal services sector, there is no significant
difference in sectoral response to public sector spending cuts. Majority of businesses are
actively seeking new markets
•
The clearest strategy for dealing with lost public sector sales is finding new markets (44%
across Yorkshire and Humber), with firms in the Leeds city region and the York and North
Yorkshire sub region most likely to adopt this strategy.
Opportunities
In summary...
•
The OBR’s view that private sector growth will accelerate as the public sector retreats
has been tested in our research, which suggests significant (but jobless) growth.
•
Other strategies are also evident - with up to 35% (of those companies making direct
changes) likely to reduce staff or reduce salaries.
•
Where the public sector is not a primary market (the majority of companies) similar
strategies are in place with a similar focus on new markets and reducing costs with one
exception – consumer facing business are significantly less likely to develop new
markets and much more likely to cut staffing levels (but there are opportunities for LEP
support as such sectors are will be key to getting people into the workforce )
•
Feedback effects will moderate the rate of output growth from the high scenario and
could constrain the ability of the Yorkshire economy to create jobs.
•
Sectors with the greatest net growth potential – to an extent those with greatest
resilience – are business services and banking and insurance, invariably based in and
around Leeds.
Rebalancing the Yorkshire economy –
opportunities and challenges
Introduction
Public and
Private Sector
Analysis
Quantifying the
Cuts
Conclusions
and Policy
Implications
Opportunities
Household and
Localised Effect
Conclusions
and Policy
Implications
Findings, Conclusions and Policy Implications
•
Yorkshire and Humber could lose up to 53,000 jobs and £7.3bn in output over the next five years as a
direct result of the Government’s policy to reduce public sector spending. In net terms, when forecast
private sector jobs growth is taken into account, the region is still projected to lose 5,000 jobs over the
next 5 years.
•
This however does not mean that the region’s economy will shrink. Regional growth will fall from 12% in
the period 2010-2015 to 9% after the spending cuts have worked their way through the economy.
Yorkshire and Humber will still show strong growth but this will be somewhat lower than otherwise
would have been the case.
•
According to the OBR’s assumptions, job losses will accelerate by 2013-15 as planned departmental
spending cuts are implemented. The OBR’s current forecasts suggest that 78% of the cuts will occur in
2013-2015. This is now seems to be at odds with the prevailing public view the job cuts are frontloaded.
•
Overall, the private sector in areas like Craven, Richmondshire, North Lincolnshire, Selby, Rotherham
and Leeds is expected to create enough jobs to more than offset the contraction in the public sector.
However, this will not be the case in areas like Sheffield, York, North East Lincolnshire, Barnsley and
Hull. It is worth remembering though, that these forecasts are based on the OBR projections which are
less gloomy than the views of other organisations like the CIPD.
Conclusions
and Policy
Implications
Findings, Conclusions and Policy Implications
•
Spending cuts will disproportionately affect districts which are already economically disadvantaged like Hull
and Barnsley, but also Sheffield, York and Hambleton who, over the last decade, have had a relatively high
reliance on the public sector for new job creation. Indeed, already prosperous and growing districts like
Craven and Leeds seem better placed to take advantage of any opportunities that lie ahead than
economically disadvantaged areas like Hull and Rotherham which are in greater need of such stimuli.
•
York, perhaps surprisingly seems destined for some great challenges ahead. Though the city, as a whole,
cannot be said to be economically deprived, it has been highly dependent on the public sector for new job
creation and this is now at risk. Craven, on the other hand, has key strengths in growing sectors like financial
and business services and creative industries and thus is set to continue growing.
•
The private sector needs to create 1.3 million jobs over the next 5 years in order for the Government’s jobs
growth targets to be achieved. To put this in context in the 5 years before the recession the UK economy
created 1.5 million jobs, 866 thousand (57%) of which was in the private sector. This means that the private
sector, which is emerging very tentatively from a deep recession, needs to create more than twice as many
jobs as it did in the boom years, over the next five years. This is a very tall order indeed!
Conclusions
and Policy
Implications
Findings, Conclusions and Policy Implications
•
A strong worry is that too many of the economically disadvantaged districts in Yorkshire have their economic
strengths in sectors that are not expected to grow. The region is over represented in Manufacturing which is
continuing to grow but can do so without increasing headcount. Sectors like business services which are
expected to increase employment are not strong in such areas but rather tend to congregate around
prosperous urban centres like Leeds.
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Initial findings from the region’s latest business survey also show that companies are very actively seeking
opportunities in new markets. This may represent a key opportunity for policy makers.
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There is likely to be further pressure on real income levels in the short-medium level. The spectre of rising
interest rates, relatively high and rising inflation and upward pressures on oil and utility prices will negatively
impact on real income and by extension consumer spending, thus further squeezing discretionary income.
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Analyses of the impact on households suggest that in the short-to-medium term, the already economically
deprived households are likely to be disproportionately affected. Emerging evidence suggests that the more
well-to-do households may have already emerged from the worst of the recession.
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Our household analysis shows that in some districts household income could fall by almost £600 per year
(over the next five years). Given that domestic consumption is critical to the state of the economy, the
pressure on household spending could depress the economy severely in the short to medium term.
Glossary of Terms
Acxiom - The Research Opinion Poll is Acxiom’s household survey that is distributed nationally twice a year. Over 1
million responses are received back every year across Great Britain and over 100,000 across Yorkshire and the
Humber. Data is collected by post and online across different age groups, ensuring a representative
demographic profile of responders. Acxiom also delivered the Finance Panel series of surveys and provide the
Personicx Geo tool (see later in this glossary).
Change from Baseline – The change between the original forecast and the scenario
Change from Actual – The change over a period of time
Feedback Effects - The effects that could happen as a result of changes in other macro-economic variables. These
effects are assumed to accrue to private sector businesses and could provide benefits elsewhere in the economy
that will serve to offset some/all of the direct effects of the budget cuts. These are difficult to accurately measure
as the depend on variables like the economic health of trade partners, the ability of a company or a sector to take
advantage of the changing trading environment brought about by new macro economic policy etc
Location Quotient - A calculated ratio between the local economy and the economy of some reference unit that. This
ratio is calculated for all industries to determine whether or not the local economy has a greater share of that
industry than expected.
Multiplier - The multiplier effect states than an injection (e.g. government spending) into the economy can lead to a
bigger final increase on Real GDP. E.g. if Government spending of £1bn led to an increase in real GDP of
£1.5bn, the multiplier effect would be 1.5.
Glossary of Terms
Personicx Geo – Segmentation database which classifies households into unique buckets with like behaviours,
preferences and lifestyles
PMI – Purchasing Mangers Index
REM – Regional Econometric Model
REM Scenarios – We developed a high growth scenario (see http://www.yorkshirefutures.com/news/future-yorkshireand-humber-0) for the regional economy as part of our preparations for the then Integrated Regional Strategy.
We have subsequently reprised this and have now taken into account the 2010 CSR and the feedback effects
generated thereof.
Shift Share Analysis - This analysis is primarily used to decompose employment changes within an economy over a
specific period of time into mutually exclusive factors. It provides a dynamic account of total regional employment
growth that is attributable to growth of the national economy, a mix of faster or slower than average growing
industries, and the competitive nature of the local industries.
Yorkshire Business Survey – Survey of 3,400 business carried out by BMG Research on behalf of the Yorkshire
and Humber sub-regions in December 2010 which continues the methodology of the National Business Survey
This report was written by Yorkshire Forward’s Chief Economist Unit:
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Patrick Bowes
Felix Kumi-Ampofo
Lisa Littlefair
Seamus McDonnell
Yesrab Jumma
Nick Hardcastle
Andrew Higgins
Victoria Gell
Bethan Sheridan-Jones
Together with support gratefully received from Ian Kay and Keith Tyrrell of the
Office for National Statistics