GREATER CAMBRIDGE GREATER PETERBOROUGH GROWTH PROSPECTUS

Transcription

1 GREATER CAMBRIDGE GREATER PETERBOROUGH GROWTH PROSPECTUS Economic Position Statement August

2 CONTENTS CONTENTS 2 EXECUTIVE SUMMARY 3 1. ABOUT GREATER CAMBRIDGE GREATER PETERBOROUGH ENTERPRISE PARTNERSHIP AND THE LOCAL AREA 5 2. ECONOMIC PERFORMANCE AND OUTLOOK 9 4. POPULATION AND WORKFORCE 16 4.EMPLOYERS, ENTERPRISE AND EMPLOYMENT PLACE COMPETITIVENESS 34 APPENDIX A 40 2

3 EXECUTIVE SUMMARY This report provides an economic position statement for the Greater Cambridge Greater Peterborough area. It sets out the context, issues and long term economic trends facing the local area, and has been used to inform the Greater Cambridge Greater Peterborough Enterprise Partnership Growth Prospectus that will be published later in The Greater Cambridge Greater Peterborough area comprises thirteen unitary authority/ local authority district (UALAD) members, with a combined total of 1.34 million residents. It is the third most rural of England s 39 LEP areas (by share of population in rural areas), while its two main urban centres provide 32 per cent of employment. The national context for this economic baseline report is that the UK re-entered recession at the turn of the year 2011/2012. Near-term prospects for employment are poor. In particular, public sector cuts will continue to affect the labour market. The economic outlook is for some return to output growth in 2012 and 2013, but with unemployment remaining higher than in Nevertheless, nationally, some economic sectors have actually increased employment since the onset of recession. GCGP area s economy as a whole has been more resilient in recession than the England average, though with divergent stories at local level. Cambridge and its immediate neighbours have fared relatively well being hit less hard than nationally, while some northern parts of GCGP area have fared less well. Over the past decade, the LEP area s fundamental strengths have supported an economic output (GVA) growth rate substantially higher than England, creating output 1bn higher in 2009 than if the CGCP area had only matched England average growth. Among these strengths are high population growth the GCGP area s population grew faster over the last decade than all other LEP areas except one; a higher-than-england-average economic activity rate, matched with this population expansion, put GCGP area s workforce growth in the top 10 of LEP areas. The GCGP area has high rates of labour market participation, and a lower unemployment rate than nationally. The share of working age adults in employment is 80.6 per cent compared to an average 74.7 per cent across England, and the advantage has continued to increase. The unemployment rate at 7.3 per cent is lower than the England average (7.8 per cent). However, the March 2012 claimant unemployment rate for the GCGP area was 2.9 per cent, close to its recent historical peak (3.0 per cent, during 2011), compared to the England rate of 4.0 per cent. Particular groups and particular areas bear the brunt of unemployment. Youth unemployment is a key concern for local economic and social policy, as it is internationally. In March 2012, the share of the GCGP area s year-olds who were claimant unemployed (6.0 per cent) was more than double the rate (2.9 per cent) for the year-old population. The contiguous authority areas of Peterborough, Fenland and King s Lynn & West Norfolk, in the north of the LEP s area, face particularly challenging rates of unemployment. The overall skills and qualifications attainments of GCGP residents is a strength, although there certain local areas where skills are a challenge. Skills are important in enabling successful economic performance, attracting businesses to locate in the local area and equipping firms for exporting. The GCGP area ranks highly amongst LEP areas by the share of Degree-level (or equivalent) qualified residents, and the share of residents in high level occupations, especially professionals. The share of young people qualifying at level 2 (the equivalent of 5 GCSE s at grades A to C) and level 3 (the equivalent of A levels) thresholds by age 19 1 is also higher than for England. However, some of the local areas within the GCGP area have very different skills and qualifications profiles which tend to be reflected in differences in average earnings. 1 weighted average for three Upper Tier authorities 3

4 When the types of jobs are compared between residents of the GCGP area (who may not necessarily all work in the GCGP area), and those who work in the area (who may not all necessarily live there) there are more residents who are in professional occupations than there are jobs located here. Therefore some individuals who are resident in the GCGP area working in professional occupations are exported the sole (major) occupational group where this is the case. Enterprise survival rates are consistently stronger in the GCGP area than in England on average. The GCGP area s rate of growth in its business population also outperforms England over a period of years. The number of businesses (local units) in GCGP area peaked in Job losses in the GCGP area over the past two years was in part moderated by new business proprietors. The GCGP area had over 4,900 business births in 2010, and the fall in employment (employees and working proprietors) was 10,700 whereas on their own employee jobs fell by a larger 14,800. Over 70 per cent of GCGPEP s businesses (local units) are in the 0-4 employee size band; 52 per cent are rural. Clearly, micro- and small- businesses are significant for the GCGP area. The GCGP area is one of the top 10 LEP areas for the share of employment in the knowledge economy and high and medium technology manufacturing. The Greater Cambridge area has a European Commission Award for Excellence in Innovative Regions and is the largest UK cluster of scientific R&D industry employment outside London. The GCGP area has higher than average export potential, based on its industrial structure. Advanced economies are still facing uncertain demand growth in home markets while emerging and developing economies are growing more consistently, so export markets are likely to offer growth opportunities not available at home. Health, education, manufacturing and retail are GCGP area s largest employment sectors. The knowledge economy, high-tech and export-intensive sectors are vital to ensuring that the nation and the area claim their share of world economic growth and employment, but it is also necessary to recognise the needs of existing sectors, such as retail, that provide much employment and are large determinants of economic well-being of local centres. Since at least two-thirds of new job openings occur due to the need to replace someone permanently leaving the local workforce, replacement demand in a wide range of sectors and types of jobs will continue to be significant for the unemployed, and new entrants to the labour market. High level indicators for transport infrastructure show that GCGP area overall has close-to-average road transport infrastructure density and journey times on most of the network are faster than national average. Passenger rail use grew strongly in , with journeys up by 53 per cent, and rail links - perhaps especially to the capital and to St Pancras Eurostar - are a competitive advantage. Airports are easily accessible, with Stansted (inside the LEP area) and Birmingham rail-linked, and Luton just outside the LEP area. However, some key road stretches suffer severe congestion, notoriously the A14 on the Benelux-east coast ports- Midlands Ireland axis. The A14 is crucial to planned major development projects such as Northstowe. Broadband availability has been a weakness with four of the LEP s 13 local authorities in the worst 20 per cent of England for the 2Mbit/s broadband target in OFCOM s 2011 broadband maps. Housing affordability is a particular concern for some parts of the GCGP area, and is seen as a constraint on growth as employers can find it difficult to recruit in competition with areas where employees would be better off through lower house prices. While the housing stock across the LEP as a whole increased over the past five years by 5.9 per cent, compared to England 3.7 per cent, in 2010/11 net additions were at 70 per cent of their 2006/07 level. 4

5 1. ABOUT GREATER CAMBRIDGE GREATER PETERBOROUGH ENTERPRISE PARTNERSHIP GREATER CAMBRIDGE GREATER PETERBOROUGH ENTERPRISE PARTNERSHIP Greater Cambridge Greater Peterborough Enterprise Partnership (GCGPEP) is based on the complementary functional economic areas of the cities of Cambridge and Peterborough, together with neighbouring market towns and communities. GCGPEP s vision is to lead the area s growth to 100,000 significant businesses and create 160,000 new jobs by 2025 in an internationally renowned low carbon, knowledge-based economy. INTRODUCING THE GREATER CAMBRIDGE GREATER PETERBOROUGH AREA ECONOMY The diverse economy has national and international strengths in Information and Communications Technologies (ICT), creative industries, bio-medical, low carbon and environmental goods, high value engineering and manufacturing sectors. However, growth has been constrained by under-investment in transport infrastructure, inadequate broadband infrastructure, skills disparities and shortages, and a chronic shortage of affordable homes. This report sets out baseline economic indicators for the GCGP area, to show how the area stands in relation to others. It summarises recent trends and appraises current performance. KEY CHARACTERISTICS OF THE GCGP AREA Thirteen unitary authority/ local authority district (UALAD) members Resident population of million Third most rural of LEP areas, with 64 per cent of residents living in rural areas and market towns Two main urban centres provide 32 per cent of workplace employment Compared to the rest of England (excepting London), non-farm employment is most highly concentrated in Real estate, Professional scientific & technical activities; and Manufacturing industries. AREA, AND MEMBER LOCALITIES As indicated in Figure 1.1 below, the GCGP area comprises Rutland Unitary Authority (UA), Peterborough UA, Cambridgeshire County (with its five lower tier local authorities Cambridge, East Cambridgeshire, Fenland, Huntingdonshire, and South Cambridgeshire) which are solely in this LEP area; together with five lower tier local authorities that overlap other LEP areas: King s Lynn & West Norfolk, Forest Heath and St Edmundsbury (New Anglia LEP); Uttlesford (South East LEP); and North Hertfordshire (Hertfordshire LEP). The members that overlap other LEP areas account for 48 per cent by area and 38 per cent by population of GCGP area total. 2 GCGP is the sixth largest LEP by area, at some 7250 sq. km. It is in the least densely populated quartile of LEP areas, and in population terms, ranks 17th, with a mid-year 2010 population estimated at 1,344,100. GCGP area has two predominant urban areas, and is otherwise mainly rural. In the Department for Environment, Food and Rural Affairs (DEFRA) s 2009 classification, of the thirteen UALADs, seven are in the most rural class (R80), two are R50, and one Significantly Rural, while Cambridge and Peterborough are Other Urban (i.e. not Major or Large Urban). This DEFRA 2009 work, using 2001 population data, showed 64 per cent living in rural areas including large market towns (the basis of classifying the district), or under the rural definition where large market towns are considered 2 In this report, all figures are for the LEP geography of these twelve UALAD (unitary authorities/ local authority districts), except where not available. Where data is available only for UACounty (Rutland, Peterborough and Cambridgeshire) or NUTS3 areas (Peterborough and Cambridgeshire) this is clearly identified. 5

6 urban, 47 per cent live in rural areas. The GCGP area is third most rural of England s 39 LEPs on the first of the above two measures, below only Cornwall & the Isles of Scilly and Cumbria. Figure 1.1: Map of local authority composition of GCGP area The two urban centres, Peterborough and Cambridge, are major employment centres, providing 32 per cent of all GCGP area employment on a workplace basis. Both cities support jobs for residents that live in surrounding districts that commute in. Taking the balance of net in- and out- commuting, both cities combined attract 64,000 more in-commuters than out-commuters. 68 per cent of employment is not in the two main urban centres, and at a local level, economies have their own characteristics, challenges and opportunities. INDUSTRY STRUCTURE As indicated in Figure 1.2, GCGP area s industry structure is differentiated from England 3 in the following activities: A higher employee concentration in Real Estate (LQ 1.36), Manufacturing (1.29), and Education (1.11); and A lower employee concentration in Distribution other than Retail (i.e. Warehousing etc) (LQ 0.46); Financial & Insurance (0.58), and Information & Communications (0.77). 3 A concise way of presenting an area comparison to a benchmark is the Location Quotient (LQ). The share of employees is compared. An LQ of 1.00 means the area s share is the same as for the benchmark; an LQ above 1.00 indicates that the industry is more strongly present, and less than 1.00 that the industry is under-represented. 6

7 Because of London s dominance in specific activities, it is sometimes more telling to remove it from a comparison benchmark. Differences between GCGP area s structure and England without London are, GCGP area s higher employee concentration in Real Estate (LQ 1.48), Professional Scientific and Technical Activities (1.29), and Manufacturing (1.12); lower employee concentration in Distribution other than Retail (i.e. Warehousing etc) (LQ 0.43); Financial & Insurance (0.75), and Arts, Entertainment and Recreation (0.82). (Source: BRES 2010) INDUSTRY STRENGTHS AND GCGPEP FOCUS Knowledge and innovation are key strengths and future drivers of the GCGP area economy. Significantly, in a recent LEP area benchmarking exercise 4, the GCGP area performed highly in innovation and knowledge - with the highest ranking for the share of patent applications per 10,000 residents, and ranking 9th for the share of total employment in the knowledge economy and high & medium technology manufacturing. The Greater Cambridge Greater Peterborough area is renowned for its strengths in the following industries: ICT and telecommunications rooted in the GCGP area s internationally significant ICT, software and telecoms cluster employing nearly 50,000 individuals. Key businesses include ARM, the world s premier semiconductor IP supplier and Autonomy, a University of Cambridge spin-out formerly (before being acquired by Hewlett Packard) the second largest pure software company in Europe. Biotech and life sciences a cluster of nearly 600 companies including Napp Pharmaceuticals, Amgen, Bespak, Nestor and Medimmune. The presence of Addenbrooke s, an internationally renowned NHS Trust University Teaching Hospital, further strengthens and supports the cluster, as does the planned Cambridge Biomedical Campus already chosen as home by the Medical Research Council, Cancer Research UK and GlaxoSmithKline. Low carbon environmental goods and services where Peterborough is home to 335 companies and organisations with 6,000 jobs and a 600m turnover that anchors a much broader sector of firms and capabilities across the area. Manufacturing, engineering and processing the GCGP area hosts engineering firms with a global presence, such as Perkins which for 75 years has led the field in the design and manufacture of high performance diesel engines; BAe Systems; and Marshall Aerospace, one of Europe s leading aerospace companies with extensive experience in aircraft design, manufacture and maintenance. There are also strong capabilities along the A1 corridor from Huntingdon to Grantham, and in King s Lynn. Agriculture, food and drink GCGP is home to a strong and fast-evolving food processing and agribusiness sector. The University of Lincoln s R&D foundation at the National Centre for Food Manufacturing in Holbeach and the strong agricultural roots in the Fens has helped attract inward investment from across Europe achieving ground breaking initiatives in food technology. Key businesses include British Sugar, Mars UK Ltd, Premier Foods, Nestlé Purina, Bakkavor, and Produce World Group, all UK market leaders. A world renowned equine industry is located around Newmarket. Logistics building on Peterborough s strengths as a value added logistics hub, the GCGP area is home to a range of nationally important logistics operators including IKEA, Amazon, Tesco and Debenhams. Water and energy operating in the driest region in the country both Anglian Water, Britain s largest water and waste utility with over 5 million customers, and Cambridge Water companies are sector leaders and there is a 4 The LEP Network (2012) Creating Successful Economies: Review of Local Enterprise Partnership area economies in

8 strong R&D and commercial presence in the cities; with a range of major employers like Cummins Generator Technologies (Stamford) and significant bio-renewables production companies across the rural economy. Creative industries technology-based creative companies turn over more than 1billion per annum in the area. The key sub-sectors demonstrating significant national growth (publishing, software and computer gaming) are also the GCGP area s most established creative industry clusters. Ten per cent of the UK s computer games developers are within five miles of Cambridge city centre. Key businesses include: Bauer Media, Cambridge University Press, the BAFTA-winning Sony Computer Entertainment s Cambridge Studio, Supreme Being (urban fashion) and Jagex whose RuneScape is the world s most popular, free massively multiplayer online role-playing game. Visitor economy more than 20 million visitors come each year to the area s distinctive heritage attractions such as Cambridge, Ely, Bury St Edmunds and Peterborough, horse racing at Newmarket and Huntingdon, the Imperial War Museum at Duxford, and our rural habitats, such as Wicken Fen, Great Fen and Rutland Water, our Fenland waterways and the North Norfolk Coast. Figure 1.2: Industrial specialisms in the Greater Cambridge Greater Peterborough Area measured by location quotients compared to the England, 2010 Source: BRES

9 2. ECONOMIC PERFORMANCE AND OUTLOOK SUMMARY NATIONAL Recession is the overwhelming context for the UK economy in the present Poor near-term prospects for employment Public sector cuts will affect whole employment market However, some sectors have not only escaped job losses, but grown GCGP AREA GCGP area has been more resilient in recession than England average Past fundamentals are foundation for the future: over past decade, GVA growth rate substantially higher than England, creating output 1bn higher in 2009 than if it had matched England average growth RECESSION, OUTPUT AND UNEMPLOYMENT THE UK IMPACT UK GDP fell by 7.1 per cent from peak to trough in the recession of 2008/2009, and has subsequently recovered less than half that loss: output in first quarter 2012 is 4.3 per cent below the peak. Output contracted by 0.2 per cent in the first quarter of 2012, this second successive period of negative economic growth technically returning the UK to recession, and meaning that the economy has shown no growth over the past year. The stuttering nature of growth following the recession means that the economy is weaker relative to its pre-recession peak than at the corresponding stage of the depression in the early 1930s, or the recessions in the early 1980s and early 1990s. 5 The official unemployment rate stands at 8.3 per cent (Dec2011-Feb2012) compared to a pre-recession rate of 5.2 per cent. The latest quarter showed a 0.1 per cent fall compared to the previous quarter, though remains 0.5 per cent higher than a year earlier. The claimant count in March 2012 was 1.61 million, up 3,600 on the previous month and up 145,200 on a year earlier. The claimant count rate was 4.9 per cent, in March 2008, before the recession, the rate was 2.4 per cent with a claimant count of million. The most recent rate was unchanged on the previous month but up 0.4 percentage points from a year earlier. 6 UK SECTOR EMPLOYMENT LOSS The total number of UK workforce jobs fell by 1.5 per cent from the beginning of 2008 to the end of 2011, representing a net job loss of 482,000. Manufacturing, with more than one in every seven net jobs lost, was the worst hit sector experiencing a net job loss of 388,000. More than quarter of a million UK jobs (258,000) were lost in Construction, and even more in Distribution (Wholesale & retail trade including of motor vehicles) (283,000). At the other end of the scale, Professional scientific and technical activities grew overall by more than 9.5 per cent, 216,000 jobs, despite standstill for much of 2010; and the health and social work sector has the highest absolute increase in jobs, over 300 thousand, growth of 8.3 per cent. 5 ONS Economic Review April ONS Labour Market Statistics April

10 Figure 2.1: UK Workforce Jobs, Seasonally adjusted (thousands) 2011 Q4 Change from Q Jobs (thousands) Jobs Per cent A,B,D,E Agriculture, Extraction, Utilities etc C Manufacturing 2, F Construction 2, G Wholesale & retail trade; repair of motor vehicles and motorcycles 4, H Transport & storage 1, I Accommodation & food service activities 2, J Information & communication 1, K Financial & insurance activities 1, L Real estate activities M Professional scientific & technical activities 2, N Administrative & support service activities 2, O Public admin & defence; compulsory social security 1, P Education 2, Q Human health & social work activities 4, R Arts, entertainment & recreation S Other service activities G-S Total services 26, Total 31, Source: ONS Labour Market Statistics, 14 March 2012 PUBLIC SECTOR EMPLOYMENT LOSS IN THE UK Public sector employment accounts for 20 per cent of total UK employment (Q4 2011). Over the same period as the table above (Q to Q4 2011), total public sector employment fell by 270,000, a 1.2 per cent fall. Excluding public financial corporations (including the Royal Bank of Scotland and Lloyds TSB) from total public sector employment, the loss was 258,000 - a 4.3 per cent fall. RECESSION IMPACT IN THE GCGP AREA Overall the impact of recession on the GCGP area has been less severe than for England as a whole. In 2011, employment was 1.1 per cent below the pre-recession total in 2008, outperforming the 1.6 per cent fall in England over the same time period. A number of LEP areas fared better than GCGP on this measure - for example, in London, Buckinghamshire Thames Valley and West of England employment actually increased 7. The hardest hit LEP area, the Black County, saw a drop of 6 per cent in employment. The industrial structure of the economy and employment in the GCGP area is undoubtedly a factor in its relative resilience to the recession compared to other localities in England. The GCGP area has an above-average share of employees in Professional, Scientific and Technical Activities (which was more resilient to job losses), and a lower than average share in Construction (which was more vulnerable). However, the GCGP area also has a higher than average exposure to Manufacturing, which was hit hard by the recession. The official unemployment rate for GCGP (year to June 2011) was 7.3 per cent similar to England s 7.8 per cent rate. The range for LEP areas is from 4.1 per cent (Enterprise M3) to 11.5 per cent (Black Country). Claimant unemployment 7 Sub-regional employment statistics are from the Annual Population Survey. To increase reliability, full year to June 2011 is compared to full year to June The national comparator is England. National statistics above were Q to Q4 2011, seasonally adjusted workforce jobs, UK, hence figures do not totally agree. 10

11 in GCGP area was less affected in the recession than for England on average for most claimant measures. The exception was the change in number of people claiming Jobseekers Allowance. In GCGP area this more than doubled from June 2008 to March 2012 (+108 per cent), while in England the increase was less than double, at 97 per cent. Nevertheless, the claimant unemployment rate as a share of the working age population rose by less in GCGP area - by 1.5 percentage points (to 2.9 per cent) while England s rate rose by 1.9 percentage points to 4.0 per cent. In other words, more growth in unemployment in GCGP area than in England was due to population growth. Starting during the recession, and continuing into 2011, business closures exceeded business births which took GCGP area s 2011 active business base to 3.6 per cent below its peak, while in England the total fall was 4.5 per cent. LOCALITIES WITHIN GCGP AREA HAVE HAD DIFFERENT EXPERIENCES DURING AND AFTER THE RECESSION Local experiences of recession may be more coloured by what is happening in the direct locality, than in the wider overall LEP area. The narrative above compares the overall GCGP area figure to England and other LEPs. However, there is wide variation within the GCGP area, some of which features later in this report. Some of the main variances are described as follows. In terms of claimant unemployment, Peterborough and Fenland were unique amongst GCGP local areas in that their claimant rates increased by more than England s 1.9 per cent increase. Cambridge s unemployment rate increased by only 0.7 percentage points whereas Peterborough s increase was 3.0 per cent. Despite low rates of unemployment, Uttlesford and Rutland saw their claimant count numbers more than double, well above the GCGP average. Forest Heath s total claimant count is 260 per cent higher than pre-recession, while Cambridge s is just 65 per cent higher. In terms of the business population, between 2008 and 2010, the business stock increased in East Cambridgeshire and South Cambridgeshire, decreased by less than the national average in Uttlesford, while in all other localities decreased by more than the England average (-1.1 per cent), with the greatest fall, more than 8 per cent, in Forest Heath. ECONOMIC OUTPUT, PRODUCTIVITY AND INCOMES Latest figures (2009) show that the GCGP area s 8 total economic output was valued at 17,115 million (also known as Gross Value Added or GVA). The UK economy entered 2009 after three quarters of declining growth in 2008, and did not come out of recession until 2009 s third quarter, so not surprisingly, 2009 economic output was down on the previous year: in the local area by -3 per cent ( 530m), and in England by -1.6 per cent. 9 Locally, in 2009 output fell most in real estate (- 280m) and Information & communications (- 120m). These were also among the sectors with the biggest percentage falls in output, per cent and -9.1 per cent. Other sectors with big percentage falls between 2008 and 2009 were agricultural related (-12.8 per cent, - 34m) and construction (-9 per cent, - 98m). The latest regional data shows that the majority of regions GVA returned to growth in 2010, so local figures for 2010 (due in December 2012) are likely to show that too. Over a ten-year period ( ) GVA growth in the GCGP area was substantially higher (62.0 per cent) than in England (52.5 per cent). Had the GCGP area only grown at the same rate as England, the total value of its economic output in 2009 would have been 1 billion lower. GCGP s economic output per capita (GVA per capita) was 21,990, 10 per cent higher than the UK average. GCGP s GVA per capita was also higher than for England ( 20,500). The 38 LEP areas had GVA per capita values ranging from 13,000 (Cornwall & Isles of Scilly) to 34,500 (London). Productivity measures index (UK=100) of GVA per job filled and GVA per hour worked - are separate figures for Cambridgeshire and Peterborough and the published data does not allow calculation of a weighted average. The 8 Official statistics on these three topics are published only down to NUTS 3 areas so the nearest approximation to the GCGP area is Cambridgeshire and Peterborough Cambridgeshire County Council will be producing modelled figures for the whole of the area in the near future. 9 Note: this data published on five-year moving average basis. 11

12 recommended productivity measure is per hour worked. The latest figures, available for 2009, suggest that productivity is about four per cent higher in Cambridgeshire than UK, while in Peterborough, it is eight per cent lower. This will reflect a complex mix of reasons, including different industry structures. Gross Domestic Household Income (GDHI) represents what the household has left to spend or save after paying taxes on income, national insurance, pension contributions, council tax and interest payments related to property ownership (such as mortgage interest). The latest data shows GDHI per head in Cambridgeshire of 16,500, about eight per cent higher than UK, and in Peterborough 14,200, about seven per cent lower than UK. The ONS publishes the local level figures for all of these datasets on a five year moving average, in part because data on many of the components are subsequently adjusted as information gaps get filled. This makes the data much more robust for comparing between different areas, and at the same time makes the series unsuited as immediate indicators. UK ECONOMIC OUTLOOK UK ECONOMY S FALL INTO RECESSION DEEPER THAN EXPECTED UK economy contracted by 0.3 per cent in Q1 2012, following 0.3 per cent contraction in Q The latest figures suggest a slightly higher rate of contraction for Q1 than originally estimated, at 0.2 per cent, in April. There was a particularly high contraction in construction output - declining by 4.8 per cent in Q1 this is thought to be in large part due to declining work for the public sector. Encouragingly, construction activity in the housing market continued to rise. Sharp fall in consumer spending prompts fears for UK recovery. A rise in mortgage rates, slowing income growth and persistently high inflation has triggered a sharp fall in consumer spending power during April. House prices were flat in May, while shopper numbers fell in April. Economic output is four per cent below its 2008 peak and 14 per cent short of where it would have been had growth continued at its long-term annual trend of 2.5 per cent over the past four years. BUSINESS CONDITIONS IN MAY 2012: WEAK DOMESTIC RECOVERY, STRONG EXPORT GROWTH According to the Bank of England Agents summary of business conditions, the continued weakness of the economic recovery was evident. Private sector employment was expected to be broadly unchanged over the next six months, with investment intentions pointing to a small increase in capital spending over the coming year. Goods export growth remained strong, particularly to emerging market economies, and manufacturing output for the domestic market continued to expand at a moderate pace. Turnover in business services had improved a little compared with a year earlier, partly due to higher prices. There remains spare capacity in many firms, with most able to meet expected changes in demand comfortably. There tended to be relatively slacker in the service sector. Labour cost growth remained fairly modest, and there were generally few signs of upward pressure on pay from employees. Past increases in the price of oil fed through to a range of materials, and rising production costs abroad pushed up on import prices. Manufacturing output prices continued to rise at a moderate pace reflecting some passthrough of increases in costs. Business services inflation was subdued. For firms with strong balance sheets, credit was normally available on reasonable terms, but for some businesses there had been a rise in the interest rate spreads charged on loans over the past few months, and fees were also reported to have increased. 12

13 OUTLOOK FOR THE UK ECONOMY Most forecasters agree on lower growth forecasts for the UK in These range from -0.5 per cent (a contraction) to 0.8 per cent growth. The outlook for 2013 is subject to more variation between 1.5 and 3.0 per cent growth. The OBR economic growth forecasts for 2012 are more optimistic than many independent forecasters. The Office for Budget Responsibility (OBR) s March 2012 forecasts were for 0.8 per cent growth in 2012 and 2.0 per cent in 2013; and for claimant unemployment of 1.65 million, and then 1.64 million in The OBR at the time believed that the UK could avoid falling back into technical recession. Its forecasts extend to 2016: the end period forecast for ILO unemployment, at 6.3 per cent, while lower than the current 8.4 per cent, remains higher than the pre-recession figure of 5.5 per cent (May-July 2008). Figure 2.2: A range of forecasts for UK economic growth in 2012 and 2013 (Sourced in June 2012) INTERNATIONAL ECONOMY Global growth is projected to drop from about 4.0 per cent in 2011 to about 3.5 per cent in 2012 according to the latest (April 2012) IMF World Economic Outlook. Due to problems in Europe, activity will continue to disappoint for the advanced economies as a group, expanding by only about 1.5 per cent in 2012 and by 2 per cent in Real GDP growth in the emerging and developing economies is projected to slow from 6.25 per cent in 2011 to 5.75 per cent in 2012 but then to reaccelerate to 6 per cent in 2013, helped by easier macroeconomic policies and strengthening foreign demand. 13

14 PUBLIC SECTOR EMPLOYMENT AND RESILIENCE TO ECONOMIC SHOCKS The OBR forecasts 710,000 public sector job losses during alone saw 270,000 losses, leaving 440,000 still to be cut one in every 14. There are concerns about the vulnerability of areas most dependent on public sector employment, as jobs and spending are cut, and pay is frozen. Private sector suppliers of goods and services to public buyers are also at risk. Sectors identified as more dependent than others on public purchasing include the defence supply industry, construction, consultancy, IT systems providers, pharmaceuticals and medical products, care providers and training providers, but in fact most sectors are at least indirectly affected through the loss of spending power. In the GCGP area public sector employment is just over 18 per cent of all non-farm employment (employees and working proprietors) in The England average is 20.8 per cent. GCGP area is 32nd of the 39 LEPs ranked by share of employment in the public sector, while GCGPEP is less exposed than some areas with 112,000 public sector jobs. The public sector accounts for more than 1 in 5 jobs in a number of GCGPEP districts: King s Lynn and West Norfolk (highest, 25 per cent of all its non-farm employment in public sector), St Edmundsbury, Huntingdonshire, Rutland and Cambridge. If the OBR s projection that 7.4 per cent of public sector jobs are to be cut by this would equate to circa 8,300 job cuts in the GCGP area. RESILIENCE Experian recently published resilience rankings of LEP areas; resilience being the ability of the LEP area to withstand and respond to shocks in the external environment. It looked at resilience across four key themes: business, community, people, and place. Figure 3.1 over the page sets out more information about characteristics Experian has associated with greater resilience. Experian s figures and methodology position GCGP area low in the first quartile or near the top of the second quartile in the different themes. A number of the contributory indicators are examined individually in this report. LONGER TERM FUNDAMENTALS FOR ECONOMIC HEALTH The global financial crisis and widespread recession has changed the way we think about the future. Nevertheless, fundamental strengths have to provide the base for the future. HM Treasury sets out the key influences on economic growth: economic output is determined by employment dependent on working age population and economic activity rates - and productivity. Productivity is driven by innovation, skills, enterprise and investment. The LEP Network (2012) report Creating Successful Local Economies: Review of Local Enterprise Partnership area economies in 2012 looked at LEP areas with consistently high economic output per capita and strong historic growth rates. GCGP area was placed among the 10 top-performers. Indicators that contributed to its position included: GVA per head (using Cambridgeshire and Peterborough as proxy for LEP area) at 21,700 (current basic prices) in 2009, this ranked it 9 th ; innovation indicator (patents per 100,000 residents, 2007) GCGP was top ranked of all the LEP areas; share of employment in the knowledge economy and high & medium technology manufacturing (9th); and business formation and creative destruction: churn rate (7th). 14

15 Figure 3: Experian s resilience index for LEP areas EXPERIAN S RESILIENCE INDEX FOR LEP AREAS, 2012 Source: Experian, per cent20economic per cent20resilience.aspx Note: Experian s approach looks at resilience across four key themes: business, community, people, and place. Underneath each of the four themes sit a number of variables. 39 variables have been used in total to create the index. Each variable is available at local authority district level. As such, data can be sorted and analysed by variable allowing an understanding of which factors impact local economic resilience and how these compare across geographies. Business: How strong is the local business base? Is it dependent on sectors that have been impacted by the challenging economic climate? Does it have a high number of firms proven to adapt to difficult economic conditions? Have many firms gone out of business? Are businesses dependent on only local markets, or do they export? People: Is there a large working age population that can contribute to the economy? How many people have high skills levels? How many people work as managers and how many people work in elementary roles such as cleaners and refuse workers? How much do locals earn on average? Community: How high is life expectancy? How many people claim benefits? Does the area suffer from deprivation? How many households are vulnerable to long-term unemployment? How many households are vulnerable to declines in disposable income? How cohesive is the community? Place: What are GCSE attainment rates like? How affordable are houses? How high is the local crime rate? How much fraud is committed? What is the value of local office space? How high are the local carbon emissions? How many vacant shops are there? 15

16 4. POPULATION AND WORKFORCE SUMMARY The GCGP area s high population growth between 2000 and 2010 (10 per cent) over the last decade is second to only one LEP (the West of England, with a 10.7 per cent increase) The GCGP area s rates of economic activity (80.6 per cent) were higher than the England average (76.3 per cent) The GCGP area s workforce growth rate (9.2 per cent between 2000 and 2010) puts it in the top 10 for LEP areas The GCGP area s employment rate (74.7 per cent) is higher than the England average (70.3 per cent), with the gap widening since pre-recession The rate of claimant unemployment is not a good measure of underused labour market potential (2.5 per cent for a period when ILO unemployment 7.3 per cent), but does provide more timely and local intelligence The March 2012 claimant unemployment rate for the GCGP area, at 2.9 per cent is close to the recent historical peak (3.0 per cent in 2011) Youth unemployment is a key concern - the youth (18-24) unemployment rate in March at 6.0 per cent was more than double the rate (2.9 per cent) for year-olds Peterborough, Fenland and King s Lynn and West Norfolk face particularly challenging rates of unemployment POPULATION In the decade to 2010, England s population grew by 6.1 per cent, from 49.2 million to 62.0 million. Official (2010-based) projections are for England s population growth of 8.4 per cent in the decade to 2020, and 6.7 per cent in the subsequent decade. Projections are modelled on past trends in birth rates, death rates, and migration. They do not take account of policy nor, sub-nationally, of different areas capacity to absorb population growth. Sub-national population projections understate what is planned to happen to the GCGP area. The continuing growth of population and creation of new communities is one of the LEP s top priorities, with the requirement for major sites, infrastructure, homes, public and private services, consumption and business investment being fundamental to future economic growth. In the decade to 2010, the GCGP area s population grew by 10 per cent, the second highest of the LEP areas (after the West of England, 10.7 per cent). Even in absolute terms, its 122,400 population increase was in the top five amongst the 39 LEP areas. Two thirds of the GCGP area s population growth took place in Cambridgeshire and Peterborough. The working age population (taken as 16-64) increased by 9.2 per cent in GCGP area in the decade, compared to 7.6 per cent in England. ECONOMIC ACTIVITY The GCGP area has a high economic activity rate with 80.6 per cent of working age people means local residents are more likely than England average to be in employment or actively looking for employment. Although there is a confidence interval associated with the GCGP area measure, as shown in the chart, the difference from the English average (76.3 per cent) is statistically significant. However, changes in the GCGP area measure from year to year and even over the whole period of the chart are not statistically significant. Figures for the local areas that constitute the GCGP area have wide confidence intervals, but some differences between local areas are statistically significant. Fenland s economic activity rate is lower than most other areas, and East Cambridgeshire s is higher than some. 16

17 Figure 4.1: Economic participation as measured by the economic activity rate from 2005 to 2011 Source: ONS Annual Population Survey, years to June WORKFORCE GROWTH The combination of high growth in the adult population and a high rate of economic activity have meant that the size of the GCGP area s workforce has increased by about 9 per cent over the decade, putting GCGP amongst the top 10 LEP areas, though substantially exceeded by London (19 per cent) and West of England (15 per cent). EMPLOYMENT RATE While 80.6 per cent of GCGP area s working age population is economically active, the share in employment is 74.7 per cent (year to June 2011), compared to 70.3 per cent for England. That doesn t quite put the GCGP area in the top 10 LEP areas, although the GCGP is not far behind some higher ranked LEP areas. The working age employment rate of the GCGP area (74.7 per cent) is significantly higher than the English average (70.3 per cent), with the gap widening since the recession began. Within the local areas that form the GCGP area, employment rates range from 64 per cent in Fenland to 82 per cent in East Cambridgeshire. UNEMPLOYMENT RATE The working age unemployment rate 10 for GCGP area in the year to June 2011 is 7.3 per cent. Twenty-five other LEP areas have lower unemployment rates, the lowest being 4.1 per cent (Enterprise M3). The GCGP area s unemployment rate, changeable in the pre-recession years, has climbed since the onset of the recession, although remaining lower than the England average. 10 Unemployment is the share of the (working-age) economically active that are available and actively looking for work. It is expressed as a proportion of the economically active, not the working age population. 17

18 Figure 4.2: Participation in work, as measured by the employment rate from 2005 to 2011 Source: ONS Annual Population Survey, year is Jul-Jun. Figure 4.3: Official unemployment rates from 2005 to 2011 Source: ONS Annual Population Survey, year is Jul-Jun. 18

19 CLAIMANT UNEMPLOYMENT Claimant unemployment is the sub-set of the unemployed who are eligible to claim JobSeekers Allowance. In GCGP area, in the year to June 2011, while ILO unemployment was 49,500, 7.3 per cent of the working age population, the claimant number was 21,250, a rate of 2.5 per cent. Therefore claimant count is not a good measure of underused human potential, but it has the advantage of being a consistent and timely measure of trends. March 2012 figures show a claimant count of over 24,720 people in GCGP area. This is well over double pre-recessionary levels in mid-2008 (11,900 claimants). Unemployment levels have proved persistent as March 2012 s 2.9 per cent claimant unemployment rate was just short of the recessionary peak of 3.0 per cent in February YOUNG PEOPLE The youth (18-24) unemployment rate in GCGP area in March 2012 was 6.0 per cent - more than double the rate (2.9 per cent) for the year-old population. In England, 8.1 per cent of year-olds and 4.1 per cent of yearolds were claimant unemployed. The Black Country LEP area has the highest rate of youth unemployment, at 15.0 per cent, and another seven LEP areas have rates above 10 per cent. Of the 7, year-olds who are claimant unemployed in the GCGP area, 675 have been on the register for over a year, and 80 for over two years. LOCAL AREAS Peterborough has the highest rate of claimant unemployment, at 5.6 per cent, and Rutland the lowest, at 1.4 per cent. Peterborough has experienced the largest increase in claimant unemployment over a five-year and one-year period. Fenland and King s Lynn and West Norfolk, with Peterborough, face the greatest challenges with regard to unemployment, also experiencing high rates of youth and long-term unemployment. WIDER WORKLESSNESS JSA (Job Seekers Allowance) claimants account for under a third of out-of-work benefits recipients (30 per cent, up from 20 per cent pre-recession). There were 73,780 people receiving out-of-work benefits at the last quarterly snapshot in August 2011 more than 1 in 12 (8.6 per cent) of the working age population. Since then 2,250 additional people are claiming JSA, which is the main component of change. COMPARING LABOUR MARKET DEMAND AND SUPPLY: JOBSEEKERS TO VACANCIES RATIOS Jobcentre Plus claimants per unfilled vacancy ratios are used as a measure of labour market conditions (in particular how tight or loose a local labour market is), although it must be remembered the Jobcentre Plus only handle a share of total vacancies in the labour market. Across the GCGP area as a whole in March 2012, there are 2.9 claimants for every vacancy, ranging from 1.4 in Cambridge to 6.0 in Fenland. This compares to 5.7 nationally (England). At the most acute point of the recession, there were 6.3 claimants for every vacancy in the GCGP area (Spring 2009), and in Fenland the ratio averaged 15 in the first three months of In Peterborough, where the claimant to vacancy ratio is 3.8 (March 2012), a recent care home advertising 25 jobs had 2000 applications: a reminder that the ratio says little about the full extent of competition that JobSeekers are facing. 19

20 Figure 4.4: Claimant unemployment rate in March 2012 in local areas in GCGP area Source: Claimant Count, accessed via Nomis WORKFORCE SKILLS SUMMARY GCGP area ranks 12 th amongst LEP areas for the share of Degree-level qualified residents The share of young people qualifying at level 2 and level 3 thresholds by age 19 is higher than the England average The share of residents in high level occupations (46.2 per cent), especially professionals, is strong Over the past five years, the earnings gaps between local areas has narrowed a little QUALIFICATIONS AND HIGH LEVEL OCCUPATIONS Skills are vital to economic performance, but difficult to measure - we rely on proxy measures for skills levels in the workforce such as qualifications attainment. Conventionally, an area s skills base is assessed by analysing how the workforce is qualified at different levels of the National Qualifications Framework (NQF), and by occupations of people in employment, sometimes in specific industry sectors if the information is available. The updated Standard Occupational Classification (SOC2010), like its predecessors, is expressly designed to capture requirements for skills in how occupations are classified. The Major Groups are 1 through 9, in which 1 to 3 are termed high level (high skill) occupations, through to 9 being elementary occupations (low skills). Employers often use qualifications levels as specifications in recruitment. Workforce qualifications levels are often considered in location decisions. Where availability of a well-qualified pool of people is important, this is sometimes also appraised by the presence of similar employers or clusters of businesses. 20

21 Qualifications Level 4 in the NQF equates to Degree-level or equivalent, and the share of the workforce qualified to Level 4 or above (L4+) is a key indicator. Evidence on L4+ attainment in 2010 shows that the GCGP area is not significantly different from England: 32.2 per cent versus 31.1 per cent respectively. The GCGP area has more than 269,000 working age residents qualified to L4+, ranking it just outside the top third of LEP areas (14 th ). The share of the GCGP area s workforce qualified at that Level 4+ is 32 per cent, rank 12 th amongst the 38 LEP areas. LEP areas with the highest share of their workforce qualified to Level 4+ are significantly ahead and include London (42 per cent), Oxfordshire (40 per cent), and the two Thames Valleys Thames Valley Berkshire and Buckinghamshire Thames Valley (both with 38 per cent). At the other end of the table, less than one in five of the Black Country LEP area s residents is qualified to L4+ (19.1 per cent). GCGP area-wide figure is a weighted average of some very different local area profiles. The chart below sets the areas out in rank order. Lines at the top of the bars show what might be due just to the particular sample selected, but differences between the top and bottom are significant in the sense of their magnitude and in the statistical sense. YOUNG PEOPLE QUALIFYING AT LEVELS 2 AND 3 The share of the area s young people who gain Level 2 qualifications by age 19 in GCGP area (proxy by three upper tier authorities) is a little above the England average, and in the most recent data (2010/11), the share reaching Level 3 by 19 is 2.5 percentage points higher than England. Like adult qualifications and incomes, young people s achievement varies widely. In the local areas which make up the GCGP area, Peterborough has the highest share of the workforce not attaining Level 3 qualifications. Peterborough has narrowed the gap in Level 2 achievement over the past five years, but its slower improvement at Level 3 means the gap there has widened. Figure 4.5: Share of working age residents with highest level of qualification at or above degree-level or equivalent Source: Annual Population Survey, year is Jan-Dec (only period for which qualifications data published) 21

22 Figure 4.6: Share of working age residents with highest level of qualification at or above Degree-level or equivalent for GCGP local areas, 2010 Source: ONS Annual Population Survey, Jan-Dec 2010 Figure 4.7: The types of jobs undertaken by workers and residents in the GCGP area in 2011 Workplace Resident GCGP Area England GCGP Area England all in employment who are: Number Per cent Per cent Number Per cent Per cent 1: managers and senior officials 66, , : professional occupations 134, , : associate prof & tech occupations 93, , : administrative and secretarial occupations 74, , : skilled trades occupations 78, , : personal service occupations 57, , : sales and customer service occupations 50, , : process, plant and machine operatives 44, , : elementary occupations 68, , All 668, ,300 Source: ONS Annual Population Survey, Jul 2010-Jun 2011 OCCUPATIONS THE TYPES OF JOB UNDERTAKEN A marginally greater share of the GCGP area s residents are employed in high level occupations (SOC1-3) 46.2 per cent, compared to the England average of 43.5 per cent. The GCGP area has a correspondingly lower share at intermediate level, in both the practical (SOC4,5) and service (SOC6,7) groups, and in the operative and elementary occupations (SOC8,9). The differences are marginal, and the occupational structure is almost identical to England as a whole. 22

23 The GCGP area s share in high level occupations, at 46.2 per cent, puts GCGP just in the top 10 of 39 LEP areas. London has 53.9 per cent of residents in high-level occupations, while the Black Country has the lowest share (34.5 per cent). In terms of local differences within the GCGP area, the occupational profile varies markedly. Almost six out of ten Cambridge residents are in employment in high level occupations (58.3 per cent), compared to three out of ten in King s Lynn & West Norfolk (30.4 per cent). Residents employment occupations of course reflect the complex interaction between their skills and the kinds of work available in the area. High level occupations such as managers and professionals - attract workers from a wider catchment, whereas elementary jobs tend to be fulfilled by workers living locally. Travel into the main employment centres in GCGP area and commuting beyond its area means that occupations on a workplace basis (i.e. the jobs based within GCGP rather than the residents who may work in GCGP or elsewhere) differ from residents. Overall, there are some 21,000 more workplace jobs in the GCGP area than residents in employment. Intermediate Skills occupations are the largest occupational grouping in terms of importing workers, while high level occupations are the sole export grouping. Figure 4.8: Comparing the types of jobs that are undertaken in workplaces with residents reveals where there is inand out-commuting, 2011 Source: ONS Annual Population Survey and Workplace Analysis, Jul 2010-Jun 2011 A LONG-TERM VIEW OF OCCUPATIONAL CHANGE AND THE IMPORTANCE OF REPLACEMENT DEMAND High level occupations are seen as a key driver of economic growth, going hand-in-hand with the increased knowledgeintensity of our economies. But other sources of change, as well as growth, give rise to demand for a whole range of different occupations, including particularly those that are not affected by globalisation, such as care and personal service occupations. 23

24 There has been an hour-glass pattern to occupational change, with most of the job creation at the top and bottom of occupational classification. However, all occupational groups provide job openings because the vast majority of employment opportunities come not from new jobs but from existing jobs becoming vacant (known as replacement demand). It is vital for that message to appear when GCGPEP partners are using occupational projections from its (future) local economic model to provide information about the jobs of the future. EARNINGS Earnings can be seen as an indicator of quality of job opportunities and workforce quality. Indices of earnings compared to the national benchmark reflect similar patterns to occupations, with higher earnings figures for districts with higher shares of high level occupations. Earnings are published on both resident and workplace basis. The basis of publication does not allow calculation of a weighted average for the GCGP area. South Cambridgeshire s median annual gross earnings on a workplace basis were 31,000 in 2011, while Fenland s was 23,300. On a residence basis the range was from North Hertfordshire ( 32,700) to King s Lynn ( 23,600). Compared to five years ago, median earnings in local areas in the GCGP area appear to have converged with each other and with England, as the range of index values has narrowed. On the same measure (index of median full-time gross earnings) the workplace range in 2006 (where England=100) was South Cambs (127) to Forest Heath (75); and the residence-based range Uttlesford (119) to Forest Heath (75). Figure 4.9: Index of median full-time earnings (England=100) districts where there are statistically significant differences, 2011 Workplace Basis Residence Basis Higher Lower Higher Lower South Cambs (116) Cambridge (108) Fenland (88) East Cambs (88) Source: ONS Annual Survey of Hours and Earnings, 2011 North Herts (123) South Cambs (119) Uttlesford (117) Peterborough (89) King s Lynn & West Norfolk (89) 24

25 5.EMPLOYERS, ENTERPRISE AND EMPLOYMENT SUMMARY The number of enterprises (local units which measures individual enterprises and branches) peaked in 2008 at 63, per cent of local units are rural Over 70 per cent of local units are microbusinesses: in the 0-4 employee size band The GCGP area s rate of growth in the number of outperforms the England average The annual average growth rate needed to reach 100,000 businesses by 2025 has only been achieved once in the past decade There were over 4,900 business births in 2010, with business survival rates consistently stronger than the England average Employment fell over 2009 and 2010, but the rate of change was 0.8 per cent below the average for England Employee job losses were partially offset by an increase in business proprietors Health, education, manufacturing and retail are the largest employment sectors The GCGP area is in the top 10 LEP areas of the share of total employment in the knowledge economy and high and medium tech manufacturing activities. The GCGP area s industrial structure is such that it has a greater export potential (share of employment in sectors with above average exports per employee) than the average for England The Greater Cambridge area has a European Commission Award for Excellence in Innovative Regions and is the largest UK cluster of scientific R&D industry employment outside London THE ENTERPRISE BASE NUMBER OF ENTERPRISES The GCGP area had 61,500 local units (local units are individual sites, for example a factory, office or shop, and may or may not be part of a larger group) in March The number of local units peaked at 63,695 in 2008 and has fallen in each of the three years since. FEATURES OF THE ENTERPRISE POPULATION 48 per cent of local units are Urban and 52 per cent are Rural. Over the two years 2009 to 2011, the total number of urban local units declined at a higher rate than for rural areas a decline of 4.0 per cent in urban areas compared to a 2.3 per cent decline in rural areas. Rural enterprises with highest relative representation ( location quotient versus whole GCGP area) are Agriculture, Construction and Transport & storage. Urban enterprises most highly represented relative to the whole: Retail, Finance & insurance; Accommodation & food, and Education & health. Seven in ten of GCGP area s local units are in the 0-4 people employment sizeband (70.8 per cent). Only 8.5 per cent employ 20 or more people. 35 per cent of those employing 20+ are in Rural areas, 65 per cent in Urban areas. Average employment per local unit was 10 people (2010, latest), up from the 9.7 of the last five years. The high share of Agricultural local units is the outstanding difference of GCGP area s enterprise base (local units) compared to England Statistics about local business have two measures: enterprises and local units. Enterprises are the smallest combination of legal units (usually based on VAT and/or PAYE records) that has some autonomy, and may or may not be part of a larger group. Local units are individual sites, for example a factory, office or shop, and may or may not be part of a larger group. Turnover and employment of enterprises is counted where the enterprise is based, and may include activities carried out outside the area. Employment of local units is therefore a better measure of local employment. Turnover figures, however, are only available for enterprises. 25

26 Figure 5.1: Industrial specialism according to enterprise population (location quotients of GCGP Area compared to England) Source: IDBR analysis by Broad Industry Group, via Neighbourhood Statistics is at March. CHANGE IN NUMBER OF ENTERPRISES SINCE 2001 Over the ten year period to 2011, the GCGP area out-performed England for growth in its total population of enterprises, with total growth of 7.2 per cent compared to 5.9 per cent. Over the 10 years from 2001 to 2011 annual growth in GCGP area reached (and exceeded) 3 per cent only once. To grow the 2008 baseline to 100,000 enterprises by 2025 requires an average annual average growth rate of 3 per cent. The baseline is now 2,465 units (4 per cent) lower than 2008, therefore GCGP s stated target is ambitious. ENTREPRENEURSHIP New enterprise formation is a key contributor to growth, and an EU study 13 concluded that while SMEs account for 65 per cent of employment, their share in job creation in the decade to 2010 was 85 per cent. Newly formed enterprises are particularly important to job creation, and survival rates meant that, despite loss through young business deaths, in the past decade, approximately 85 per cent of jobs created were sustained after five years. 12 Location Quotient (LQ): where Industry Group s share of local units is the same in GCGP as for England, the LQ is 1.0. An LQ greater than 1.0 shows that GCGP has a greater share of its local units in that industry than England. 13 Study on the SMEs' impact on the EU labour market, Jan

27 Figure 5.2: Change in number of enterprises (local units) Source: IDBR and Neighbourhood Statistics. (Reference date March) Figure 5.3: Percentage change in number of enterprises (local units) in GCGP Area and England Source: IDBR and Neighbourhood Statistics. (Reference date March) 27

28 The recent LEP Network Report, Creating Successful Local Economies: Review of Local Enterprise Partnership area economies in 2012, sets out a number of analytical points. The GCGP area is above the England average, and ranks about a third of the way down LEP areas, for Enterprises per 1000 population and Annual average change in number of enterprises The GCGP area s 2010 business birth rate (8.9 per cent of stock) was relatively low (England 10.4 per cent), but then so too was the death rate, meaning that the net change rate (-2.1 per cent) was better than the England average (-2.7 per cent), and on that measure, it was just outside the top 10 LEP areas. Self-employment, at 9.4 per cent of the working age population (year to June 2011), is in line with the England average, and puts GCGP area as middle-ranking amongst the LEP areas. Business births in GCGP area as a whole exceeded deaths by over 1,200 annually in the years 2004 to 2006 and this went up to 1,400 in 2007, before the crisis hit. In 2008 births fell and deaths rose. In 2009 (earlier in some localities within the GCGP area) deaths overtook births. However, there were over 4,900 births in 2010 supporting the other evidence that new business proprietors helped to moderate the loss of employee jobs. Figure 5.4: Business births and deaths in the GCGP Area Source: Business Demography 2010 Local areas within GCGPEP have different levels of entrepreneurship. The recession has also impacted them differently: Fenland, King s Lynn & West Norfolk (KLWN) and Forest Heath all suffered net loss in the enterprise base from 2008, ahead of the other areas. Cumulative net loss, from when net change first turned negative until 2010, was over 300 enterprises in KLWN, 260 in St Edmundsbury, 230 in Fenland, 225 in Peterborough. In 2010, areas most affected, measured by net loss as per cent of stock, were Rutland -4 per cent, KLWN (-3.8 per cent) and St Edmundsbury (-3.0 per cent). ENTERPRISE SURVIVAL Survival rates for businesses are reducing. The UK five-year survival rate was 46.8 per cent for 2004 births, but has fallen to 44.4 per cent for 2005 births. The table shows the various survival rates for different birth years, for GCGP area and England for comparison. GCGP area s consistently stronger rates may reflect stronger entrepreneurial capabilities, or better support, or may simply be due to the mix of businesses that set up locally. Five-year UK survival rates are notably 28

29 high for businesses in health (58.3 per cent) and education (55.5 per cent), whereas the hotels & catering sector sees only 33.6 per cent of businesses surviving for five years. Figure 5.5: Survival rates for businesses born , GCGP area Year of Birth year survival year survival year survival year survival year survival 47.1 Source: ONS Business Demography 2010 Figure 5.6: Difference GCGP area survival rate, compared to England average Year of Birth year survival year survival year survival year survival year survival 3.0 Source: ONS Business Demography 2010 SELF-EMPLOYMENT Enterprise statistics capture business as they reach some legal threshold such as registration for PAYE or for VAT. Activity below these thresholds can escape the radar. National Business Population Estimates (BPE) 14 look at what this might mean, and conclude that self-employment figures from the Annual Population Survey, adjusted for those that are counted in the Business Register (IDBR), are the best available source. Nationally just over 70 per cent of self-employed are not on the IDBR. Self-assessment tax returns indicate what share are sole traders and what share are partnerships. As there is no data to show how this might vary by area, unadjusted self-employment figures can show the relative importance between areas of below-the-radar business, and an adjusted figure can suggest the order of magnitude for the GCGP area. The rate of working-age self-employment in GCGP area is 9.4 per cent, in line with the England average of 9.3 per cent, and in the top half of LEP areas. Within GCGP area, working-age self-employment varies from 17 per cent (Uttlesford) to about 6½ per cent (Peterborough and Cambridge). (Lower reported rates for Fenland and Forest Heath are not reliable because of the small samples.) The number of self-employed people in GCGP area is 78,900. Using metrics from national BPE, that might add an additional 51,700 to the zero-employee business population. EMPLOYMENT CHANGE IN EMPLOYMENT LEVELS From September 2008 to September 2010, employment 15 in the GCGP area fell by 10,700 jobs representing a 1.7 per cent contraction. This was less than the 2.5 per cent contraction experienced in England over this period. Employee numbers in the GCGP area fell by 14,800 (-2.5 per cent), compared to a 3.0 per cent fall in England. The GCGP area 14 Business Population Estimates Methodology Note, May Employment is defined as employees and working proprietors. 29

30 ranked 14 th of the 39 LEP areas for employment change over this period. Evidence suggests that a 4,100 increase in enterprise proprietors partly offset employee-job losses in the GCGP area. 16 Full-time and part-time employee jobs both fell: between 2008 and During this period, the GCGP area experienced a 9,000 loss in full-time jobs (a contraction of -2.2 per cent), and a 6,000 loss in part-time jobs (a -3.2 per cent contraction). Part-time employment suffered hardest in 2009, but bounced back in Full-time employment was hit less hard initially, but continued to decline into This evidence may indicate that employers were trying to protect core employees in expectation of recovery, but subsequently turned to seek the greater flexibility of part-time employment. In England there was a 4 per cent drop in full-time employee jobs and 0.9 per cent drop in part-time employee jobs. EMPLOYEES BY INDUSTRY The GCGP area s industrial composition, in terms of (non-farm) employees, is shown in the Figure 5.8 below. Health and social work, Education, Retail and Manufacturing each employ more than 10 per cent of employees. Figure 5.8: Employees by industry/industry group in GCGP Area, 2010 Source: ONS BRES 2010, based on Standard Industry Classification 2007 (SIC2007); excludes agriculture Export Intensity and Foreign Ownership LEP Network (2012) Creating Successful Local Economies:Review of Local Enterprise Partnership area economies in 2012 sets out the importance for economic growth of internationalism and export since these offer major areas of opportunity because of population growth, the growth of consumerism, and business investment to meet that. As 16 Source: ONS BRES 30