The South West Healthy Labour Market Review, Produced by SLIM, on behalf of the South West Regional Skills Partnership

Transcription

1 The South West Healthy Labour Market Review, 2008 Produced by SLIM, on behalf of the South West Regional Skills Partnership October 2008

2 South West Observatory - Skills and Learning (SLIM) 'the key co-ordinator, assembler, analyser and disseminator of skills and learning information in the South West' The Skills and Learning Intelligence Module (SLIM) provides a source of robust and accessible evidence on the skills and learning needs of individuals and businesses across the South West. SLIM seeks to inform policy decisions, funding programmes, organisational and partnership strategies and individual projects. The development of SLIM has been driven by the growing emphasis on the region as a focus for promoting sustainable economic and social development and a national emphasis on evidence-based practice. SLIM offers a range of services to capture, synthesise and disseminate knowledge on skills and learning: It develops knowledge management systems, including on-line databases of research and data. It drives discussion and analysis of this information through e-newsletters; a quarterly Bulletin; online discussions; workshops and thematic reports. It offers individual advice and analysis through a help-desk and through direct working with the South West Regional Development Agency. It undertakes and commissions research to support the work of partner organisations in the region. As a module of the South West Regional Observatory, it will increasingly work with the other modules to contribute to an holistic understanding of the region s path to sustainable development. SLIM also supports the work of the South West Regional Skills Partnership (RSP). It does this in its role as secretariat to the RSP Performance Monitoring Group where it works in partnership to support the evidence base for the RSP. SLIM is based within the Marchmont Observatory, at the School of Education Lifelong Learning and Education at the University of Exeter. 2

3 ACKNOWLEDGMENTS SLIM would like to thank the Regional Skills Partnership Performance Monitoring Group for oversight of the project, and to the South West RDA and ESF for funding the project. Thanks go to the LSC Research Team for provision of the National Employer Skills Survey 2007 data. The modelling for the Leitch analysis in Section 4 of the report drew upon the work of the West Midlands Observatory. The report was produced by: Adam Crews, of Crews Associates who provided the labour market analysis; and, Allison McCaig, South West Observatory Business and Economy Module, who provided the analysis on productivity and business indicators. The project was overseen by Chris Evans, Director of SLIM who also edited the report. Thanks also go to SLIM staff Ruth Carey and Hilary Todd for proof reading and production and to Kevin Aggett for web site development. 3

4 CONTENTS Acknowledgments... 3 Contents... 4 List of Tables... 5 List of Figures... 6 EXECUTIVE SUMMARY Key findings Broad outcome indicators Closer to policy indicators Qualifications and Learning Introduction Purpose of the Review Approach Economic Context Structure of the report Broad Outcome Indicators Employment Employment rate Employment growth Jobs density Balance and quality of employment Employment by sector Knowledge-Intensive Sectors Employment by occupation Future Employment Trends Earnings levels Distribution of Earnings Employment by size of business Working patterns and job types Self-employment Part-time employment Temporary work Output and Productivity Output GVA per head Labour productivity Capital productivity Population and migration Population Graduate flows Labour supply Working age population Economic activity Workforce attitudes and well-being Unemployment Equity in the labour market Equity at the individual level Equity at the geographical level

5 3. Closer to Policy Indicators Business generation and survival Business generation and start ups Business survival Research and development Labour market turnover Job churning Redundancies Vacancies and skills shortages Vacancies Internal skills gaps Work-related training Qualifications, Skills & Learning Participation of young people Adult participation Investment in qualifications and skills by individuals Qualification attainment among young people Qualification attainment among adults Qualification attainment by age Leitch Targets Baseline vs Intermediate (2011) targets Baseline vs Full (2020) targets Local Authority Analysis Summary Broad outcome indicators Closer to policy indicators Qualifications and Learning Conclusions References Appendix 1: Leitch Targets - Local Authority Tables Endnotes List of Tables Table 2.1: Employment in high-technology and knowledge-intensive sectors, 2006 (%) by county/unitary authority Table 2.2: Distribution of gross weekly earnings by region, Table 2.3: Gap between the top 10% and bottom 10% of earners, South West, Table 2.4: Self-employment by sector, South West vs England, 2007 (%) Table 2.5: Temporary employment by sector, 2007 (%), South West vs England Table 2.6 Summary of regional GVA, current prices Table 2.7: Summary of South West NUTS 3 sub-regional GVA, current prices Table 2.8: Investment as a proportion of GVA Table 2.9: Inter-regional migration flows, year ending June 2007 (thousands) Table 2.10: Sources of in-flows and destinations of out-flows to and from South West, year ending June 2007 (thousands)

6 Table 2.11: Graduate movements into and out of South West, 2005/ Table 3.1: VAT registered businesses still trading three years from first registration (percent still trading) Table 3.2: Vacancies in the South West, by LSC area, Table 3.3: Hard-to-fill vacancies by region, Table 4.1: Participation in HE by students from the South West, 2002/ / Table 4.2: Comparison of baseline position against Leitch intermediate targets Table 4.3: Comparison of baseline position against Leitch 2020 targets List of Figures Figure 2.1: Employment rates, working age population, 2007 (%) all regions Figure 2.2: Employment rates, working age population, 1997 to 2007 (%) South West vs England Figure 2.3: Employment rate working age population, by local authority district, Figure 2.4: Change in employees in employment (%), all regions Figure 2.5: Change in employees in employment, 1998 to 2006 (Index 1998=100) South West vs England Figure 2.6: Jobs per working age resident, All regions Figure 2.7: Job densities by local authority district, Figure 2.8: Employees in employment by sector, 2006 (%) broad SIC, South West vs England Figure 2.9: Change in employees in employment by sector, (%) broad SIC, South West vs England Figure 2.10: Change in employees in employment by sector, (%), South West vs England Figure 2.11: Employment in knowledge sectors, 2006 (%) all regions Figure 2.12: Change in employment in high technology and knowledge-intensive sectors (%) all regions Figure 2.13: Change in employment in high technology and knowledge-intensive sectors (%) by South West local authority district Figure 2.14: Employment in high level occupations, 2007 (%) all regions Figure 2.15: Employment by occupation, 2007 (%) South West vs England Figure 2.16: Employment change by occupation, (%) South West vs England Figure 2.17: Projected employment change by sector, (%), South West vs England Figure 2.18: Projected employment change by occupation, (%) South West vs England Figure 2.19: Average gross weekly earnings of full-time employees, 2007 ( ) all regions Figure 2.20: Average gross weekly earnings by local authority district, 2007 ( ) Figure 2.21: Distribution of employment by size of establishment, 2006 (%)

7 Figure 2.22: Proportion of self-employment, summer 2007 (% of working age population), all regions Figure 2.23: Self-employment rates, (%of working age population) South West vs England Figure 2.24: Proportion of part-time employment, 2007 (%) all regions Figure 2.25: Proportion of temporary employment, summer 2007 (%) all regions.. 44 Figure 2.26: Nominal growth in South West and UK Gross Value Added Figure 2.27: Regional GVA per head, 2006 (UK=100) Figure 2.28: SW GVA per head relative to the UK average +/- London Figure 2.30: South West sub-regional GVA per head, Figure 2.31: South West sub-regional GVA per head, 1995 vs Figure 2.32: South West productivity measures, 1996 to Figure 2.33: GVA per filled job in South West NUTS 3 sub-regions Figure 2.34: UK migration summary, (thousands) Figure 2.35: Age structure of the working age population, 2007 (percentages) South West vs England Figure 2.36 Change in number of working age residents by five year age band; 2009 to 2018, South West Figure 2.37: Economic activity rates of working age population, 2007 (%) all regions Figure 2.38: Economic activity rates of working age population, 2004 to 2007 (%) South West vs England and neighbouring regions Figure 2.39: Economic activity rates by local authority district, 2007 (%) Figure 2.40: Working days lost through industrial disputes per 1,000 employees, South West vs UK and neighbouring regions Figure 2.41: Trade union density by region 2006 (% of employees) not seasonally adjusted Figure 2.42: Proportion of workforce taking one or more days off sick in previous week, Winter 2005 (%) Figure 2.43: Regional unemployment rates (%) all regions Figure 2.44: Claimant count unemployment rates, , South West vs England and neighbouring regions Figure 2.45: Claimant unemployment rates by local authority district, August 2008 (%) Figure 2.46: ILO unemployment rates, South West vs England and neighbouring regions (%) Figure 2.47: Incapacity Benefit and Jobseekers Allowance Claimants, South West, Figure 2.48: Long term unemployment as proportion of total unemployed, August 2008 (%) all regions Figure 2.49: Long-term unemployment (6 months +) as a % of total unemployed, by local authority district, August Figure 2.50: Ratio of 50 and over/under 50, female/male, disabled/non-disabled, nonwhite/white employment rates, 2007 (%)

8 Figure 2.51: Ratio between highest and lowest unemployment rate at LAD level, August Figure 2.52: Ratio between highest and lowest gross weekly earnings at LAD level, Figure 3.1: Annual change in VAT-registered business stock Figure 3.2: Net change in SW VAT-registered business stock by sector, 1997 to Figure 3.3: Growth in South West VAT-registered business stock by sub-region, 1997 to Figure 3.4: Sub-regional business survival rates Figure 3.5 Business expenditure on R&D as proportion of GVA Figure 3.6: Regional expenditure on R&D by sector, Figure 3.7: Labour market turnover by region, 2007 (%) all regions Figure 3.8: Employees made redundant in the last three months, 2007 (rate per 1,000 employees) Figure 3.9: Vacancies by occupational group, South West & England, Figure 3.10: Skills shortage vacancies (SSVs) as a proportion of the total number of vacancies, by region, Figure 3.11: Skills shortage vacancies by occupation, South West & England, Figure 3.12: Proportion of internal skills gaps by occupation, South West & England, Figure 3.13: Skills gaps as a proportion of employment by Sector Skills Council, South West, Figure 3.14: Proportion of employees and self-employed receiving work-related training in last three months, 2007 (%) all regions Figure 3.15: Proportion of employees and self-employed receiving work-related training in last three months, (%) SW vs England and neighbouring regions Figure 3.16: Proportion of working age population receiving work-related training in past 4 weeks, by South West local authority, Figure 4.1: Proportion of year olds in education or training, 2005 (%) international comparisons Figure 4.2: Proportion of year olds in education and training, 2006 (%) all regions Figure 4.3: Proportion of year olds in education and training, (%), SW vs England and neighbouring regions Figure 4.4: Proportion of year olds not in education, employment or training (NEET), Figure 4.5: Proportion of adults* participating in any learning in the last 3 years, 2007 (%) Figure 4.6: Percentage of 15 year olds achieving 5+ A*-C grades at GCSE, including English and Maths, 2008, all regions Figure 4.7: Percentage of 15 year olds achieving 5+ A*-C grades at GCSE, including English and Maths, by South West local authority,

9 Figure 4.8: Average points score per entry at A Level, 2008, all regions Figure 4.9: Average points score per entry at A Level, by South West local authority, Figure 4.10: Attainment of Level 2 at age 19, , South West vs England. 103 Figure 4.11: Attainment of Level 3 at age 19, , South West vs England. 103 Figure 4.12: Proportion of the working age population with no qualifications, all regions, Figure 4.13: Proportion of the working age population with no qualifications, , South West vs England Figure 4.14: Proportion of the working age population with no qualifications, 2007, by South West local authority Figure 4.15: Proportion of the working age population with no qualifications, by industrial sector, South West vs England, Figure 4.16: Proportion of the working age population with Level 2+ qualifications, all regions, Figure 4.17: Proportion of the working age population with Level 2+ qualifications, , South West vs England Figure 4.18: Proportion of the working age population with Level 2+ qualifications, 2007, by South West local authority Figure 4.19: Proportion of the working age population with Level 2+ qualifications, by industrial sector, South West vs England, Figure 4.20: Proportion of the working age population with Level 3+ qualifications, all regions, Figure 4.21: Proportion of the working age population with Level 3+ qualifications, , South West vs England Figure 4.22: Proportion of the working age population with Level 3+ qualifications, 2007, by South West local authority Figure 4.23: Proportion of the working age population with Level 3+ qualifications, by industrial sector, South West vs England, Figure 4.24: Proportion of the working age population with Level 4+ qualifications, all regions, Figure 4.25: Proportion of the working age population with Level 4+ qualifications, , South West vs England Figure 4.26: Proportion of the working age population with Level 4+ qualifications, 2007, by South West local authority Figure 4.27: Proportion of the working age population with level 4+ qualifications, by industrial sector, South West vs England, Figure 4.28: Qualification attainment by age in the South West, Figure 4.29: South West baseline position vs 2011 Leitch targets Figure 4.30: South West baseline position vs Leitch targets

10 EXECUTIVE SUMMARY The South West Healthy Labour Market Review 2008 is commissioned by the South West Skills Partnership (RSP) and produced by the South West Observatory Skills and Learning Intelligence Module (SLIM). It forms part of the robust evidence base which underpins the policies and actions of the RSP. The Healthy Labour Market Review process also forms an important part of the RSP s Performance Monitoring Framework through a detailed analysis of key labour market indicators. Key findings On most indicators the Review continues to paint a positive picture of the region s labour market. The South West enjoys a high degree of labour demand, a high performing education system producing a well-qualified workforce, and efficient and equitable functioning between the demand and supply sides. On many of the issues covered throughout the report, the South West performs better than most other English regions, with the exceptions of London and the South East, traditionally the strongest performing regions in the country. However, there seems to have been little overall shift in the region s position relative to other parts of the country and significant intra-regional disparities remain firmly in place in relation to a range of indicators. The northern and eastern parts of the region remain the powerhouse of the regional economy, with higher average earnings and employment rates and lower levels of deprivation than areas further south and west. Of course, much of this report looks at data on the recent past. Past Reviews have taken place during a time when conditions have been fairly stable and conducive to growth. However, future prospects look rather different for the 2008 Review. With economic growth slowing down, rapidly rising energy, fuel and food prices, rising inflation, the credit crunch and falling house prices, the economic outlook is rather more gloomy than in the recent past. However, although these factors are already starting to have an impact on businesses, at the time of writing there is little evidence yet of any significant effect on the regional labour market, in terms of redundancies or, business closures. The data analysed here suggested no drop in the employment rate, or any significant increases in ILO or claimant unemployment. Since this Review was undertaken, the region has now begun to experience rising ILO and claimant unemployment. The most obvious short-term implication of these rising prices is the impact on people s disposable income, and the likely effect on sectors of the economy most dependent on this sort of discretionary spending i.e. retail and tourism. The effects on retail have been felt for some time and are set to continue, with concerns for further job losses in the sector over the next two years. Richard Hyman of Verdict Consulting - one of the UK's most respected retail-watchers estimates that 100,000 jobs will be lost from the sector in 2008/09, and is quoted as saying: In all likelihood there will be an acceleration in job losses. Cost growth at the retailers has been outstripping sales growth and I expect this gap to widen in

11 The likely effect on the region s tourism sector is less clear. While there will be clear reductions in disposable income, the region may benefit from consumers perhaps being more cautious about spending their disposable income on relatively expensive foreign holidays and choosing to holiday in this country, a trend that the South West in particular may benefit from. The pound s recent weakening against the Euro certainly adds weight to this possibility. However, if the economic slowdown becomes a recession, then the prospects for tourism spending in the South West will become far more uncertain. These impacts on disposable income will most certainly impact most on those who earn the least. The relatively low wage rates in the South West means that this could have a more significant impact on levels of disposable income. At a time when intra-regional disparities in earnings and economic opportunity show little sign of reducing, this highlights the need for policy makers to focus their efforts on improving the skills and qualifications of those most in need, in those areas where economic opportunities may be in short supply. Whatever the near future holds for the South West, there is little to suggest that there are any structural problems that make it more vulnerable to economic change than other parts of the country, which should help it retain its position as a generally healthy labour market. This Review looks at performance against a set of indicators: Broad outcome indicators Closer to policy indicators Skills and learning indicators Broad outcome indicators The South West appears very healthy in terms of the efficient working of the labour market, with a high employment rate and relatively low unemployment. Although the longer-term trend of growth in employment has been suspended, with no growth in between 2005 and 2006, the slowdown in the South West has been less severe compared to other regions, suggesting the region is coping better than most with the recent economic slowdown. The region scores fairly well on the proportion of employment in high level occupations. Although it lags some way behind London and the South East, it has a much higher proportion than several other regions. The same could be said of the region s sectoral mix, which fairly closely mirrors the national structure of employment by industry. The proportion of employment in high-technology and knowledge-intensive sectors is comparable with most other regions, which all lag behind London and the South East. In terms of GVA per head, SW productivity is 93.8% of the UK average, the fourth highest of the English regions (fifth in United Kingdom). The region also performs reasonably in terms of average earnings, with the fourth highest gross weekly wages of the nine English regions, although the gap with the highest earning regions (London, the South East and East of England) remains significant. Overall, the South West seems to perform fairly well or better on all of these key indicators. At the same time, most indicators show significant disparities between different parts of the region, with the north and east of the region continuing to be the areas with the highest earnings, job densities and 11

12 employment rates, with the areas further south and west being characterised by lower earnings, less employment in knowledge intensive industries and higher unemployment. Closer to policy indicators In terms of business formation, the South West has the lowest rate of registration and deregistrations as a proportion of business stock. Business churn drives competitiveness and innovation and low business turnover rates are a potential indicator of lack of competitive pressures. However, the region has the highest business survival rates of all English regions. Expenditure on research and development is higher than the national average, with over 1.3 billion spent in the region in 2006, 1.5% of the region s GVA. The region has the joint third highest proportion of its GVA spent on R&D. Data from the latest National Employer Skills Survey suggests that employers are finding it increasingly difficult to find suitable employees to fill their vacancies. The total number of hard to fill vacancies has increased between 2005 and 2007 (to over 20,000), with the proportion of vacancies that are proving hard to fill also increasing. While some vacancies may be hard to fill due to the nature of the work, the hours or pay on offer, an increasing proportion of vacancies are proving hard to fill due to a shortage of skilled applicants. The number of reported skill shortage vacancies (SSVs) across the South West has increased by 15% between 2005 and 2007, and the region currently has the second highest level of SSVs in England. A similar picture emerges in relation to internal skills gaps experienced by employers, with an increasing number of skills gaps reported (from 107,000 in 2005 up to 137,000 in 2007). Although the number of skill shortage vacancies and internal skills gaps are increasing, the evidence does not point to a lack of higher level skills in the region. Both SSVs and skills gaps are most commonly reported in lower level occupations, such as sales, machine operatives and elementary occupations. The fact that the number of internal skills gaps has been rising may well be influenced by the fall in levels of training that is being undertaken. The proportion of employees undertaking any work-related training has been falling for the last two years. Qualifications and Learning The South West performs very well against other regions in terms of the educational achievement of its young people in both GCSEs and A Levels, and also in its retention of young people in fulltime education post-16. Similarly, the region also scores highly in terms of the qualification levels of the workforce and adults engaging in education. On the key indicators relating to qualifications, the South West has the lowest proportion of its working age population of all the regions, a proportion which is also falling year on year. The region has the third highest proportion of its working age population qualified to level 4 and above, falling only behind London and the South East, which are a particular attraction to graduates seeking work. The Leitch Review of Skills has set some ambitious targets for the achievement of both functional skills in literacy and numeracy among adults, and also the achievement of qualifications at levels 2, 3, 4 and above. Data estimating the region s baseline position against these targets suggests that the region is already well placed to meet its interim literacy and numeracy targets, but with much further to go before its targets relating to higher level qualifications can be reached, despite the region s good performance against others. 12

13 1. INTRODUCTION 1.1 Purpose of the Review Welcome to the South West Healthy Labour Market Review This report was commissioned by the South West Skills Partnership (RSP) and produced by the Skills and Learning Intelligence Module (SLIM). Developing a robust evidence base for the policies and actions of the RSP is of critical importance. It ensures that the skills and enterprise agenda for the region is grounded in an understanding of the operation of the labour market, through a detailed analysis of key labour market indicators. The analysis presented in this report is largely statistical, and based on robust national data sources. Yet, statistics are open to interpretation: they can provide a useful indication of current and future trends but they cannot accurately predict future needs and directions. Understanding the impact of these trends for policy actions therefore requires ongoing debate and discussion. This will be developed further in the forthcoming Regional Analysis of Skills, Enterprise and Employment This Report also forms part of the RSPs Performance Monitoring Framework and enables the RSP and its partners to benchmark performance and review progress against objectives. This report is the fourth such full review of the health of the labour market in the region. Following the approach set out in the first Health Labour Market Review 2004 (HLMR), the indicators are grouped under three broad headings: Broad outcome indicators which can be monitored to inform the performance over the regional economy, but over which the organisations involved in the Regional Skills Partnership (RSP) are likely to have little direct influence Closer to policy indicators which can be monitored to inform the performance of the regional strategy, and over which the organisations involved in the RSP may have some influence Qualifications and Learning targets which may be directly manipulated by organisations involved in the RSP. This year, in recognition of the importance of the Leitch Review and its targets, the Review has been extended to include a more in depth review of skills and learning performance including an analysis of performance against Leitch targets. This builds upon such analysis within the West Midlands. 1.2 Approach Data were collected from a wide range of national available secondary data sources to make comparisons across all of the regions, and also across the sub-regions within the South West. Where relevant, time series analyses, international comparisons and information from survey and qualitative sources have been included. 13

14 1.3 Economic Context Following many years of fairly stable economic growth, the United Kingdom is now in a period of relative economic uncertainty, following the convergence of the credit crunch and its ramifications for many asset and debt markets and unprecedented inflation in oil, food and other commodity costs. Despite the high profile liquidity or credit crunch seeded in the US in 2007 and then spread to the UK financial services sector, the UK economy actually performed strongly in Since late 2007, however, economic growth projections for 2008 have been steadily revised downwards. Although figures for the first half of 2008 showed a slowdown, latest figures show that the economy is moving into recession. The debate continues as to the length and depth of the recession. During the summer of 2008, the price of oil and other commodities was at an all time high, exacerbated by increasing demand from China, India and other rapidly developing countries. Food prices also rocketed as a combination of increasing global demand, decreased productivity of the agriculture sector (perhaps linked to climate change), and the substitution of land for growing crops for bio-fuel. Both are now falling as a result of the global economic slowdown. As a result, inflation measures input and output prices which have risen rapidly in recent months in the United Kingdom and elsewhere should now begin to fall again. This will enable the Bank of England to further reduce interest rates. As a result of the credit crunch, banks have tightened their lending criteria. While the official bank rate fell (from 5.75% in July 2007 to 4.5% in October 2008), lenders have increased their loan rates, causing potential problems for the large number of borrowers having to re-negotiate fixed rate mortgage deals in the next year or so. Repossessions and insolvencies are rising, with reports of an increase in negative equity in areas where house prices are falling. There is wider concern around the state of the housing market and house building, and whether this will have negative implications for the path of the overall economic slowdown. Whilst a correction in house prices may be overdue and affordability issues could be eased somewhat as the markets for second homes and buy-to-let lose their momentum, the greater danger is of a freezing of the market with knock-on effects for other forms of spending. To gauge how strong the downturn might get, all eyes are on the labour market indicators, in particular unemployment numbers which are now starting to rise. There is already some evidence that economic migrants are returning to their home countries as job opportunities in the United Kingdom start to fall off and this may be offsetting a rise in unemployment that otherwise might have been seen by now. The South West of England will be affected by any period of stagflation, though the region often feels these effects with a lag. Anecdotal and survey evidence suggests that most regional businesses are still reasonably confident. Major financial and business services centres, such as in Bristol, and Swindon, and Bournemouth and Poole, are at risk, as are areas that are dependent upon discretionary spending, including leisure and tourism; and businesses in the property sector. The region is also at risk through relatively high levels of indebtedness as the cost of living continues to rise. The region has had a relatively healthy and flexible labour market for some time, characterised by relatively high employment and low unemployment rates. Together with our diversified economy, this may help the region ride out the economic storm better than some. On the other hand, peripherality and debt positions may augur for some deeper impacts in specific places or sectors. Over the next 14

15 eighteen months, the South West labour market is likely to experience a period of greater uncertainty than we have been used to in recent years. 1.4 Structure of the report The report is organised along similar lines to the original South West Healthy Labour Market Report, commissioned by the South West Regional Employment Forum in 2004, allowing the region to track performance against an established benchmark. Section 2 looks at South West s position on the range of broad outcome themes and indicators, which cover: issues of labour demand; the characteristics of employment in the region; measures of output and productivity 1 ; the size and characteristics of the pool of labour supply; the unemployment picture in the region; and the extent to which labour market outcomes in the region are shared equally between different population groups and different geographical areas. Section 3 analyses the close to policy indicators, which include: business generation and survival; investment in research and development; the extent of vacancies, hard-to-fill vacancies, skills shortage vacancies and internal skills gaps; the extent of labour market turnover and churning, including the scale of redundancies; and work-related training. Section 4 presents a range of data on qualifications and learning targets, including: the participation of young people and adults in education and learning; qualification levels in the region; the scale of the task facing the region if the targets in the Leitch Review are to be met. Finally, in Section 5, we summarise the South West s position against other regions and the national averages on the smaller number of top-level indicators, and highlight some key issues that have been identified in the review. 15

16 2. BROAD OUTCOME INDICATORS This section covers Broad Outcome Indicator labour market themes. These have been identified as those which can be monitored to inform the performance of the economy, but over which the organisations involved in the Regional Skills Partnership (RSP) are likely to have little direct influence. Much of the information is presented in graphical format, and the data tables upon which the figures are based can be accessed by clicking on relevant graph. 2.1 Employment In this section we present the South West s performance in terms of the strength of labour demand, by looking at the proportion of the working age resident population in employment, recent trends in the number of employee jobs in the region, and the ratio of jobs to working age residents Employment rate Perhaps the simplest indicator of the strength of labour demand in a region is the employment rate. The employment rate is defined as the proportion of the working age population who are in employment, and comes from data on the resident population and labour force. One disadvantage of this measure is that it may reflect the strength of labour demand not only in the South West, but also in adjacent regions, if significant numbers of the region s residents commute outside the region for work. The nature of the South West s geography suggests that this is only likely to be of any significance in the north and east of the region. In 2007, the employment rate in the South West was 78.2%. This compares with 74.4% for England as a whole. The South East had the highest employment rate, at 78.4%, while London and the North East had the lowest rates, at 69.8% and 71.6% respectively (Figure 2.1). Figure 2.1: Employment rates, working age population, 2007 (%) all regions Source: Annual Population Survey, via Nomis 16

17 Figure 2.2 shows the trend in employment rate for the South West and England, and shows that between 1997 and 2007, the rate in the South West has consistently been above the national average. However, after several years of consistent growth, employment rates peaked in 2001, and have fallen slightly from this level in 2006 and This is true of the region and for the country as a whole, resulting in the gap between the regional and national employment rate being maintained. Figure 2.2: Employment rates, working age population, 1997 to 2007 (%) South West vs England Source: Annual Population Survey and Labour Force Survey, via Nomis Figure 2.3 shows the pattern of employment rates by local authority district across the region. The map shows little clear pattern, although the areas further west in the region e.g. northern parts of Devon and into Cornwall tend to have lower employment rate than many of the eastern areas. Access the latest Local Area Data online 17

18 Figure 2.3: Employment rate working age population, by local authority district, 2007 Source: Annual Population Survey, via Nomis Employment growth The employment rate looks at the number of people in employment, whereas an alternative indicator would be to look at the number of employee jobs in the region. This indicator (which is derived from data from employers) suffers from the opposite problem associated with the employment rate, in that jobs in the region might be filled by commuters coming into the South West from other regions to work. In 2006, the number of employee jobs in the South West was just over 2.2 million, a very slight fall from the previous year of around 600 jobs (less than 0.1% - Figure 2.4). Although not a positive indication of economic and labour market conditions, the South West fared better over the last year compared to national performance, where the number of employee jobs had fallen by nearly 150,000 (0.6%). Five other English regions experienced a fall in employment in this time, with just the Eastern, North West and West Midlands experiencing positive growth. 18

19 Figure 2.4: Change in employees in employment (%), all regions Source: Annual Business Inquiry, via Nomis Looking back over the longer term, since 1998, the South West has consistently outperformed the national average. Between 1998 and 2006, the number of employees in employment in the South West increased by 13.3%, while the increase for England as a whole was just 7.6% over the same period (see Figure 2.5). Figure 2.5: Change in employees in employment, 1998 to 2006 (Index 1998=100) South West vs England Source: Annual Business Inquiry, via Nomis Looking at employment change at a sub-regional level, there are some notable exceptions to the overall trend of steady growth. Over the period from 1998 to 2006, there were decreases in 19

20 employment in a number of areas, such as Cheltenham and the Forest of Dean in Gloucestershire, and West Wiltshire and Swindon in Wiltshire. Access the latest Local Area Data online Jobs density Having looked at the resident workforce in the region, and the number of jobs available in the region, it is possible to combine the two together. Jobs density is defined as the number of filled jobs in an area divided by the working-age population resident in that area, which gives an indication of the extent to which the area could generate enough employment for its working age population (assuming all chose to look for work). A healthy labour market would be one in which there are sufficient job opportunities for the resident working age population. In the South West as a whole, there were 0.87 jobs per working age resident in 2005, above the England average of 0.85 jobs, and third highest in England behind London (0.93) and the South East (0.88 see Figure 2.6). Figure 2.6: Jobs per working age resident, All regions Source: Nomis There is considerable variation within the region in terms of the number of jobs per working age resident, on a broad urban/rural split. Exeter, Swindon, Taunton Dean, Gloucester and Bristol have some of the highest job density figures, with one or more jobs per working age resident, while the lowest job densities are in Weymouth and Portland, the Forest of Dean, Caradon, Torridge and Kerrier. 20

21 Figure 2.7: Job densities by local authority district, 2005 Source: Nomis Access the latest Local Area Data online 21

22 2.2 Balance and quality of employment Having looked at the overall level of labour demand in the South West, we now go on to consider measures of the balance and quality of employment in the region, including employment by sector and by size of establishment, and average earnings levels, based on data from employers in the region, and employment by occupation, based on data from people in employment who are resident in the region. The South West has a wide spread of employment across industrial sectors, although with higher than average proportions in some low value added sectors such as agriculture and hotels and restaurants, and below average proportions in some higher value added sectors such as business services. Looking specifically at high value added and knowledge-intensive sectors, the region has a higher than average proportion of employment in manufacturing sectors, but a below average proportion of employment in knowledge-intensive service sectors. The proportion of employment in high level occupations is very close to the national average, although below the levels found in London, the South East and the East of England. A similar pattern is found when looking at earnings levels: those in the South West are lower than in the three regions in the south and east of the country, but are higher than in all other regions. The proportion of employment in knowledge-intensive sectors and in high level occupations, and average earnings levels, are all higher than average in the north and east of the region, and lower than average in the far west. The distribution of employment by size of establishment is skewed towards the smallest establishments, and the region has second lowest proportion of employment in large establishments, behind the Eastern region Employment by sector Perhaps the most useful measure of quality of employment is the breakdown of employment by industrial sector. There are two considerations here. Firstly, to determine whether the region has a diverse and balanced spread of employment across all sectors, to provide a range of working opportunities to its residents and to help insure the region is not overly vulnerable to any external shocks or slowdowns in particular sectors. Secondly, to assess whether the region has a relative concentration of employment in a number of high value added and knowledge-intensive sectors, which would be a key element of regional competitive advantage. However, this second consideration may have implications for other areas of the labour market, if the growth of high value added, high wage sectors in the region drive up local wages and in turn cause recruitment difficulties for low margin, low wage sectors. Looking first at the spread across all sectors, the overall distribution of employment by industrial sector in the South West matches fairly closely that for England as a whole (Figure 2.8). However, the region has a slightly higher concentration of employment in distribution, and hotels and restaurants, reflecting the strength of tourism in the region, as well as in manufacturing and health. The region has a slightly lower concentration of employment in transport and communication, financial intermediation, business services, and other services. The implications of this are that while the region has a diverse economic base, the lack of specialisation means there may be less scope for the formation of business clusters in high value added sectors. 22

23 There is considerable variation in the sectoral distribution of employment within the region. Some points to note are: Agriculture is concentrated in Devon, Cornwall and Somerset. Manufacturing is more concentrated in the northern area of the region, in Gloucestershire (particularly Tewkesbury and Stroud), Wiltshire (particularly Swindon) and South Gloucestershire. The hotels and restaurants sector is more prevalent in the southern areas of the regions i.e. Dorset, Devon and Cornwall. The financial services sector is concentrated in Bournemouth, Bristol, Swindon and Gloucester, and to a lesser extent Poole, Cheltenham and Salisbury. 23

24 Figure 2.8: Employees in employment by sector, 2006 (%) broad SIC, South West vs England Source: Annual Business Inquiry, via Nomis Between 2005 and 2006, the changing industrial picture in the South West showed some variations to that for the country as a whole (Figure 2.9). In line with the national trend, there were decreases in employment in the agriculture, distribution transport and education sectors. However, while there was a continued decline in manufacturing employment nationally, the South West bucked the trend and increased slightly, while there were declines in financial and business services, while these sectors grew nationally. 24

25 Figure 2.9: Change in employees in employment by sector, (%) broad SIC, South West vs England Source: Annual Business Inquiry, via Nomis Figure 2.10 shows the changing industrial structure of the South West compared to England over a longer period, from 1998 to Over this period, total employment in the South West grew faster than the national average, and the region outperformed the national in most sectors agriculture being the notable exception. The South West experienced larger than average increases in employment in distribution, transport & communication, business services, public administration, education, health and other services. In sectors that have declined in overall employment, such as manufacturing and mining & quarrying, the decline in the South West has been less severe than across England as a whole. 25

26 Figure 2.10: Change in employees in employment by sector, (%), South West vs England Source: Annual Business Inquiry, via Nomis Access the latest Local Area Data online Knowledge-Intensive Sectors This section considers the concentration of employment in high value added and knowledge-intensive sectors, using the definition used by Eurostat. This defines the following four groups of sectors: High-technology manufacturing: which includes the manufacture of office machinery and computers, communications equipment, and medical and precision instruments; Medium high-technology manufacturing: which includes the manufacture of chemicals, machinery, electrical apparatus, motor vehicles and other vehicles; High-technology knowledge-intensive services sectors: which includes telecommunications, computing activities and research and development; Knowledge-intensive service sectors: which include water and air transport, financial services, other business services, education, health and recreational services. It should be noted that this designation of industrial sectors as knowledge-intensive is necessarily crude, and assumes that all workplaces and all workers within these sectors will be operating in a knowledge-intensive fashion. This will not be the case in the real world. However, in the absence of any better indicators of knowledge intensity available on a regional basis, we adopt this approach, but the limitations of this approach should be borne in mind when considering the analysis. Overall, 50.4% of employment in the South West is in high-technology and knowledge-intensive sectors (Figure 2.11). This is below the national average of 52%, although this is heavily influenced by London and the South East, whose much higher concentrations inflate the national average. Most other regions have a similar proportion to the South West, with only the East Midlands being significantly lower. 26

27 Figure 2.11: Employment in knowledge sectors, 2006 (%) all regions Source: Annual Business Inquiry, via Nomis Looking at the composition within this total, the South West has a relatively high proportion of employment in high-technology manufacturing. The much higher overall proportion in London is mainly due to its concentration of employment in knowledge-intensive service sectors. Looking within the region (see Table 2.1), the highest proportion of knowledge-intensive employment is in Bristol, and the lowest in Cornwall. There are concentrations of high and medium high-technology manufacturing in Swindon, Gloucestershire, Torbay and Plymouth. Looking at knowledge-intensive service sectors, the highest proportions are in some of the large urban areas, namely Bristol, Bath and Bournemouth. 27

28 Table 2.1: Employment in high-technology and knowledge-intensive sectors, 2006 (%) by county/unitary authority Area High-tech manufacturing (%) Medium-high tech manufacturing (%) High-tech knowledgeintensive service sectors (%) Knowledgeintensive service sectors (%) Total Employment in Knowledge Intensive Sectors (No.) % of employment in Knowledge Intensive Sectors Bath and North East Somerset , Bournemouth , Bristol , Cornwall and Isles of Scilly , Devon , Dorset , Gloucestershire , North Somerset , Plymouth , Poole , Somerset , South Gloucestershire , Swindon , Torbay , Wiltshire , South West ,113, England ,829, Source: Annual Business Inquiry, via Nomis 28

29 The longer-term trend in high technology and knowledge-intensive sectors looks particularly rosy for the South West (see Figure 2.12). Between 1998 and 2006, employment in these sectors increased by around 22%, the highest of any English region. This has been driven by large increases in employment in high-tech knowledge-intensive service sectors and knowledge-intensive service sectors (both up by nearly 30%), while high-technology manufacturing has declined by third and medium technology manufacturing is down by around 13%. Figure 2.12: Change in employment in high technology and knowledge-intensive sectors (%) all regions Source: Annual Business Inquiry, via Nomis Within the South West, the largest increases in employment in knowledge-intensive sectors have been across parts of Devon and Cornwall, South Gloucestershire and Tewkesbury in Gloucestershire and the West of England, while the smallest increases have been in parts of Wiltshire, Bristol and the Forest of Dean in Gloucestershire (see Figure 2.13). High-technology manufacturing has declined across most of the region, with South Gloucestershire and North Somerset being the only areas to experience an increase. However, the increase in knowledge-intensive services (driven by a strong employment growth in the education and health sectors) has been consistently strong across the region. 29

30 Figure 2.13: Change in employment in high technology and knowledge-intensive sectors (%) by South West local authority district Source: Annual Business Inquiry, via Nomis Access the latest Local Area Data online Employment by occupation Another measure of the balance and quality of jobs in the region is the range of occupations available in the labour market. While it may be desirable for the labour market to have a large proportion of highly skilled, highly paid jobs, there is also a need for a healthy labour market to offer a sufficient range of jobs to correspond to the full range of skills in the workforce, including jobs for the lower skilled members of the workforce. Looking first at highly skilled jobs, the three highest skilled occupational classes (Managers and Senior Officials, Professionals, and Associate Professional and Technical occupations) account for a similar proportion of South West employment (43%) as for England. The South West has the fourth highest proportion, behind London, the South East, and the East of England in terms of workers in highly skilled occupations (see Figure 2.14). The South West has a slightly higher than average proportion of managers and senior officials, but slightly below average proportions of professionals and associate professionals. 30

31 Figure 2.14: Employment in high level occupations, 2007 (%) all regions Source: Annual Population Survey, via Nomis The northern parts of the region i.e. Bath, Bristol, South Gloucestershire, North Somerset and Gloucestershire have the highest proportion of workers in high level occupations, with the lowest proportions in Plymouth, Torbay and Somerset. However, there is a varied pattern across the three occupational groups. The highest relative concentrations of managers and senior officials are in Gloucestershire (18.2%), Dorset (18%), Bath (17.6%) and Wiltshire (17.4%). Professional occupations are concentrated in the Bristol area (17.3%), and to a lesser extent in Bournemouth (14.8%), Gloucestershire (14.7%) and Bath (14.6%). There are concentrations of associate professionals across the region, with the highest proportions in Bournemouth (17.2%), Bath (16.8%) and South Gloucestershire (16.7%). Looking at the spread across all occupations, the South West closely mirrors the distribution across England, although with slightly higher proportions of managers and senior officials, skilled trades occupations, personal service occupations, and elementary occupations, and slightly lower proportions in the other occupational groups (Figure 2.15). 31

32 Figure 2.15: Employment by occupation, 2007 (%) South West vs England Source: Annual Population Survey, via Nomis Key 1 Managers and senior officials 2 Professional occupations 3 Associate professional & technical occupations 4 Administrative and secretarial occupations 5 Skilled trades occupations 6 Personal service occupations 7 Sales and customer service occupations 8 Process, plant and machine operatives 9 Elementary occupations Turning now to recent trends in employment by occupation, in the last year the proportion of employment in all three higher level occupations has increased, along with skilled trades, personal services and sales, with the proportions accounted for by other occupational groups having declined (see Figure 2.16). There are some differences in the occupational employment trends between the South West and England, with the proportion employed in skilled trades and sales occupations increasing in the South West but falling nationally. 32

33 Figure 2.16: Employment change by occupation, (%) South West vs England Source: Annual Population Survey, via Nomis Access the latest Local Area Data online Future Employment Trends Having considered how the composition of the South West s labour market has changed recently, it is important also to consider how it is likely to change in the future, to identify sectors in which new job opportunities are likely to be. While forecasts of employment are by their nature uncertain, at a broad level they are likely to give an indication of which sectors are growing and declining over the coming years. The forecasts presented here are from Working Futures III, for the period from 2007 to 2017, produced by the Institute for Employment Research (IER) and Cambridge Econometrics in Employment projections of this nature assume there will be no major shocks to the economy during the forecast period. The Working Futures model was run during February 2008, when the credit crunch had started but before the recent economic downturn. This has resulted in less confidence in the shorter term projections, but the medium-term forecasts are still considered fit for purpose. Employment prospects for the South West are slightly better than the national forecasts. Total employment is projected to increase by 6.9% between 2007 and 2017, compared to the projected national increase of 6.5%. Employment is forecast to decline considerably in the following sectors (see Figure 2.17): Agriculture, etc (forecast decline of 33%) Engineering (21%) Mining & quarrying (19%) Electricity, gas & water (19%) 33

34 Rest of manufacturing (15%) Food, drink & tobacco (14%) In each of these sectors, the expected falls in employment are set to be more severe in the South West than across England as a whole. There is significant growth forecast in the following sectors: Other business services (forecast growth of 22%) Hotels and catering (20%) Miscellaneous services (16%) Health and social work (11%) Banking & insurance (9%) Figure 2.17: Projected employment change by sector, (%), South West vs England Source: Working Futures III (via SWRDA) As well as projections by industry, Working Futures also produced occupational forecasts to Over the period from 2007 to 2017, the largest projected increases in employment for both England 34

35 and the South West are among culture, media & sports, customer service, caring, corporate managers and teaching / research professionals (see Figure 2.18). The biggest declines are forecast to be in secretarial, skilled agricultural trades, process machine operatives and other skilled trades. Figure 2.18: Projected employment change by occupation, (%) South West vs England Source: Working Futures III (via SWRDA) Earnings levels Another dimension of balance and job quality relates to the level of pay and earnings in the labour market. In 2007 average gross weekly earnings for full-time employees in the South West stood at , below the figure for England of However, the national average is skewed by very 35

36 high earnings in London and the South East, and the South West has the highest average earnings figure outside of these two regions and the East of England (Figure 2.19). Figure 2.19: Average gross weekly earnings of full-time employees, 2007 ( ) all regions Source: Annual Survey of Hours and Earnings (ASHE) 2007, via Nomis Within the region, earnings are highest along the M4 corridor and to the north, and lowest in the far west. Average earnings in North Somerset stood at 498 per week and 484 in Swindon, compared with 384 per week in Cornwall and just 370 in Torbay. Thus, the pattern of earnings within the region matches that of general labour demand and also employment in high value added sectors, with earnings highest in those areas with the highest employment rates, and the highest proportions of employment in knowledge-intensive sectors, and earnings lowest in the areas with low employment rates and the smallest proportions in knowledge-intensive sectors. 36

37 Figure 2.20: Average gross weekly earnings by local authority district, 2007 ( ) Source: Annual Survey of Hours and Earnings (ASHE) 2007, via Nomis Access the latest Local Area Data online Distribution of Earnings As well as overall average earnings levels, it is also important to examine the distribution of earnings around this average, to consider the extent of low pay and also pay inequalities between those on the highest wages and those on the lowest. Table 2.2 shows data on the distribution of full-time earnings by region for In general, the equality of the earnings distribution and the prevalence of low pay are inversely related to average earnings; thus in London where average earnings are highest - the highest paid 10% of workers earn almost four times as much as the lowest earners. This pay differential in the South West is less extreme than in London, where the ratio between the highest and lowest earners was 3.3 in 2007, reflecting the region s position in relation to overall average wages. 37

38 Table 2.2: Distribution of gross weekly earnings by region, 2007 Area 10 % earn under 10 % earn over Ratio of 10% to bottom 10% England East East Midlands London , North East North West South East , South West West Midlands Yorkshire and The Humber Source: Annual Survey of Hours and Earnings (ASHE) 2007, via Nomis Over the last few years, the ratio between the highest and lowest earners has barely changed at all, as shown in Table 2.3. However, although the ratio has remained steady, in terms of pounds per week earned, this gap between the top and bottom 10% has grown every year, with the top 10% earning around 586 a week more in 2007, compared to just over 500 in Table 2.3: Gap between the top 10% and bottom 10% of earners, South West, Variable % earned less than % earned more than Pay Gap Ratio of top 10% to bottom 10% Source: Annual Survey of Hours and Earnings (ASHE) , via Nomis Employment by size of business The final balance and quality theme is the distribution of employment across establishments of different sizes. On the one hand, a high proportion of employment in small firms might indicate a dynamic labour market with a high rate of new job generation and new firm generation. On the other hand, a regional labour market with a small proportion of employment in large firms, who are more likely to engage in workforce development and research and development expenditure, might not be considered healthy. In 2006, the South West had the highest proportion of employment in small firms with ten or less employees, and also had the second lowest proportion of employment in large establishments with 200 or more employees, with the Eastern region the only one with a lower proportion (see Figure 2.21). To some extent the position in the South West is influenced by its sectoral composition, with a high proportion of employment in sectors such as tourism which traditionally are dominated by small firms. 38

39 Figure 2.21: Distribution of employment by size of establishment, 2006 (%) Source: Annual Business Inquiry, via Nomis Access the latest Local Area Data online 39

40 2.3 Working patterns and job types This section examines the balance of working patterns and job types in the labour market, in terms of: Employee jobs vs self-employment Full-time vs part time employment Permanent vs temporary employment From the point of view of investigating the health of the labour market, there is no clear sense in which one particular pattern of job types and working patterns would be preferable over another. However, there is a general presumption that a healthy labour market would be one in which there was a variety of working patterns and contractual arrangements, to meet the needs of the workforce and also employers. At the extreme end of the scale, a labour market with only full time, permanent employee jobs sited at the employer s premises would be unlikely to be considered healthy in the modern economy. The South West has relatively high proportions of all types of non-typical working patterns. Where we are able to investigate in more detail the reasons behind these, there does not appear to be evidence of large scale involuntary part time or temporary working among the workforce, and it is therefore likely that these working patterns are meeting the needs of employers and individuals in the labour market Self-employment A high proportion of self-employment in a labour market may be an indicator of a dynamic labour market with a strong entrepreneurial culture and a high rate of new firm generation. In 2007, 11% of the South West s working age population were self-employed, compared with 9.5% across England. The South West had the highest proportion of self-employment in England (see Figure 2.22). Figure 2.22: Proportion of self-employment, summer 2007 (% of working age population), all regions 40

41 Source: Annual Population Survey, via Nomis There is considerable variation across the region in terms of self-employment. Self-employment rates are highest in Cornwall, Devon, Torbay and Dorset, and lowest in Plymouth, Bristol and South Gloucestershire. Figure 2.23 shows the trend in the proportion of self-employment for the region compared to the national average since The general trend has been an increase in the proportion of selfemployed people, both regionally and nationally, apart from a slight dip in the South West in Figure 2.23: Self-employment rates, (%of working age population) South West vs England Source: Annual Population Survey, via Nomis The high self-employment rate in the region is due to above average proportions of self-employment across a number of industrial sectors, as shown in Table 2.4. Table 2.4: Self-employment by sector, South West vs England, 2007 (%) Sector South West England Agriculture & fishing Energy & water Manufacturing Construction Distribution, hotels & restaurants Transport & communication Banking, finance & insurance Public admin, education & health Other services Total Self-Employed 373,800 3,252,800 Source: Annual Population Survey, via Nomis 41

42 Access the latest Local Area Data online Part-time employment The South West has the highest proportion of part-time employment of all the English regions. In 2007, 27.7% of employment in the South West was part-time, compared with the national average of 23.6% (see Figure 2.24). The proportion of part-time work in the South West has been consistently higher than the national average between 2004 and 2007, but with little change in this time in the proportion of employees working part-time. Data is available from the Labour Force Survey on the reasons for part-time working. Among the region s part-time workers, 8% were doing so because they could not find a full-time job, while 75% did not want a full-time job, 14% were students, and 3% were ill or disabled. Nationally, 10% of parttimers could not find a full-time job, 72% did not want a full-time job. 42

43 Figure 2.24: Proportion of part-time employment, 2007 (%) all regions Source: Annual Population Survey, via Nomis Access the latest Local Area Data online Temporary work In 2007, 4.9% of employees in the South West were in employment that was not permanent in some way, including seasonal, casual, fixed-term contract or some other temporary job. This is comparable with the figure for England as a whole. The North East had the highest proportion of temporary working, at 5.8%, with the South West very much in the middle of the English regions (see Figure 2.26). 43

44 Figure 2.25: Proportion of temporary employment, summer 2007 (%) all regions Source: Annual Population Survey, via Nomis There are some notable trends by industrial sector. Table 2.5 shows just two sectors account for almost two-thirds of all temporary employees. The Public sector is the biggest area of temporary employment accounting for around 40% of temporary employees, mainly due to fixed terms of projectspecific funding, for which staff are appointed on a fixed-term contract basis. The second largest sector is in Distribution, hotels and restaurants, which, with its strong links to the tourism sector, is much more likely to utilise employees at peak times on a seasonal and casual basis. Table 2.5: Temporary employment by sector, 2007 (%), South West vs England Sector South West England (%) (%) Agriculture & fishing Energy & water Manufacturing Construction Distribution, hotels & restaurants Transport & communication Banking, finance & insurance Public admin, education & health Other services Total Temporary Employment 120,900 1,201,500 Source: Annual Population Survey, via Nomis Again using the Labour Force Survey, we can gain more detail about temporary working, both in the type of temporary work being undertaken and the reasons for taking a temporary job. Looking first at the type of temporary work, the South West has the highest proportion of seasonal work of all English regions (12.3% compared to just 8.6% nationally), and also the highest proportion of casual work (23.3%). The region has among the lowest proportions of fixed-term contract work and agency 44

45 temping. This is unsurprising as some of the most important employment sectors in the region - such as agriculture and tourism - rely on seasonal workforces and would come under pressure if they were not able to recruit staff for short periods to meet their peaks in demand. As for the reasons for temporary working, 28% of temporary workers in the South West said that they could not get a permanent job, slightly above the national average of 26.4%, and one of the second highest regional figures behind only the East Midlands (33%). There was a smaller than average proportion of temporary workers in the South West saying they took a temporary job because it was a contract with training, but a slightly higher than average proportion saying that they did not want a permanent job. 45

46 2.4 Output and Productivity Output Economic output at a regional level is estimated using Gross Value Added (GVA) 2. The latest data show that the South West economy was worth around 90 billion GVA in 2006, just under 8% of the UK economy see Table 2.6. The South West economy has grown faster than the UK average and is the fastest growing region outside London and the South East and, as a result, the South West share has grown marginally over the last decade (7.7% in 1996). Table 2.6 Summary of regional GVA, current prices GVA, 2006 ( bn) Share of UK (%) United Kingdom 1,128, North East 38, North West 111, Yorkshire & the Humber 82, East Midlands 74, West Midlands 88, East of England 109, London 196, South East 177, South West 89, England 968, Wales 42, Scotland 91, Northern Ireland 26, Source: Regional Accounts, ONS Figure 2.26 compares regional and national GVA growth rates over the last decade. The data are only available at current prices and so do not account for the effect of inflation over time (around 2%). As the chart shows, this has been a period of sustained economic growth for both the national and regional economy. While 2005 saw a downturn in economic growth, there was some recovery in 2006 and this is expected to continue in However, 2008 and 2009 are likely to see a downturn as the South West follows albeit with a lag - the national trend. 46

47 Figure 2.26: Nominal growth in South West and UK Gross Value Added 8 % change per annum UK SW Source: Regional Accounts, ONS At a sub-regional level, the latest available GVA data are for As Table 2.7 shows, economic output in the South West is concentrated in the more urban north of the region, with around a quarter of South West GVA attributed to Bristol and the wider West of England area. Growth rates for 2004 to 2005 were generally quite low, in line with the regional and national downturn shown above. Only Torbay bucked this trend. These figures should pick up in the 2006 data release (due December 2008). Over the longer period, highest growth rates were seen in Cornwall, which receives substantial investment from Europe, as well as the dynamic north of the region where rates of 6% to 7% were observed over the five- and ten-year periods to Torbay, on the other hand, was one of the poorest performing sub-regions in the United Kingdom at only 2.9% per annum growth over the tenyear period. Table 2.7: Summary of South West NUTS 3 sub-regional GVA, current prices GVA, 2005 ( bn) Share of SW (%) % per annum change SOUTH WEST 84, Gloucestershire, Wilts. & N. Somerset 45, Bristol 9, North, NE Somerset, S.Glos. 12, Gloucestershire 11, Swindon 5, Wiltshire 7, Dorset and Somerset 18, Bournemouth & Poole 5, Dorset 5, Somerset 7, Cornwall & Isles of Scilly 6, Devon 15, Plymouth 3,

48 Torbay 1, Devon 10, Source: Regional Accounts, ONS GVA per head GVA per head is the most commonly used measure of regional productivity. GVA per head of population in 2006 for the South West was 17,467, compared to the UK average of 18,631 and England average of 19,082. South West productivity on this measure is 93.8% of the UK average, the fourth highest of the English regions (fifth in United Kingdom), after the three Greater South East regions, which dominate the remaining regions see Figure Figure 2.27: Regional GVA per head, 2006 (UK=100) GVA per head UK=100 0 NE NW YH EM WM E L SE SW ENG WAL SCO NI Source: Regional Accounts, ONS South West GVA per head grew at 5% between both 1996 and 2006, and 2001 to 2006, slightly above the UK average of 4.9%. As shown in Figure 2.27, the gap with the UK average has closed slightly as a result with relative South West GVA per head rising from a low of 91.9% in 1994 to 93.8% of the UK average in Although this is only a small change, it potentially represents a relatively large shift in economic performance. The economic growth of London, the engine of the UK economy, continually drives up the UK average. It is impossible for the remaining regional economies, which can never be the same as London, to compete with this, and so even the small change in South West s relative position is a positive sign. This is illustrated in Figure 2.28, which also shows GVA per head when London is excluded from the analysis South West England s position rose from 96.9% to 99.5% of the UK average over the same period. 48

49 Figure 2.28: SW GVA per head relative to the UK average +/- London 100 GVA per head (UK=100) SW vs UK SW vs UK ex London Source: Regional Accounts, ONS Figure 2.30 shows the sub-regional distribution of GVA per head in the South West (2005 latest). Broadly speaking, the north and east of the region have above average productivity and the far south west has below average productivity. In particular, Swindon was 53% above average and Bristol was 31% above the UK average fourth and tenth in the United Kingdom (out of 133 sub-regions). Conversely, Torbay and Cornwall rank among the least productive parts of the United Kingdom 63% and 65% of the UK average. It should be noted that the figures are somewhat skewed in areas with high net commuting while the GVA is the economic output of workers in an area, the per head denominator is the number of residents in that area. In places like Bristol, the heads figure is substantially lower than the number of workers producing the economic output, and so productivity is inflated. The opposite effect will occur in rural areas, which will lose workers to urban areas. 49

50 Figure 2.30: South West sub-regional GVA per head, 2005 Source: Regional Accounts, ONS Figure 2.31 shows change in sub-regional GVA per head over the ten-year period to With the exception of Cornwall, all those areas that have GVA per head above the South West average (i.e. the more urban north and east of the region) have seen growth in relative productivity over this period, and all of those areas below the South West average (i.e. peripheral and rural) have seen decline. This hides some variation in the intervening period for example, Swindon s relative productivity has declined from a peak of 164% in 1998, following a slowdown due to downturn in the ICT industry in the early part of this decade. Bristol followed a similar trend, but both are still very high relative to the average. 50

51 Figure 2.31: South West sub-regional GVA per head, 1995 vs GVA per head (UK=100) Torbay Cornwall & Isles of Scilly Dorset Devon Somerset Plymouth Wiltshire South West Bournemouth & Poole Gloucestershire North, NE Somerset, S. Bristol Swindon Source: Regional Accounts, ONS Access the latest Local Area Data online Labour productivity Figure 2.32 compares GVA per head to two labour productivity measures GVA per filled job and GVA per hour. GVA per filled job strips out regional variations introduced through differences in labour market participation rates and population composition. GVA per head and GVA per filled job in the South West are similar, however, as the older than average population is largely offset by having higher than average economic activity. South West workers tend to work fewer hours than average and there is a relatively high proportion of part-time working. This in effect depresses South West productivity per job relative to the average. South West GVA per hour, on the other hand, is somewhat higher, showing that work carried out by the South West labour force albeit in fewer hours is relatively productive. Both of these labour productivity measures have improved over time. While there has been a 2.9% increase in GVA per job, progress on what might be considered a more accurate reflection of productivity output produced during a specific period of time has been substantially better at a 4.4% increase in GVA per hour. The progress shown in the chart on all three productivity indicators suggests that the South West has managed to narrow its productivity gap over the last ten years, achieving the regional economic target set by Government. 51

52 Figure 2.32: South West productivity measures, 1996 to Productivity (UK=100) GVA per head GVA per job GVA per hour Source: Regional Accounts, ONS Figure 2.33 shows GVA per filled job at a sub-regional level in As might be expected, this broadly follows the pattern shown for GVA per head, with a highly productive north versus declining productivity moving further south and west. However, it does strip out the effect of commuting that skews GVA per head in some areas of the region, in particular Swindon and Bristol. Swindon remains extremely productive on this measure of labour productivity, more than 20% above the UK average and fifth highest in the United Kingdom (out of 133 NUTS 3 sub-regions). However, while Bristol remains above the UK average (and well above the SW average of 94%), it falls out of the UK top 10. At the other end of the spectrum, although their relative position improves, Torbay, which falls in the bottom 10 sub-regions in GVA per head, is joined by Cornwall and Devon when looking at GVA per filled job. Productivity measurement in these areas may be depressed by lower average working hours. 52

53 Figure 2.33: GVA per filled job in South West NUTS 3 sub-regions Source: Changing Regional Economies: South West, ONS

54 2.4.4 Capital productivity Although physical capital and capital investment drive productivity, there is little robust information on this aspect of the economy. Net capital expenditure - calculated by adding to the value of new building work, acquisitions less disposals of land and existing buildings, vehicles and plant and machinery - is generally used as a proxy for capital investment. Estimates should be treated with caution as large, one-off investment decisions by companies can make significant differences to total investment figures in a particular region or year. Allocation of capital expenditure across regions is particularly difficult and may be influenced by variations in industrial composition. Table 2.8 shows investment levels (i.e. net capital expenditure) expressed as a proportion of sector GVA for UK- and foreign-owned manufacturing and service-sector firms in the South West and England. Table 2.8: Investment as a proportion of GVA South West England Manufacturing Services Manufacturing Services Foreign Owned UK Owned Source: Derived from Regional Competitiveness Indicators 2007, BERR The table shows a decline in investment as a proportion of GVA in manufacturing and services nationally and in both foreign- and UK-owned firms. Foreign-owned firms in manufacturing on the whole have higher relative levels of investment than UK-owned firms, and vice versa for services. This could be explained by varying attractiveness of particular manufacturing or service sectors to foreign-owned companies. The figures are difficult to interpret. Declining investment as a share of GVA may suggest an increase in productivity over time, as firms learn to use their capital more efficiently. However, as investment is known to drive productivity, lagging levels of capital expenditure may signal reduced productivity gains in future. It is also of concern that firms in some sectors may have used relatively cheap migrant labour to generate short-term productivity gains instead of investing for the future. 54

55 2.5 Population and migration Population The population of the South West region stood at 5.18 million in 2007, accounting for 10% of the total population of England. The region s population has grown by almost 235,000 since 2001, an increase of 4.7%, which is faster than the average for England as a whole (3.3%). There are slightly more women than men in the South West population, making up 51% of the total. The South West s population is not very ethnically diverse. According to the Census of Population 2001, only 2.3% of the population are from minority ethnic groups, compared to the average for England of 9.1% (the national average is skewed upwards by the large minority ethnic populations in London and the West Midlands). The South West has the smallest proportion of minority ethnic residents of all the English regions. The South West has the oldest age profile of all English regions, with the lowest proportion of people aged under 15, and the highest proportion aged over 65. Only 16.5% of the South West s population is aged under 15, compared to the national average of 17.6%, and 18.8% of the South West s population is aged 65 and over, compared to 16% nationally. Access the latest Local Area Data online International migration As shown in Figure 2.34, the population of the UK as a whole has been consistently increased by inward migration from other parts of the world, by around 200,000 people per year in recent years. There was a sudden increase in 2004 to almost 250,000, boosted by the expansion of the EU that year, which has significantly increased the number of migrant workers coming to the UK. The inflow of migrants to the UK has almost doubled between 1997 and 2006, which has been offset somewhat by increasing levels of outward migration. 55

56 Figure 2.34: UK migration summary, (thousands) Source: National Statistics Internal migration In this context of increasing inward migration to the UK, the South West region retains its appeal as a popular place to live. Data on inter-regional migration flows for the year to June 2007 shows the South West has the largest net in-flow of all the English regions, with over 28,000 more people moving into the region than moving away (Table 2.9). The South West has had the largest net in-flow of all the regions since Table 2.9: Inter-regional migration flows, year ending June 2007 (thousands) Region Inflow Outflow Net inflow North East North West Yorkshire and The Humber East Midlands West Midlands East London South East South West Source: National Health Service Central Register The largest flows are between the South West and the South East region. In 2006/07, 44,800 people moved from the South East to the South West, while 33,300 moved in the opposite direction (Table 2.10). Other regions with significant net inflows to the South West were London, the East of England, and the West Midlands. 56

57 Table 2.10: Sources of in-flows and destinations of out-flows to and from South West, year ending June 2007 (thousands) Region In Out Net United Kingdom England North East North West Yorkshire and The Humber East Midlands West Midlands East London South East Wales Scotland Northern Ireland Source: National Health Service Central Register Graduate flows When considering migration flows, one important group of the population are graduates from higher education. Graduates coming into the region to study are an important source of potentially highskilled labour. Table 2.11 provides details on the retention of graduates who had previously studied in the South West, and also the number of graduates who come into the region to work after graduating from HEIs elsewhere in the UK. The table shows that the South West retained around 57% of the graduates in 2005/06 who studied within the region, with the remainder (approximately 7,800) leaving to work elsewhere in the UK. 25% of all the region s graduates (around 4,500) left to seek work in London and the South East. The South West attracts around 7,100 graduates who have studied elsewhere, meaning that overall, the region experiences a net outflow of just over 700 graduates each year. Table 2.11: Graduate movements into and out of South West, 2005/06 Region of work for SW graduates Region of study for graduate workers in SW Net in-flow of graduates into SW Number % Number % Number North East North West Yorkshire & the Humber East Midlands West Midlands East London 2, ,535 South East 2, , South West 10, , Wales , Scotland Northern Ireland, Channel Islands & Isle of Man Total HE Students 18,065 17, Source: HESA - Destinations of Leavers from Higher Education 2005/06 57

58 2.6 Labour supply A very high proportion of the South West s working age population are active in the labour market, second only to the proportion in the South East. Relatively few working days are lost to industrial disputes, and union membership is relatively low, although sickness absence is slightly above the national average Working age population Three-fifths (60%) of the South West s resident population (some million people) are of workingage; that is, are aged for women and for men. This is a smaller proportion of working age residents than any other England region. Figure 2.35 shows that, whilst the South West has a similar proportion of teenagers of working-age to England, the age profile of the region s labour force tends to be older than average with 27% aged over 50, compared to 24% nationally. Figure 2.35: Age structure of the working age population, 2007 (percentages) South West vs England 30.0 % working age population South West England Source: ONS Mid-year Population Estimates The South West has some of the oldest resident labour forces in England. At 42% and 35% respectively, the Isles of Scilly and West Somerset have the highest proportion of residents aged 50 and over in their working age population of all local authority areas in England. Furthermore, 60% of the region s local authority areas are ranked in the oldest quartile nationally. In contrast, the City of Bristol (at 18%) has the lowest share of older workers in the region. Population projections published by the Office for National Statistics suggest that the region s working age population will increase by almost 300,000 people (equivalent to 9%) between 2009 and Most of the growth will come from an increase in the older labour force (Figure 2.36) and half will be attributable to the rises in the state pension age for women 3. Examining projected changes in the age 58

59 composition of the labour force more closely illustrates the impact of rising pension ages, and a projected hollowing-out of the labour force of workers in their 40s. This corresponds to the career peak phase when people traditionally take on managerial and leadership roles and is therefore potentially an area of future labour and skills shortage. The number of young new labour market entrants is also expected to fall. Figure 2.36 Change in number of working age residents by five year age band; 2009 to 2018, South West Source: ONS Population Projections (2006 based) Access the latest Local Area Data online Economic activity While the size of the working age population is an important factor in looking at the volume of labour supply in the region, we need also to look at how many people of working age are economically active in the labour force, that is either working, or looking for and available to start work. In 2007, the economic activity rate in the South West was 81.5%, compared with 78.6% for England (Figure 2.37). The South West had the second highest economic activity rate, behind the South East (82%). 59

60 Figure 2.37: Economic activity rates of working age population, 2007 (%) all regions Source: Annual Population Survey, via Nomis Figure 2.38 shows that economic activity rates in the South West have been increasing between 2005 and 2007, in contrast to its neighbouring regions and the national average, where rates have remained fairly steady each year from 2004 to Figure 2.38: Economic activity rates of working age population, 2004 to 2007 (%) South West vs England and neighbouring regions Source: Annual Population Survey, via Nomis 60

61 Economic activity rates varied across local authority districts in the region, although in general the highest rates are found in the north and east of the region, and the lowest in Devon and Cornwall (see Figure 2.39). Figure 2.39: Economic activity rates by local authority district, 2007 (%) Source: Annual Population Survey, via Nomis Access the latest Local Area Data online The male economic activity rate in the South West in 2007 was 84.8%, and the female rate was 77.9%, compared with 83.4% and 73.4% respectively for England. The South West s male rate was the third highest, after the South East and Eastern regions, and its female rate was the highest of any English region. One factor contributing to the high activity rates in the South West is the relatively high activity rates among the older section of the working age population, with 76.7% of those aged between 50 and retirement age in the South West being economically active, compared to the average for England of 74.3% Workforce attitudes and well-being Measures of workforce attitudes and morale are of particular interest to employers who may be looking to locate in an area, who may consider sickness and strike rates alongside the wage and skill levels of the workforce. Perhaps the best measures are the number of working days lost to industrial disputes, levels of trade union membership and workforce sickness absence. Working days lost to industrial disputes 61

62 The one aspect of workforce attitudes for which data are available the industrial relations climate in the region, using working days lost to industrial disputes as an indicator. In 2006 in the South West, there were eight days lost per 1,000 employees, compared to the UK figure of 28 days (Figure 2.40). The number of days lost in the South West was the joint second lowest, after the South East region (5 days), while the North West lost 53 days per 1,000 employees. The South West has consistently had one of the lowest to industrial disputes of all the English regions. Figure 2.40: Working days lost through industrial disputes per 1,000 employees, South West vs UK and neighbouring regions Source: National Statistics Another indicator of workforce attitudes is trade union membership. In 2006, 24.8% of employees in the South West were members of trade union, compared to the UK figure of 27%. The proportion in the South West is the third lowest in England after the South East and the East of England regions (see Figure 2.41). 62

63 Figure 2.41: Trade union density by region 2006 (% of employees) not seasonally adjusted Source: BERR The longer-term trend is a slow but steady decline in the level of trade union membership, both regionally and nationally. The current level in the South West of 24.8% has declined from 26.4% in 2001, and from 28.1% back in Workforce sickness absence One aspect of workforce well-being that can be picked up from available national data is workforce sickness absence. In 2005, the proportion of workers taking one or more days off sick in the previous week in the South West, at 2.6%, was comparable with the national average, although considerably higher than the rate in the best region, the Northern East, of 1.9% (Figure 2.42). However, the sickness absence rate in the South West is lower than the rates in the neighbouring regions of the South East and the West Midlands. 63

64 Figure 2.42: Proportion of workforce taking one or more days off sick in previous week, Winter 2005 (%) Source: National Statistics 64

65 2.7 Unemployment In a healthy labour market, the attributes of the workforce and the needs of employers are well matched, with unemployment being low, and where individuals do not remain out of work for long. On this basis, the South West appears to have a very healthy labour market, having the lowest unemployment rate of all the regions in the UK, however unemployment is measured. It also has the smallest proportion of long-term unemployment, that is looking at the unemployed who have been out of work for over six months or 12 months. Unemployment rates There are two alternative measures of unemployment: the claimant count, which measures individuals claiming benefits, and the ILO unemployment rate, which is based on an individual not currently working, having looked for work in the last four weeks, and being able to start a job in the next two weeks. In recent years the ILO definition has been adopted as the official measure of unemployment, although the claimant count is still more useful for small geographical areas or for the duration of unemployment. In August 2008, the claimant count unemployment rate for the South West was 1.6%, the second lowest rate in England, compared with the national rate of 2.4%. The region had the lowest unemployment rate under the ILO definition, with a rate of 4.1% in 2007 (see Figure 2.43). 65

66 Figure 2.43: Regional unemployment rates (%) all regions Source: Annual Population Survey and Claimant Count (via Nomis) Figure 2.44 shows the trend in the claimant count unemployment rate for selected regions and for England from 2001 to After falling consistently between 2001 and 2004, unemployment rates rose slightly in 2005 and 2006 before falling again, although rates have been increasing across all regions since Figure 2.44: Claimant count unemployment rates, , South West vs England and neighbouring regions Source: Claimant Count (via Nomis) 66

67 There are some local variations within the region in terms of claimant unemployment. Generally, there are higher rates of unemployment in the region s urban areas, along with some rural areas of the western parts of the region. However, even those areas with the highest unemployment rates tend to be below the national average, the only exceptions being in Torbay and Plymouth (both at 2.5%). Figure 2.45: Claimant unemployment rates by local authority district, August 2008 (%) Source: Claimant Count (via Nomis) The ILO unemployment has been slowly increasing in the South West over the last two years, but remains the lowest in England (Figure 2.46). 67

68 Figure 2.46: ILO unemployment rates, South West vs England and neighbouring regions (%) Source: Annual Population Survey (via Nomis) The local pattern of ILO unemployment across the region is similar to that of claimant count unemployment, with unemployment generally lower in the east of the region and higher in the west, with the highest rates again found in Plymouth (7.5%), Cornwall (5.4%) and Torbay (4.9%). Unemployment is much higher when measured by the ILO rate compared to the claimant count. The ILO gives a better estimate of the real level of unemployment, which raises the question of whether a number of people who may actually be available to work are actually claiming some other form of benefit i.e. sickness and disability benefit. Despite an overall fall in the number of Jobseekers Allowance (JSA) claimants of 17,000 (29%) between 2001 and 2008, there has been an increase in the number of Incapacity Benefit claimants of almost 12,000 over the same period. This has resulted in a net reduction of just 5,000 claimants (2.2%) across the region in this time, with the overall number remaining fairly steady year to year (Figure 2.47). This suggests that there are a number of people who have simply moved from claiming JSA to Incapacity Benefit. 68

69 Figure 2.47: Incapacity Benefit and Jobseekers Allowance Claimants, South West, Source: DWP (via Nomis) Long-term unemployment In addition to the total numbers of claimant unemployed, an important characteristic is the duration of unemployment. It is thought that those who have been out of employment the longest are least likely to possess the skills and experience that employers are seeking. In August 2008, 19.8% of the unemployed in the South West had been unemployed for over six months, and 7.2% had been so for over 12 months (Figure 2.48). Nationally, 27% of the unemployed have been out of work for more than six months, and 11% for more than 12 months. The South West was the region with the lowest proportion of long-term unemployed, looking at both of these definitions. 69

70 Figure 2.48: Long term unemployment as proportion of total unemployed, August 2008 (%) all regions Source: Claimant Count (via Nomis) Long-term unemployment varies across the region, generally being higher in some urban areas (see Figure 2.49). However, there is also a notable concentration of long-term unemployment across Gloucestershire, with all six districts featuring in the top ten highest levels of claimants having been unemployed for at least six months. 70

71 Figure 2.49: Long-term unemployment (6 months +) as a % of total unemployed, by local authority district, August 2008 Source: Claimant Count (via Nomis) Access the latest Local Area Data online 71

72 2.8 Equity in the labour market As well as the efficiency of the labour market, a further aspect of the health of the labour market is the extent to which it functions equitably and fairly. There are two dimensions to equity in the context of a regional labour market that we will examine: equity at the individual level; and equity at the geographical level Equity at the individual level The first dimension of equity we are looking at relates to equity at the individual level, i.e. between groups of the workforce. Opportunities should be available to all those in the labour market who are able to take them, regardless of gender, ethnicity or disability. It would be difficult, for example, to see a regional labour market as healthy if the minority ethnic population, despite equal or higher levels of qualifications and skills, experience persistently higher unemployment rates than are found among the population as a whole. For this theme we will compare the employment rates of men and women, older and younger people, people with disabilities and those without, and people from minority ethnic groups and white people. The best indicator to measure the relative labour market position of these different groups is the employment rate. The benefit of using this as opposed to the unemployment rate, is that many people in the groups in question, who are not in employment, are unlikely to appear in the unemployment figures, even if they would like to work. This applies, for example, to lone parents and many disabled people i.e. those in receipt of Incapacity Benefit. The South West scores very highly on all four indicators of individual equity (Figure 2.50). The region has the highest ratio of female to male employment rates, the second highest ratio of minority ethnic to white employment rates, the second highest ratio of disabled to non-disabled employment rates and the fifth highest ratio of older to younger employment rates. 72

73 Figure 2.50: Ratio of 50 and over/under 50, female/male, disabled/non-disabled, nonwhite/white employment rates, 2007 (%) Source: Annual Population Survey (via Nomis) Equity at the geographical level The second dimension of equity is a geographical one. Within a regional labour market, it may not be seen as healthy to have large and persistent disparities between local areas in terms of their labour market opportunities. Using the same approach as in IES original healthy labour market review for the region, the two best indicators of the geographical dimension of equity are: the ratio between the highest and lowest unemployment rate at a local authority level (Figure 2.51); the ratio between the highest and lowest gross weekly full time earnings at a loc authority level (Figure 2.52). The South West has a good showing on local unemployment rates, with the second lowest differential of the English regions. Nevertheless, the chances of an individual being unemployed are nearly four times higher in Torbay (with a claimant count unemployment rate of 2.5%) than in North Dorset (with a rate of 0.7%). 73

74 Figure 2.51: Ratio between highest and lowest unemployment rate at LAD level, August 2008 Source: Claimant Count (via Nomis) On the wages differentials, the region performs less well, with the 5 th highest wage gap of the nine regions. The average individual could earn more than 1.5 times as much working in North Wiltshire ( 515 per week) as they could working in North Devon ( 340 per week). Figure 2.52: Ratio between highest and lowest gross weekly earnings at LAD level, 2007 Source: ASHE 2007 (via Nomis) 74

75 3. CLOSER TO POLICY INDICATORS This chapter focuses on the Closer to Policy Indicator labour market themes. These may be distinguished from the Broad Outcome Indicators in that public sector bodies are able to exert some influence on aspects of the labour market themes here through policy initiatives and interventions. For example, policy initiatives may be envisaged to encourage and support business generation and improve the rapid functioning of the labour market, or to address the skills of the workforce and their participation in training. However, it should be noted that the process of identifying specific policy actions that correspond to each of these themes will be a complex one, and there will often be interactions between specific policies and other closer to policy indicators. 3.1 Business generation and survival Business generation and start ups 4 In 2007, there were 183,420 VAT-registered businesses in the South West, 9.4% of the UK VAT business stock. South West VAT stock has grown year on year since i.e. VAT registrations have outnumbered VAT de-registrations. As Figure 3.1 shows, growth in South West business stock has closely followed the UK pattern, though at a slightly slower rate - 1.7% per annum over the last ten years, compared to 1.8% for the United Kingdom. The region does tend to respond to UK economic conditions with a slight lag. Figure 3.1: Annual change in VAT-registered business stock 2.5 % change per annum UK SW Source: BERR, 2007 The South West has the highest density of VAT stock, registrations and de-registrations relative to population size outside of the Greater South East (London, South East and East of England) 37 registrations and 29 de-registrations per 10,000 population in 2006, similar to the UK average. However, the South West has the lowest rate of registration and de-registrations as a proportion of business stock. Business churn drives competitiveness and innovation and low business turnover rates are a potential indicator of lack of competitive pressures. On the other hand, the South West region has a larger than average number of small businesses that will not be counted here. 75

76 Figure 3.2 shows the distribution of growth in South West business stock by industrial sector between 1997 and Only manufacturing and agriculture saw a decline in business stock over this period, illustrating the continuing shift of the South West and UK economy (and western economies more generally) from production to services. The majority of growth was in business services, which expanded from 20% of South West VAT in 1997stock to 27% in Figure 3.2: Net change in SW VAT-registered business stock by sector, 1997 to ,000 Education; Health & social work 30,000 25,000 20,000 15,000 10,000 5, ,000 Source: BERR, 2007 Net change in VAT stock Public admin etc. Business activities Financial intermediation Transport & communication Hotels & restaurants Wholesale, retail & repairs Construction Manufacturing Extractive industries & utilities Agriculture, forestry & fishing As Figure 3.3 shows, growth in VAT stock over the last decade has been concentrated in the east and north of the region, and in urban areas. With the exception of Torbay, which was hit hard by the ICT downturn in the early part of this decade, urban areas have seen relatively faster growth than rural areas. Broadly speaking, this pattern is maintained over the five-year and one-year periods. Plymouth has seen particularly high business growth rates more recently 3.7% growth between 2006 and 2007 compared to 3.0% and 1.8% over the five- and ten-year periods. Cornwall, North Somerset and Bristol all follow a similar pattern; and Bournemouth s business stock also grew by 3.4% in 2006 to 2007 (2.2% for both five- and ten-year periods). 76

77 Figure 3.3: Growth in South West VAT-registered business stock by sub-region, 1997 to % change 1997 to Ten-year grow th SW average Torbay Cornwall & the Isles of Scilly Devon Somerset Dorset Gloucestershire Plymouth Bristol Wiltshire N. Somerset Bournemouth Poole S. Gloucestershire Bath & NE Somerset Swindon Source: BERR, 2007 Access the latest Local Area Data online Business survival VAT registration and de-registration 5, in particular the proportion of businesses still trading one and three years following registration, is the most commonly used proxy for business survival. As Table 3.1 shows, 74.0% of South West businesses registering for VAT in 2002 were still trading three years later in This is the highest survival rate of the English Regions and second only in the United Kingdom to Northern Ireland. 93.3% of South West businesses registering in 2004 were still trading one year later the highest in the United Kingdom. This does not leave much room for improvement in these figures going forward indeed, some level of business churn is expected and required to maintain competitiveness and thereby a healthy economy. 77

78 Table 3.1: VAT registered businesses still trading three years from first registration (percent still trading) Year of registration Change (1995 to ) United Kingdom North East North West Yorkshire and the Humber East Midlands West Midlands East London South East South West England Wales Scotland Northern Ireland Source: BERR, 2007 There has been a steady increase in survival rates since the mid 1990s, in line with economic growth and expansion of business stock. Based on knowledge of performance in the last few years, these relatively high figures are likely to be maintained in the short-term. Clearly a long time lag is required in order to estimate business survival and the effect of any national economic downturn in 2008 and 2009 on business survival will not be seen in this data for several years. There is substantial variation across the region (Figure 3.4), with three-year survival rates ranging from 77% in Devon to 71% in Bristol, North Somerset, Plymouth and Gloucestershire. Broadly speaking, northern and eastern parts of the region have lower survival rates than rural and peripheral areas due to higher competitive pressures in areas with higher business density. Plymouth and Torbay, which perform relatively poorly on economic output measures, have seen the greatest improvement in survival rates, rising by 12 percentage points over this seven year period. Sectoral data is only available nationally in the latest year s data, agriculture and fishing had the highest survival rates (84% and 83%, respectively, compared to an average of 71%) and lowest survival rates were in extraction and utilities (56%, though not robust due to small numbers of businesses registering and deregistering), and hotels and catering (61%). Hotels and catering is a very competitive sector and a difficult product to develop continually this sector tends to have high levels of debt, high business rates (particularly in key locations in urban centres), high turnover of staff and management. These businesses are also vulnerable to fluctuations in discretionary household spending, an important consideration in the South West, a tourism destination that relies on this sector, during periods of economic slowdown. 78

79 Figure 3.4: Sub-regional business survival rates 78 % still trading after three years Bristol N. Somerset Source: BERR, 2007 Plymouth Gloucestershire UK Poole Swindon S. Gloucestershire SOUTH WEST Bournemouth Wiltshire Torbay Cornwall & Isles of Scilly Somerset Bath & NE Somerset Dorset Devon Access the latest Local Area Data online 79

80 3.2 Research and development 6 Business and other organisations contribute to the health of the labour market not just through survival, but also by becoming more efficient at what they do. Businesses in particular do so through innovation. Innovation - the successful exploitation of new ideas - is a recognised driver of productivity, improving efficiency and enabling competitive advantage to be gained or maintained. Innovation is wide reaching, encompassing research and development, patenting and design, the uptake of new ideas, approaches and methods; and the dissemination and sharing of best practice. Some of these aspects are rather qualitative, and measurement of innovation generally relies on using indicators that are easily quantified, such as expenditure on R&D. A healthy labour market is one which is sustained by high levels of research and development activity in the different sectors of its economy. Expenditure on research and development activity provides an indication of the level of innovation in the local economy. The most successful companies tend to be engaged in R&D. Firms in the FTSE 100 with higher R&D as a proportion of sales have been judged by the market to be more successful over the recent past than the index as a whole FTSE100 firms spending at least 4% of their sales on R&D saw their value rise by 51% since 2001, compared to a 27% rise in the FTSE100 index over the same period 7. However the relationship between R&D and firm performance is complex. The public sector is also an important investor in research and development - the health sector, for example, is an important catalyst for development and growth in knowledge-intensive activities, and higher education institutions have been at the forefront of innovation in science and technology-related activities and products, which have come to market through spin-off businesses. In 2006, businesses in the South West spent 1.3 billion on R&D with a labour force of 14,000 full-time equivalent employees. Figure 3.5 shows regional R&D expenditure as a proportion of economic output in both 1996 and In 2006, the South West ranked third, up from fifth in This suggests that the region is making relative progress on this measure. South West R&D expenditure grew at around 6.3% per annum between 1996 and 2006 (around 4% per annum in real terms), somewhat higher than the UK average of 4.4%, and slightly higher than GVA growth over the same period (5.7% per annum). The North East is the only other English region that grew its R&D faster than economic output, with most of the others seeing a substantial fall. Similarly, South West employment in R&D has grown against a background of national decline. 80

81 Figure Business expenditure on R&D as proportion of GVA Business R&D as % of GVA YH L WAL NI SCO NE WM UK EM ENG NW SW SE E Source: ONS The South West s relative success, at least in maintaining levels of engagement in R&D relative to the size of the economy, most likely lies in the areas or sectors of R&D in which South West businesses specialise. Unfortunately, statistics on research by sector or by sub-region are not available at regional level, though aerospace-related research is known to be a significant component. Importantly, R&D is often one of the first types of expenditure to be cut when a business is facing uncertain economic conditions and when budgets are tight. As such, R&D expenditure is yet another indicator to watch as the region moves towards an economic slowdown. Figure 3.6 shows the sources of R&D in the South West by region in Two-thirds of the region s R&D expenditure can be attributed to business, a fifth to Government and 14% to the higher education sector. The UK pattern is 63%, 11% and 26%, respectively. As such, the South West hits above its weight in both business and government R&D expenditure (the latter largely due to defence spend), with a 9% and 16% share of the UK totals, respectively, compared to an 8% share of UK GVA. The region s higher education institutions on the other hand receive only a small share of total UK R&D expenditure in this sector (less than 5%). 81

82 Figure 3.6: Regional expenditure on R&D by sector, ,000 Business Government Higher Education 4,000 3,000 million 2,000 1,000 0 NE NW YH EM WM E L SE SW WAL SCO NI Source: ONS 82

83 3.3 Labour market turnover Job churning A healthy labour market is one where there is flexibility that allows people to progress in career terms over time, and a flexibility which allows people to move out of the labour market and adjust their employment patterns in line with their personal needs. An important indicator of this flexibility is labour market turnover. In looking at this indicator, data from the Labour Force Survey gives the proportion of those in employment who have started their job in the last three months, and on the proportion of those who have left one job and started another in the last three months. A relatively high rate on either measure provides an indication of flexibility associated with a healthy labour market. Information from the LFS on the proportion of people in employment who started a paid job in the last three months shows that the North East and the East Midlands had the highest rates, considerably higher than the UK average of 5.8%, while the South West rate of 5.5% was relatively low (Figure 3.7). However, when looking at those who left one job but started another in the previous three months before the survey, the South West region s position is nearer the average for the UK. This suggests that while the region has a certain degree of flexibility, there is no stronger tradition of a hire-and-fire culture in the South West than in the country as a whole. Figure 3.7: Labour market turnover by region, 2007 (%) all regions Source: Labour Force Survey 83

84 3.3.2 Redundancies Redundancies can occur for many reasons. Some are internal, whereby within employers, certain skills or occupations may be obsolete and no longer needed by an employer. But there are also a range of external influences, such as the local, national and even international economic climate, which can cause difficult trading conditions for businesses and result in redundancies and business closures. It could be argued that a healthy labour market is one that is able to counter barriers to business prosperity, with consequent low rates of redundancies among employers. Data from the Labour Force Survey shows that in 2007, the South West had the second highest rate of redundancies in England (see Figure 3.8). Redundancies per 1,000 employees in the region was estimated at 2.4, compared with the average for England of 1.9, but well below the worst performing region - the North East, at 8.7. Figure 3.8: Employees made redundant in the last three months, 2007 (rate per 1,000 employees) Source: Labour Force Survey Redundancies are also the result of structural change in the economy. While this can be traumatic for employees in the short term, it is not necessarily a bad thing for the health of the labour market, especially if confined to industries in long-term decline and with a bleak economic future. 84

85 3.4 Vacancies and skills shortages Vacancies In 2007 there were approximately 58,600 vacancies reported by employers in the South West. As a proportion of actual jobs in the region, vacancies only equate to around 2.7% of total employment, in line with the national average of 2.8% (Table 3.2). The total number of vacancies is down from 62,500 in 2005, when vacancies accounted for 2.9% of employment, suggesting a tightening of the labour market in the last two years. Table 3.2: Vacancies in the South West, by LSC area, 2007 Local LSC Area Bournemouth, Dorset & Poole Unweighted base (employers) Number of Vacancies Vacancies as % of jobs % of employers with one or more vacancies 1,169 8, Devon & Cornwall 2,805 18, Gloucestershire 1,001 7, Somerset 938 4, West of England 1,518 13, Wiltshire & Swindon 1,023 6, South West 8,454 58, England 79, , Source: Derived from National Employer Skills Survey by LSC SW Research Team Within the region, Somerset and Wiltshire & Swindon have significantly lower levels of vacancies than the other local LSC areas in the region. Looking at vacancies by occupation, as a proportion of all of vacancies reported, sales, elementary and technical occupations account for the highest proportions. Relatively few vacancies (4% of the total) were in managerial occupations. In the South West, in comparison to the national picture there are higher proportions of vacancies in administrative, sales and operative occupations, and relatively few in higher level (managerial, professional and technical) occupations. 85

86 Figure 3.9: Vacancies by occupational group, South West & England, 2007 Source: Derived from National Employer Skills Survey by LSC SW Research Team Access the latest Local Area Data online Hard-to-fill vacancies Hard-to-fill (HTF) vacancies are just that vacancies which employers regard as hard to fill. In 2007 employers reported around 20,500 HTF vacancies, equating to approximately 35% of all vacancies, the highest rate amongst the English regions. The number of HTF vacancies reported in the region has increased slightly from 19,200 in 2005, when they accounted for 31% of all vacancies, suggesting that employers are finding it increasingly difficult to find suitable employees to fill their vacancies. Table 3.3: Hard-to-fill vacancies by region, 2007 Unweighted (employers) % of all employment % of all vacancies % of all HtF vacancies HtF vacancies as % of all vacancies East 8, East Midlands 7, London 12, North East 5, North West 8, South East 12, South West 8, West Midlands 8, Yorkshire & the Humber 7, England 79, Source: Derived from National Employer Skills Survey by LSC SW Research Team 86

87 HTF vacancies most strongly affect employers within industry sectors such as manufacturing, construction, transport and land-based industries. Creative industries and the care sector also face significant problems. Access the latest Local Area Data online Skills shortage vacancies Skills shortage vacancies (SSVs) are those hard-to-fill vacancies where employers state that they are difficult to fill because applicants lack the level of skills, experience or qualifications needed to do the job. Nearly two-thirds of all HTF vacancies reported in the South West were difficult to fill due to a lack of skilled applicants (a total of around 12,700 SSVs). Looking at the intensity of the skills shortage problem for the South West, Figure 3.10 shows that the region has the joint second highest level of SSVs (22% of all vacancies), a proportion only higher in London (26%). This is higher than the 17% of vacancies in 2005, suggesting that shortages of skilled applicants for vacancies are becoming more of a problem for the region s employers than in previous years. Figure 3.10: Skills shortage vacancies (SSVs) as a proportion of the total number of vacancies, by region, 2007 Source: Derived from National Employer Skills Survey by LSC SW Research Team In the South West, there was a higher proportion of SSVs in skilled trades, administrative and machine operative occupations, compared to the national average. In line with the smaller proportions of vacancies in higher level occupations, these account for a smaller proportion of SSVs compared to nationally. 87

88 Figure 3.11: Skills shortage vacancies by occupation, South West & England, 2007 Source: Derived from National Employer Skills Survey by LSC SW Research Team Access the latest Local Area Data online By industry, the Sector Skills Councils (SSCs) with the most SSVs, in terms of volumes, are: Construction (Construction Skills) approximately 1,500 SSVs Hospitality (People 1st) 1,300 Retail (Skillsmart) Engineering (SEMTA) Health (Skills for Health) However, if we look at the concentration of skill shortages at sector level in the South West, we find that SSVs comprise a higher proportion of vacancies in: Construction (ConstructionSkills) Creative media (Skillset) Land-based industries (Lantra) Building services engineering (SummitSkills) Passenger transport (Goskills) Engineering (SEMTA) Retail Motor Industry (Automotive Skills) Advertising, crafts, music, performing, heritage, design & arts (Creative and Cultural Skills) Fashion & textiles (Skillfast-UK) IT & telecoms (e-skills UK) Internal skills gaps In the National Employer Skills Survey, employers were also asked to report on internal skills gaps within their organisation, which look at skills deficiencies in existing employees rather than at vacancies. In 2007, 16% of employers reported having a skills gap, with around 137,000 employees assessed as not being fully proficient in their job. This accounted for 6% of total employment, and represents an increase from around 5% in 2005 (107,000 employees) in However, this level of skills gaps is exactly the same as reported by employers across England as whole. 88

89 Sales (24%) and elementary occupations (17%) accounted for the highest proportion of the South West s skills gaps in In comparison to the national picture, the region has a larger proportion of skills gaps in sales, skilled trades, personal service and operative occupations. Higher level (managerial, professional and technical) occupations account for a lower proportion than nationally, suggesting that the region s managerial and professional workers are less likely to be experiencing skills gaps. Figure 3.12: Proportion of internal skills gaps by occupation, South West & England, 2007 Source: Derived from National Employer Skills Survey by LSC SW Research Team NESS 2007 reveals that skills gaps are most numerous in: Hospitality (People 1st) 25,500 skills gaps Retail (Skillsmart) 19,800 Engineering (SEMTA) 11,000 IT & telecoms (e-skills UK) 6,900 Construction (ConstructionSkills) 6,800 When considering skills gaps as a proportion of employment, the following sectors have the highest concentrations of skills gaps (as shown in Figure 3.13): Hospitality (People 1st) IT & telecoms (e-skills UK) Active leisure and learning (SkillsActive) Engineering (SEMTA) Building services engineering (SummitSkills) Retail (Skillsmart) 89

90 Figure 3.13: Skills gaps as a proportion of employment by Sector Skills Council, South West, 2007 Source: Derived from National Employer Skills Survey by LSC SW Research Team Access the latest Local Area Data online 90

91 3.5 Work-related training One key response for employers to deal with skill shortages and to increase its productivity and competitiveness is to provide training for its workers. Data from the Labour Force Survey shows that the South West performs fairly well compared to other regions of England, with 22% of employees having received work-related training of some kind in the last three months. This is slightly higher than the national average of 20.3%, and is the second highest of the English regions, behind the North East (Figure 3.14). Figure 3.14: Proportion of employees and self-employed receiving work-related training in last three months, 2007 (%) all regions Source: Annual Population Survey (via Nomis) In the last two years, however, the trend is for a falling level of work-related training, for the South West and its neighbouring regions, in line with the national average (see Figure 3.15). 91

92 Figure 3.15: Proportion of employees and self-employed receiving work-related training in last three months, (%) SW vs England and neighbouring regions Source: Annual Population Survey (via Nomis) As with the regional situation, local patterns of undertaking work-related training bear little resemblance to overall workforce qualifications. The highest rates of training were to be found in Swindon (26.3%) and the lowest in Cornwall (18.6%). 92

93 Figure 3.16: Proportion of working age population receiving work-related training in past 4 weeks, by South West local authority, 2007 Source: Annual Population Survey, 2007 Access the latest Local Area Data online 93

94 4. QUALIFICATIONS, SKILLS & LEARNING This section is concerned principally with characteristics of the pool of labour supply which can help to address issues relating to vacancies, skills shortage and other recruitment difficulties encountered by employers. It begins by looking at levels of participation by young people and adults in education and learning activities, and then goes to examine the level of qualifications achieved by young people and across the entire working age population. Together, they provide an indication of the health of the labour market by how easily it can respond to changing demand from employers through the renewal and updating of the skills of the workforce. 4.1 Participation of young people According to Eurostat, the UK has one of the lowest rates of participation of year olds of all the countries in Western Europe. In 2005, 78.7% of year olds in the UK were in education or training (see Figure 4.1), a rate higher only than Portugal and Luxembourg. Figure 4.1: Proportion of year olds in education or training, 2005 (%) international comparisons Source: Eurostat In the context of low participation in the UK as a whole, data from the DCSF shows that the South West performs fairly poorly on this indicator (see Figure 4.2). In 2006, 81% of the region s year olds were engaged in education and training, just below the England average of 82%. The region s performance was surpassed by five other regions, particularly by London, with 89% in full-time education. 94

95 Figure 4.2: Proportion of year olds in education and training, 2006 (%) all regions Source: DCSF, SFR13/2008 Participation rates varied considerably between local authority areas in the South West region itself. Bath & North East Somerset (88%) had the highest level of participation, in contrast with several parts of the region where the rate of participation was just 79% in Over recent years, Figure 4.3 shows that there has been limited improvement in the overall participation rate of year olds. With no improvement in the South West between 2002 and 2004, the region s previously advantageous position has been eroded, relative to both the national average and also its neighbouring regions. 95

96 Figure 4.3: Proportion of year olds in education and training, (%), SW vs England and neighbouring regions Source: DCSF, SFR13/2008 In tandem with increasing levels of participation among young people, the LSC also has a target to reduce the percentage of year olds classified as not engaged in education, employment or training (NEET) by 2% points by In the South West, this target is 4.7%. Figure 4.4: Proportion of year olds not in education, employment or training (NEET), 2007 Source: DCSF, website Access the latest Local Area Data online 96

97 The current position in the region is that 5.5% of year olds were NEET in Although this is the second lowest proportion of all the English regions, it is still some way short of the target level for However, there has been some movement in the right direction, with the proportion of NEETs having fallen from 6% in The rate of NEETs tends to be higher in the region s urban areas, with the highest proportions in Bournemouth (8.4%), Bristol (7.3%), Plymouth (6.8%) and Swindon (6.2%). 97

98 4.2 Adult participation There is increasing emphasis on the development of skills and knowledge throughout people s working lives. Two important aspects of the health of the labour market is the extent to which people go into higher education, and also the participation of people of working age in any learning activities (taught, non-taught learning, or both). Table 4.1 shows that, over the last few years, increasing numbers of people have been going into higher education, with over 153,000 students from the South West in 2006/07, 4.3% higher than in 2002/03. There has been faster growth in full-time participation, and at postgraduate level rather than undergraduate. Table 4.1: Participation in HE by students from the South West, 2002/ /07 Full-time Part-time Postgraduate Undergraduate Total 2002/03 85,620 61,320 27, , , /04 86,655 63,830 29, , , /05 88,250 63,380 30, , , /06 90,485 63,650 30, , , /07 91,125 62,090 30, , ,215 Change 5, ,070 3,205 6,275 % change 6.4% 1.3% 11.0% 2.7% 4.3% Source: HESA Data from the Annual Population Survey shows that the South West scores particularly well on the indicator of adults participating in learning in the last three years. Indeed, the region had the second highest proportion of all English regions in 2007, with 54% of the region s adults participating in some form of learning. By comparison, the West Midlands - the worst performing region had less than 48% of adults engaged in any learning (see Figure 4.5). 98

99 Figure 4.5: Proportion of adults* participating in any learning in the last 3 years, 2007 (%) Source: Annual Population Survey (via Nomis) * Adults refers to those aged 19+ who are not in full-time education Access the latest Local Area Data online Over recent years, however, the proportion of adults engaged in learning has fallen slightly, down from around two-thirds in This may be due to the rising costs of courses in adult learning provision and the removal of a number of courses that had previously been provided free of charge to learners. 99

100 4.3 Investment in qualifications and skills by individuals While investment in skills by employers is important, it will also be crucial for individuals to invest in their own skills and qualifications if regional aspirations are to be realised and its targets met Qualification attainment among young people Encouragingly, qualification attainment rates for young people are improving. Attainment is ahead of the national average, with the gap remaining steady on most indicators. Achievement at GCSE The South West generally performs well in terms of GCSE achievements. In 2007, 49% of pupils in South West schools achieved five or more GCSEs at grades A* - C including Maths and English, higher than the national average of 47.2% and the fourth highest of the nine English regions (see Figure 4.6). This is up from 47% in 2006, and represents a slight widening of the gap with the England average. Figure 4.6: Percentage of 15 year olds achieving 5+ A*-C grades at GCSE, including English and Maths, 2008, all regions Source: DCSF Within the region, the majority of local authorities have attainment rates above the national average, with the highest levels of achievement being in the Isles of Scilly (69.6%), Gloucestershire (56.6%), Poole (56.4%) and Dorset (53.1%), as shown in Figure 4.7. By far the worst performing area is Bristol, where just 34.9% of pupils achieved this level, 14 percentage points below the national average. Download the latest Local Area Data 100

101 Figure 4.7: Percentage of 15 year olds achieving 5+ A*-C grades at GCSE, including English and Maths, by South West local authority, 2008 Source: DCSF Achievement at A level The South West is also well above average for the A Level achievements of its young people. In terms of the average points score per A Level entry, the region is the best performing in England, with an average score around 2% better than the national average (see Figure 4.8). Figure 4.8: Average points score per entry at A Level, 2008, all regions Source: DCSF 101

102 As with GCSEs, there is significant variation across different areas of the region. Bournemouth, with an average of 224 points is well ahead of the next highest local authority (Somerset, with 213 points). The worst performing authority in 2008 was South Gloucestershire. Figure 4.9: Average points score per entry at A Level, by South West local authority, 2008 Source: DCSF Attainment of Level 2 and Level 3 qualifications at 19 The proportion of 19 year olds achieving a Level 2 qualification has increased significantly, by six percentage points between 2004 and 2007 to 76.1% (figure 4.10). This far exceeds the PSA target set by the government to increase the proportion by three percentage points between 2004 and The PSA target also aspires to a further two percentage points increase between 2006 and 2008, and based on the increase in achievement between 2006 and 2007 of 1.6 percentage points, the region seems well placed to meet this target. 102

103 Figure 4.10: Attainment of Level 2 at age 19, , South West vs England Source: DCSF, SFR 04/2008 The proportion of 19 year olds achieving a Level 3 qualification has also risen strongly over the same period, by six percentage points to 50.2% in 2007 (Figure 4.11). The rate of improvement for England as a whole has been similar, however, and the gap has remained at around two percentage points. In 2007, the South West ranked third highest of the nine English regions, behind London and the South East. Figure 4.11: Attainment of Level 3 at age 19, , South West vs England Source: DCSF, SFR 04/2008 Download the latest Local Area Data 103

104 4.3.2 Qualification attainment among adults No Qualifications The South West continues to have the lowest proportion of people without any qualifications of all the English regions (Figure 4.12). With just 9.5% of the working age population having no qualifications, the rate is more than three percentage points below the national average. Figure 4.12: Proportion of the working age population with no qualifications, all regions, 2007 Source: Annual Population Survey (via Nomis) Download the latest Local Area Data Encouragingly, the proportion of people of working age with no qualifications continues to decline, albeit only gradually. The proportion fell 10.7% in 2004 to 9.5% in 2007 (Figure 4.13). The gap with the England average has remained fairly consistent over this period. 104

105 Figure 4.13: Proportion of the working age population with no qualifications, , South West vs England Source: Annual Population Survey, There is a significant gap in attainment between different areas of the region, with higher than average proportions in Bristol, Dorset, Gloucestershire, Poole and Somerset (Figure 4.14). Figure 4.14: Proportion of the working age population with no qualifications, 2007, by South West local authority Source: Annual Population Survey (via Nomis) The proportion of the workforce with no qualifications is below the England average in all sectors (Figure 4.15). 105

106 Figure 4.15: Proportion of the working age population with no qualifications, by industrial sector, South West vs England, 2008 Source: Labour Force Survey, Jan-Mar 2008 Level 2 and above The South West actually has the second highest proportion of its working age population qualified to at least Level 2 out of all English regions. In 2007, the percentage qualified to Level 2 and above was 71.7%, well in excess of the national average of 68.2% (Figure 4.16). 106

107 Figure 4.16: Proportion of the working age population with Level 2+ qualifications, all regions, 2007 Source: Annual Population Survey (via Nomis) The proportion of the working age population with at least a Level 2 qualification is increasing, and the gap between the region and England has remained fairly constant between 2004 and 2007 (Figure 4.17). Figure 4.17: Proportion of the working age population with Level 2+ qualifications, , South West vs England Source: Annual Population Survey (via Nomis) Within the region, differences in attainment are pronounced, ranging from well over 78% in Bath & North East Somerset, down to as low as 66% in Torbay (Figure 4.18). 107

108 Figure 4.18: Proportion of the working age population with Level 2+ qualifications, 2007, by South West local authority Source: Annual Population Survey (via Nomis) Encouragingly the proportion of the workforce qualified to Level 2 and above is above the England average in most sectors. The exceptions, however, are Agriculture & Fishing, Energy & Water and Other Services. Better skilled and qualified workers are needed to support improvements in competitiveness and there is a drive to up-skill to Level 2, Level 3 and above (see section 4.4 on world class skills and the targets set out in the Leitch Review. 108

109 Figure 4.19: Proportion of the working age population with Level 2+ qualifications, by industrial sector, South West vs England, 2008 Source: Labour Force Survey, Jan-Mar 2008 Level 3 and above Again, among the English regions the South West has one of the highest proportions of the population holding at least a Level 3 qualification (50% in 2007). Along with London and the South East, the region s workforce qualified to Level 3 and above is significantly above any of the other regions (Figure 4.20). Figure 4.20: Proportion of the working age population with Level 3+ qualifications, all regions, 2007 Source: Annual Population Survey (via Nomis) 109

110 50% of the region s working age population now hold at least a Level 3 qualification. The rate has been increasing steadily, and at a slightly faster rate than the national average (Figure 4.21). Figure 4.21: Proportion of the working age population with Level 3+ qualifications, , South West vs England Source: Annual Population Survey (via Nomis) As for rates of attainment at Level 2 and above, there is a significant range in attainment of Level 3 between local areas, with Bath & North East Somerset again the having highest proportion at 56.2% and Torbay the lowest at 42.3% (Figure 4.22). 110

111 Figure 4.22: Proportion of the working age population with Level 3+ qualifications, 2007, by South West local authority Source: Annual Population Survey (via Nomis) The proportion of the workforce qualified to Level 3 and above is close to the England average in most sectors (Figure 4.23). As with Level 2, the exceptions include Energy & Water and Other Services, although the gap with the national position is not so large as to be of major concern. Figure 4.23: Proportion of the working age population with Level 3+ qualifications, by industrial sector, South West vs England, 2008 Source: Labour Force Survey, Jan-Mar

112 Higher level qualifications Almost 30% of the region s working age population now has qualifications at Level 4 or above, the third highest rate behind London and the South East (Figure 4.24). Section has already discussed the clear trend of graduates favouring a move to London for work, which significantly boosts its workforce and Level 4 and above. Figure 4.24: Proportion of the working age population with Level 4+ qualifications, all regions, 2007 Source: Annual Population Survey (via Nomis) The rate of attainment of Level 4 and higher qualifications is rising steadily, from 26.1% in 2004 to 29.1% in 2007 (Figure 4.25). The gap with England has remained fairly consistent in this time. 112

113 Figure 4.25: Proportion of the working age population with Level 4+ qualifications, , South West vs England Source: Annual Population Survey (via Nomis) Again there are marked differences across the South West in terms of rates of attainment of higher level qualifications. The general pattern is of higher concentrations of Level 4+ qualifications in the northern and eastern areas of the region, with Bristol at over 35%, and Bath & North East Somerset at 34%. By contrast, Poole, Swindon, Plymouth and Torbay have less than 25% of its workforce at Level 4 and above. Figure 4.26: Proportion of the working age population with Level 4+ qualifications, 2007, by South West local authority Source: Annual Population Survey (via Nomis) 113

114 By industrial sector - as at other levels of qualifications - the region is in a similar position to the national average at Level 4 and above. However, the differences between sectors become more marked at Level 4, with much lower proportions of workers qualified to this level in Construction, Distribution, Hotels & Restaurants and Transport & Communications compared to other sectors (Figure 4.27). Figure 4.27: Proportion of the working age population with level 4+ qualifications, by industrial sector, South West vs England, 2008 Source: Labour Force Survey, Jan-Mar 2008 Access the latest Local Area Data online Qualification attainment by age Older people are making up a significant proportion of the working age population (see section 2.5) particularly so in the South West. Therefore, it is crucial that they are encouraged and assisted to invest in their skills and qualifications if employer skill needs are to be met. However, the likelihood of holding qualifications decreases with age and those over the age of 50 are more likely to have no qualifications at all. 114

115 Figure 4.28: Qualification attainment by age in the South West, 2007 Source: Annual Population Survey (via Nomis) 4.4 Leitch Targets The findings of the Leitch Review of Skills were published in late The vision of the Leitch Review is that: in the 21st Century our natural resource is our people and their potential is both untapped and vast. Skills will unlock that potential. The prize for our country will be enormous higher productivity, the creation of wealth and social justice...skills is the most important level within our control to create wealth and to reduce social deprivation. While the review acknowledged significant recent improvements in the country s skills base, driven by rising school standards and growing numbers of university graduates, it still falls short of international standards. The review states that, if the UK remains on its current trajectory, it position relative to international competitors will not have improved by The Review sets out a vision of the UK becoming a world leader in skills, benchmarked against the upper quartile of the OECD. Stretching targets to be achieved by 2020 include: 95% of adults to achieve the basic skills of functional literacy (at least Level 1) and functional numeracy (at least Level 3), an increase from levels of 85% for literacy and 79% for numeracy in 2005 equating to an additional 7.4 million achievements over the period. Intermediate targets for 2011 of 89% of adults with functional literacy and 81% of adults with functional numeracy have also been set. More than 90% of adults qualified to at least a full Level 2, an increase from 69% in 2005 equating to an additional 5.7 million achievements over the period at a rate of around 450,000 attainments per annum. An intermediate target for 2011 of 79% of adults qualified to this level has been set. 115

116 1.9 million additional full Level 3 attainments over the period, at a rate of 213,000 per annum. An intermediate target for 2011 of 56% of adults qualified to this level has been set. 40% of adults qualified to Level 4 and above, up from 29% in 2005 equating to an additional 5.5 million attainments over the period. An intermediate target for 2014 of 36% of adults qualified to this level has also been set. This section aims to establish the South West s baseline position in relation to these targets, and to establish the scale of the task facing the region if these ambitious targets are to be met. Local area data can be found in Appendix Baseline vs Intermediate (2011) targets The South West, in common with the majority of English regions, currently does not achieve any of the intermediate targets as set by Leitch. Based on the most recent available data, Table 4.2 and Figure 4.29 summarise the current position against each target, and show that: The South West is currently fourth of the nine English regions and slightly below the national average in terms of participation in full time education amongst those aged The shortfall against the target is currently 13 percentage points. The region is currently joint second and above the national average in terms of the proportion of adults currently with literacy skills equivalent to Level 1. The shortfall against this target is currently just two percentage points. The region is currently third and again higher than the national average in terms of the proportion of adults currently with numeracy skills equivalent to entry Level 3. The shortfall is currently just one percentage point. The region is currently joint first and above the national average in terms of the proportion of adults holding qualifications equivalent to NVQ Level 2 or higher. The shortfall is currently seven percentage points. The region is currently joint first and above the national average in terms of the proportion of adults holding qualifications equivalent to NVQ Level 3 or higher. The shortfall is currently six percentage points. The region is currently third highest and equal to the national average in terms of the proportion of adults holding qualifications equivalent to NVQ Level 4 or higher. The shortfall is currently seven percentage points. 116

117 Table 4.2: Comparison of baseline position against Leitch intermediate targets FT Participation (%) L1+ Literacy (%) Entry L3+ Numeracy (%) % L2+ % L3+ % L4+ * Leitch Target (2011) England East East Midlands London North East North West South East South West West Midlands Yorkshire & the Humber Source: Derived from DfES Basic Skills Survey (2003), APS (2007), DCSF SFR 13/2008, Leitch (2006) * = Intermediate target for Level 4+ is for 2014 Figure 4.29: South West baseline position vs 2011 Leitch targets Source: Derived from DfES Basic Skills Survey (2003), APS (2006), DCSF SFR 22/07, Leitch (2006) In order to understand more clearly the scale of the task to achieve the targets, the shortfall in terms of absolute numbers of individuals has been derived. The number of additional people needed to achieve these targets is estimated as follows: To achieve a full-time education participation rate of 84%, it is estimated that a further 17, year olds will need to be in full-time education by 2011, equivalent to around 3,600 a year. 117

118 To achieve 89% of adults holding Level 1 literacy skills, it is estimated that there is a need for a further 85,000 adults to achieve this by 2011, equivalent to approximately 17,000 a year. To achieve 91% of adults holding Entry Level 3 numeracy skills, it is estimated that there is a need for a further 58,000 adults to achieve this by 2011, equivalent to just over 11,600 a year. To achieve 79% of adults holding a qualification equivalent to NVQ Level 2 or higher, it is estimated that there is a need for a further 204,000 adults to achieve this by 2011, equivalent to just over 51,000 a year. To achieve 56% of adults holding a qualification equivalent to NVQ Level 3 or higher, it is estimated that there is a need for a further 168,000 adults to achieve this by 2011, equivalent to around 42,000 a year. To achieve 36% of adults holding a qualification equivalent to NVQ Level 4 or higher, it is estimated that there is a need for a further 194,000 adults to achieve this by 2014, equivalent to just under 28,000 a year. Note: these figures are based on the assumption that there will be no change in population in the region between the baseline year and This is an unrealistic assumption; the figures are intended to serve as an indication of the scale of the task, not provide exact numbers. New Working Futures data is soon to be made available and the projections will be reviewed in light of these changes prior to publication Baseline vs Full (2020) targets There are no specific final targets set around full-time participation in education or the achievement of qualifications at NVQ Level 3 equivalence or higher. Table 4.3 and Figure 4.30 summarise the South West s position against the full Leitch targets for Table 4.3: Comparison of baseline position against Leitch 2020 targets L1+ Literacy (%) Entry L3+ Numeracy (%) % L2+ % L4+ Leitch Target (2020) England East East Midlands London North East North West South East South West West Midlands Yorkshire & the Humber Source: Derived from DfES Basic Skills Survey (2003), APS (2006), Leitch (2006) 118

119 Figure 4.30: South West baseline position vs Leitch targets Source: Derived from DfES Basic Skills Survey (2003), APS (2006), Leitch (2006) A similar exercise has been carried out as for the intermediate targets, in order to quantify the scale of the task to meet each target in terms of absolute numbers of individuals. The number of additional people needed to achieve these targets is estimated as follows: To achieve 95% of adults holding Level 1 literacy skills, it is estimated that a further 266,000 adults (19,000 annually) will be needed to achieve this by 2020 (representing an increase in the proportion of the working age population qualified to this level of eight percentage points). To achieve 95% of adults holding Entry Level 3 numeracy skills, it is estimated that there is a need for a further 479,000 adults (34,000 annually) to achieve this by 2020 (representing an increase in the proportion of the working age population qualified to this level of 15 percentage points). To achieve 90% of adults holding a qualification equivalent to NVQ Level 2 or higher, it is estimated that there is a need for a further 835,000 adults (39,000 annually) to achieve this by 2020 (representing an increase in the proportion of the working age population qualified to this level of 18 percentage points). To achieve 40% of adults holding a qualification equivalent to NVQ Level 4 or higher, it is estimated that there is a need for a further 306,000 adults (24,000 annually) to achieve this by 2020 (representing an increase in the proportion of the working age population qualified to this level of 11 percentage points). 119