WEST OF ENGLAND LEP ECONOMIC ASSESSMENT 2015 WEST OF ENGLAND ECONOMIC ASSESSMENT EXECUTIVE SUMMARY 04 AUGUST Page 1

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1 WEST OF ENGLAND ECONOMIC ASSESSMENT EXECUTIVE SUMMARY 04 AUGUST 2015 Page 1

2 INTRODUCTION This report presents the findings and conclusions from an assessment of the economic characteristics and performance of the West of England. The West of England comprises of the unitary authority areas of Bath and North East Somerset, Bristol, North Somerset and South Gloucestershire. The assessment covers a full range of economic issues and themes, including overall economic performance and economic output, productivity, industrial trends, enterprise, innovation, employment, skills, housing, property and transport. In the next section, the overall assessment sets out the strengths, weaknesses, opportunities and threats facing the West of England economy and emphasises the most striking points and conclusions for future economic strategies and decisions. ANALYSIS STRENGTHS The West of England economy has higher rates of entrepreneurship, skills and qualifications than average. Rates of productivity are also higher. This is reflected in the product-market strategies of businesses, which tend to be more geared towards quality, innovation and design compared to nationally as well as the higher rates of employment in the knowledge economy and high- and medium- technology manufacturing. The West of England has demonstrated a capability for growth in the past both in terms of economic output and jobs. And it has demonstrated resilience as the area was only one of five LEP areas which did not experience a nominal economic contraction during the recession. Another significant strength is the size and economic participation rates of the workforce; and the projected growth in the workforce. The West of England does not face population ageing to the extent that the national economy, and other regional economies do. The West of England is also a significant headquarters location for businesses and has a track record in attracting foreign direct investment. This track record will help in further increasing awareness of the area as a competitive business location, and will help make the case to future investors. WEAKNESSES A notable weakness has been the lower rates of economic growth and jobs growth since 2010, and the decline growth rate in productivity. Between 2010 and 2012 economic output decreased in many of the service sectors, including Information and Communications, Finance and Insurance and Business Service Activities. Historically, these have tended to be the sectors with growth potential in terms of jobs and output. Another observation is that high rates of jobs growth are not being reflected in GVA growth rates, and that high rates of workforce qualifications and skills offer no clear premium in terms of earnings (when compared to the national average). OPPORTUNITIES Manufacturing growth, in particularly high- and medium- technology manufacturing presents a significant future opportunity. The West of England has a higher share of residents in scientific and technology professionals, which will help to potentially underpin further growth. The higher share of establishments competing on quality, innovation and design offers further advantages for market growth and export potential. As mentioned, the track record in foreign direct investment and presence of headquarters will help to attract further investment to the West of England. Coupled with the current strengths in terms of skills and qualifications, the area has a compelling offer for business investment. THREATS The financial services sector has contracted sharply in the West of England in terms of employment and economic output. It is unlikely that this sector will be the driver of growth in jobs and for the economy going forward. Page 2

3 If the productivity growth rate continues to fall relative to the national rate, then the West of England s superior productivity performance will potentially erode and fall below the national average. There is some evidence of labour market tightening (where some employers face increasing recruitment difficulties) via the incidence of a higher rate of skills shortage vacancies; and high rates of economic participation. Of course, this may be partially offset by natural population change, and in particular an influx of young people into the labour market. However, labour demand does not always change in a smooth and gradual way, particularly in the aftermath of a recession there are usually periods of peak recruitment that are part of the business cycles in various industries. This may prove challenging for some local employers. One potential future threat is the deterioration in qualifications attainment of young people. Whereas the population projections paint a picture of strong future labour supply and young entrants to the labour market, the trends in qualifications attainments may suggest that there could be deficiencies in the qualifications of these young people. Whereas in many economies, the cohort effect means that many older members of the workforce with no qualifications are set to leave the workforce, this may be counteracted to some degree by young people entering the workforce with low or no qualifications. with stronger predisposition towards tradeable activities that compete on quality, design and innovation. High rates of skills and qualifications in the workforce; High rates of economic participation and a growing workforce. However, like many successful economies, the pressures of infrastructural and housing demand have often exceeded supply. In addition, the area s productivity advantages seem to be eroding. Despite high rates of job growth, the rate of GVA growth over recent years has been low. On balance, the strengths outweigh the weaknesses, and cannot be underestimated. Not many UK city regions (particularly those based around core cities) have such advantages, nor lie in such proximity to London and the South East of England. They should mean that the West of England will experience relatively strong rates of economic growth over the next decade. As with many local economies in the UK, the costs of housing have increased significantly over recent years, and there have been indications of increasing levels of traffic congestion. If left unaddressed, these will affect the ability to compete as an economy and as a place to attract and retain talent. OVERALL ASSESSMENT The West of England economy has some outstanding strengths to set it in good stead for economic development and growth in future: Strong rates of entrepreneurship, presence of significant businesses, and track record in foreign direct investment Strong share of employment in high value added manufacturing and services activities; Page 3

4 ECONOMIC PERFORMANCE The West of England has traditionally had a stronger economy than the rest of the country, and weathered the recession better than other areas. But in the last two years growth has slowed to below the national average. THE WEST OF ENGLAND HAS A 29.3 BILLION ECONOMY, REPRESENTING 2.3 PER CENT OF ENGLAND S ECONOMIC OUTPUT In 2013, businesses in the West of England produced 29.3 billion worth of economic output (Gross Value Added, or GVA). THE WEST OF ENGLAND ECONOMY DEMONSTRATED RESILIENCE DURING THE RECESSION, BUT SINCE 2010 GROWTH RATES HAVE SLOWED Between 1997 and 2008, economic output in the West of England grew by 76.6 per cent, or an average annual rate of 5.3 per cent. This was faster than growth across England (73.7 per cent, an annual average of 5.1 per cent) and the sixth highest of all 39 LEP areas. In 2009, GVA grew by 0.3 per cent, compared with a 1.5 per cent fall across England. Since 2010 the West of England economy has recorded the third lowest rate of economic growth among the 39 LEP areas, with annual average growth of 1.8 per cent, against 3.0 per cent nationally. Of the core cities and comparator southern LEP areas, only Liverpool and Swindon & Wiltshire had lower growth rates. Since 2010, growth in Business Services, Financial & Insurance, and Information and Communication have not matched national rates. suggests a fall of 10,000 total jobs 1 between 2011 and 2012 has been partly offset by growth of 11,000 between 2012 and 2013.Productivity is high in the West of England In 2011, each job in the West of England produced an average of 47,100 in GVA. This was higher than the Great Britain average ( 44,700), and above all core cities and most comparator southern LEP areas apart from Oxfordshire. KEY FACTS: ECONOMIC PERFORMANCE 29.3 billion in economic output in 2013 (2.3 per cent of England total) GVA per head: 26,800 in 2013 (England= 24,100 ) Historic GVA growth rate (nominal) per annum : 5.3 per cent (England = 5.1 per cent) GVA growth (nominal) during recession year 2009: 0.3 per cent (England = -1.5 per cent) GVA growth rate post-recession (nominal) per annum : 1.8 per cent (England = 3.0 per cent) Growth in total jobs between 2000 and 2013: 9.4 per cent (England = 8.7 per cent) 616,000 jobs in 2013 (2.2 per cent of England s jobs) Productivity rate 2011: 47,100 GVA per job (GB = 44,700) Productivity growth 1998 to 2011: GVA per job grew by 54.6 per cent (GB = 60.2 per cent). PRODUCTIVITY GROWTH IS BELOW THE NATIONAL AVERAGE Between 1998 and 2011, GVA per FTE job grew by 54.6 per cent in the West of England, lower than the Great Britain average of 60.2 per cent, all core cities and two of the five southern LEP areas. GROWTH OF 3.1 PER CENT PER YEAR IS FORECAST BETWEEN 2013 AND 2023 The forecast annual rates of economic growth, at an average of 3.1 per cent between 2013 and 2023, are above the pre-recession average of 2.8 per cent between 1998 and Evidence 1 Workforce jobs, as provided by the Jobs Density data series from the Office for National Statistics. Workforce jobs are the sum of jobs including those supported by employers, self employment, government-supported trainees, and and Her Majesty's Forces. Page 4

5 THE WEST OF ENGLAND SUPPORTS 616,000 JOBS, WITH AN ABOVE-AVERAGE RATE OF JOBS GROWTH In 2013, there were 616,000 jobs in the West of England. Between 2000 and 2013, the number grew by 58,000, or 9.4 per cent, outperforming the England average of 8.7 per cent. BUSINESS The West of England has a large and growing business base. Start-up rates are high, as are survival rates. The area has been very successful in attracting inward investment. This is expected to continue, helping to build the presence of foreign-owned businesses and global connections in the economy. THERE WERE 43,100 ACTIVE ENTERPRISES IN THE WEST OF ENGLAND IN 2013 Two-fifths of these businesses were located in Bristol (17,255). THE TOTAL BUSINESS POPULATION HAS GROWN YEAR ON YEAR SINCE 2004 Between 2004 and 2013, the number of businesses in the area grew by 6,120, or 16.5 per cent. Growth was stronger than across England (13.6 per cent), all core city LEP areas and all but one comparator southern LEP areas (Thames Valley Berkshire). The number of businesses grew following the recession, bucking the national trend. In contrast to the 0.3 per cent decline in England s business population, and a decline in all core city LEP areas, the West of England experienced growth of 0.3 per cent. These growth rates reinforce other evidence which points to strong start-up rates and higher survival rates, particularly since THE NUMBER OF START-UP BUSINESSES HAS INCREASED YEAR ON YEAR SINCE 2009 In 2013, 5,885 new businesses registered for VAT or PAYE in the West of England. This was the highest number of start-ups since data collection began in The rate of business start-ups in 2013 was 13.7 per 100 active enterprises. While this was lower than the England average of 14.4, and below many core city LEP areas, it was higher than most comparator southern LEP areas. Within the West of England, Bristol had an above-average rate of business start-ups, at 14.9 per 100 active enterprises. LONG-TERM BUSINESS SURVIVAL RATES ARE HIGHER THAN ACROSS ENGLAND The West of England performed slightly better on two-year survival rates than for one-year survival. Of all businesses created in 2011, 76.9 per cent survived their second year. This was above the England average (75.5 per cent) and higher than all core city LEP areas, but lower than all comparator southern LEP areas. The West of England had higher rates of survival over three to five years than the national average and core city LEP areas, and surpassed some southern LEP areas. KEY FACTS: BUSINESS 43,100 active enterprises in 2013 Total growth of active business population between 2004 and 2013: 17 per cent (England = 14 per cent) 61 businesses per 1,000 working age residents (England = 62) 88.0 per cent of businesses have under 10 employees (England = 88.4 per cent) Rate of self-employment of 18.8 per cent in Bath and North East Somerset; 15.9 per cent in Bristol; 9.1 per cent in North Somerset; and 9.7 per cent in South Gloucestershire (England = 14.2 per cent) 5,885 new start-ups (registered for VAT/PAYE) in 2013 Start-up rate in 2013: 13.7 per cent (England = 14.4 per cent) One-year business survival rate in 2013: 91.0 per cent (England = 91.1 per cent) Two-year business survival rate in 2013: 76.9 per cent (England = 75.5 per cent) Share of businesses that are foreign-owned in 2010: 0.9 per cent (England = 1.3 per cent) Share of total employment in foreign-owned companies in 2010: 8.3 per cent (England = 14.3 per cent) Bristol and Bath ranked 14 th for FDI projects , total of 84 projects. Page 5

6 IN 2013 THERE WERE 61 BUSINESSES PER 1,000 WORKING-AGE RESIDENTS This total was slightly lower than the England average of 62, but well above all core city LEP areas. The West of England is home to a large number of small businesses. A total of 88.0 per cent of the area s firms employed fewer than ten people, in line with the national average of 88.4 per cent. 40 LARGE BUSINESSES HAVE THEIR HEADQUARTERS IN THE WEST OF ENGLAND Of the 40 businesses with 250 employees or more with headquarters in the West of England, 13 were in the Professional, Scientific & Technical Activities industry. THE WEST OF ENGLAND HAS A SUCCESSFUL TRACK RECORD IN ATTRACTING INWARD INVESTMENT Although foreign-owned businesses contribute a lower share of jobs compared than is the case nationally, the West of England has a successful track record in attracting inward investment. In 2010, 315 businesses in the West of England were known to be foreign-owned. These represented 0.9 per cent of all businesses in the area below the England average of 1.3 per cent. Foreign-owned businesses employed 45,800 people or 8.3 per cent of all employment in the area, below the national average of 14.3 per cent. With 84 foreign direct investment (FDI) projects secured over the last decade, Bristol and Bath ranked 14th in terms of UK locations between 2004 and Business services and software were the top two sectors generating FDI into Bristol and Bath over the last decade. INNOVATION AND KNOWLEDGE The West of England enjoys high rates of patenting and employment in knowledgebased industries is strong. Although employment in knowledge economy industries has contracted by 3.2 per cent since 2009, there has been growth of 26.6 per cent in high- and mediumtechnology manufacturing. Employment in science and technology professional roles is also significantly higher than nationally. This high presence of jobs and skills in knowledge-based industries, and high rates of patenting, are reflected in the productmarket strategies of local businesses. In 2013 businesses in the West of England were more likely to compete on quality, innovation and industry leadership, than nationally where cost was a more significant factor. RATES OF PATENTING PER CAPITA ARE HIGH The West of England s rate of patenting, at an average of 127 patents per one million residents over the five years from 2007 to 2011, is higher than the England average of 93. Out of the 39 LEP areas The West of England ranked ninth, ahead of all other city-region LEPs. From 2007 to 2011 inventors in the West of England originated an average of 136 patents per year. EMPLOYMENT IN THE KNOWLEDGE ECONOMY IS HIGH IN THE WEST OF ENGLAND In 2013, 119,400 workers in the West of England were employed in Knowledge Economy industries (using the Work Foundation definition 2 ). This was equivalent to 21.8 per cent of all employment above the England average (19.7 per cent), all core city LEP areas and three of the five southern LEP areas. 2 See /213_know_work_survey pdf Page 6

7 EMPLOYMENT IN HIGH AND MEDIUM TECHNOLOGY MANUFACTURING IS HIGHER THAN ACROSS ENGLAND With 21,400 workers, this was equivalent to 3.9 per cent of all employment in the area above the national average of 3.1 per cent, four of the seven core city LEP areas and two of the five southern LEP areas. Employment in the airspace industries is particularly strong. WHILE EMPLOYMENT IN THE KNOWLEDGE ECONOMY HAS DECLINED IN THE PAST FOUR YEARS, HIGH AND MEDIUM TECHNOLOGY MANUFACTURING EMPLOYMENT HAS INCREASED. Between 2009 and 2013, the number of Knowledge Economy workers in the West of England declined by 3,900, or 3.2 per cent, while growth across England averaged 6.0 per cent. By contrast, employment in High and Medium Technology Manufacturing rose sharply, by 4,600, or 26.6 per cent well ahead of the England average increase of 3.6 per cent (Figure 2.24). Growing sub-sectors included Manufacture of Air and Spacecraft & Related Machinery (+1,200), Manufacture of Instruments and Appliances for Measuring, Testing and Navigation; Watches and Clocks (+800), Manufacture of Computers and Peripheral Equipment (+500) and Manufacture of Other Special-Purpose Machinery (+500). SCIENCE AND TECHNOLOGY PROFESSIONALS FORM A HIGH SHARE OF THE WORKFORCE At the time of the 2011 Census, 7.2 per cent of people working in the West of England were science and technology professionals and associate professionals higher than the England average of 5.8 per cent. THE WEST OF ENGLAND LEP HAS DEFINED FIVE PRIORITY SECTORS AND FIVE KEY SECTORS The West of England LEP defined five priority sectors and five key sectors in the economy, several of which are major employers such as Tourism (106,000); Retail (79,200); Health and Life Sciences (79,100) and Professional and Legal Services (50,200). Others such as Advanced Engineering and Aerospace, Creative Industries and High Tech Industries are not as significant in employment terms, but offer high growth potential and are knowledge-based or high value added industries. Of these priority and key sectors, four recorded significant employment growth between 2009 and 2013: Advanced Engineering and Aerospace (+3.6 per cent); Creative Industries (+2.3 per cent); Low Carbon (+4.1 per cent); and Health and Life Sciences (+3.0 per cent). Distribution recorded modest employment growth (+0.9 per cent). Five sectors recorded a decline in employment, including: Construction (-2.2 per cent); Professional and Legal Services (-1.7 per cent); High Tech Industries (-1.8 per cent); and Retail (-2.1 per cent). BUSINESSES IN THE WEST OF ENGLAND ARE MORE LIKELY TO COMPETE ON DESIGN, QUALITY AND INNOVATION In the West of England, 50 per cent of private sector businesses were defined as having a high or very high Product Market Strategies above the national average of 45 per cent. A lower share of businesses depend on price to compete compared with the national picture, while a higher proportion often lead on innovation. POPULATION TRENDS The West of England s workforce has grown significantly, and this is forecast to continue over the next 20 years. With high rates of population growth and a higher than average share of the population of working age, the area s population has aged at a slower rate than across England. THE POPULATION IS 1.1 MILLION, WITH A HIGH SHARE OF WORKING AGE, AND IS GROWING QUICKLY The West of England has a population of 1.1 million, of whom 712,300 are of wor1king age. Nearly two thirds (64.5 per cent) of the West of England population are of working age, compared with 63.5 per cent across England. The West of England is ahead of all comparator areas. POPULATION GROWTH HAS BEEN ABOVE THE NATIONAL AVERAGE, PARTICULARLY IN BRISTOL Page 7

8 Between 2000 and 2014, the West of England s population grew by 11.4 per cent (+112,700 people) the 10 th highest growth rate of all 39 LEP areas and above the England average (10.3 per cent), and all comparator areas apart from GCGP (Greater Cambridge Greater Peterborough) and Swindon & Wiltshire. Two-thirds of the population growth in the West of England came from growth in the working-age population. Between 2000 and 2013, the working age population grew by 72,900, accounting for 64.7 per cent of total population growth in the area. This was higher than the England average, and the sixth highest rate of all 39 LEP areas after Leicester and Leicestershire and GCGP. As a result, the area s population has aged less than nationally. KEY FACTS: POPULATION 1.1 million resident population in 2013 Working age residents: 64.5 per cent of total population (UK = 63.5 per cent) Population growth between 2000 and 2013: 11.4 per cent (England = 10.3 per cent) ECONOMIC PARTICIPATION AND UNEMPLOYMENT Complementing the large workforce and high rates of growth in working-age population, the West of England has high rates of economic participation and low rates of unemployment. This is reflected in low levels of benefit claimants. THE WEST OF ENGLAND HAS HIGH RATES OF ECONOMIC PARTICIPATION Economic activity in the West of England, measured by the share of working-age people either in work or actively seeking work, is above the national average at 79.5 per cent. Employment rates are higher (74.7 per cent); and unemployment is lower (6.0 per cent). Within the West of England, Bristol has higher rates of unemployment (8.3 per cent) than the national average (6.4 per cent). Among adults aged 25 and over, workforce participation across both genders and all age groups is above the national average. THE WEST OF ENGLAND S LABOUR MARKET WAS HIT HARDER BY RECESSION THAN NATIONALLY, BUT RATES OF PARTICIPATION HAVE REMAINED ABOVE THE NATIONAL AVERAGE While the rate of economic activity remained higher than the national average during the recession ( ), it did fall at a faster rate. Rates are now returning to the 2010 peak of 80.0 per cent. The West of England s unemployment rate has remained below the national rate every year since records beg an in However, the rate of increase was above the national level between 2008 and The recovery in employment has been slower than across England, resulting in a pronounced narrowing of the gap between area-based and national unemployment rates. The West of England s unemployment rate remains 2.5 percentage points above 2007 levels. A SHRINKING OF THE RETAIL SECTOR DURING THE RECESSION HAD A SIGNIFICANT IMPACT ON OVERALL UNEMPLOYMENT RATES In March 2015, the numbers of unemployed claimants from sales and customer service occupations was 215 per cent higher than before the recession, driven by a strong rise in the number of unemployed sales and retail assistants. This was a bigger rise than across England (+136 per cent). THE NUMBER OF EMPLOYED MEN HAS FALLEN SINCE THE RECESSION, LEADING TO AN OVERALL DECREASE IN EMPLOYMENT LEVELS The number of employed people across the West of England has fallen since the recession (-5,800) against a national average rise (+600,300). This is due to a fall in the numbers of men in employment. Between 2008 and 2014, the numbers of employed men in the West of England fell by 8,200, compared with a national rise of 196,700. The numbers of employed women in the area rose by 2,400. THE LABOUR MARKET FOR YOUNG PEOPLE HAS DETERIORATED SIGNIFICANTLY SINCE THE RECESSION Page 8

9 Employment rates have fallen fastest for and year olds, and more sharply than across England. Employment in the West of England fell for year olds (-8,000) and year olds (-6,400). Economic inactivity in the West of England rose by 3,800 between 2008 and All of this rise occurred among young people (16-24 year olds), with falls in inactivity across other age groups. Between March 2008 and March 2012, the claimant count rate rose most rapidly for those aged (+3.0), but this has since recovered. ONE QUARTER OF ECONOMICALLY INACTIVE PEOPLE WANT TO WORK In 2014, one quarter (24.8 per cent) of economically inactive people wanted to work, but were not technically classified as unemployed. THE RATE OF INVOLUNTARY WORKLESSNESS IS MORE THAN DOUBLE THE OFFICIAL UNEMPLOYMENT RATE In 2014, 35,500 economically inactive people wanted a job, while 33,500 people were officially classed as unemployed. This meant that a total of 69,000 people were classed as involuntarily workless representing 12.4 per cent of the economically active population, more than twice the official unemployment rate of 6.0 per cent. THE NUMBER OF WORKING-AGE PEOPLE CLAIMING OUT-OF-WORK BENEFITS IS LOWER THAN ACROSS ENGLAND In August 2014, 60,120 working age people in the West of England were claiming out-of-work benefits. This was equivalent to 8.5 per cent of working-age people (Figure 3.47), below the England average of 9.6 per cent and all core city LEP areas, but above all comparator southern LEP areas. Within the West of England, rates ranged from 5.9 per cent in South Gloucestershire to 11.0 per cent in Bristol. COMMUTING On balance, the West of England generates jobs for surrounding districts and areas, with more people commuting in than travelling out for work. Evidence suggests that the area provides many highly-skilled jobs for in-commuters. THE WEST OF ENGLAND IS AN AREA OF NET IN-COMMUTING At the time of the 2011 Census, 531,925 West of England residents were in work. Of these, 445,740 worked (and lived) within the West of England (86.9 per cent). The West of England had a net in-commuting level of 24,065 (the difference between in-commuters and outcommuters). North Somerset is the only district with net levels of out-commuting (a net balance of -13,778 workers). KEY FACTS: ECONOMIC PARTICIPATION AND UNEMPLOYMENT Economic activity rate 2014: 79.5 per cent (England = 77.4 per cent) Employment rate 2014: 74.7 per cent (England = 72.5 per cent) Unemployment rate 2014: 6.0 per cent (England = 6.4 per cent ) Worklessness rate 2014: 12.4 per cent (England = 13.6 per cent) Share of working age population claiming benefits in 2014: 8.5 per cent (England = 9.6 per cent) QUALIFICATIONS While the West of England s workforce is very highly qualified, there may be cause for concern in that young people s attainments are, below the national average. Young people s participation in higher education is also below average. QUALIFICATION RATES ARE VERY HIGH AMONG WORKING-AGE PEOPLE LIVING IN THE WEST OF ENGLAND In 2014, 41.2 per cent of working-age people living in the West of England were qualified to Level 4 and above (at least degree level). This was higher than the national average (35.7 per cent) and all comparator areas apart from Oxfordshire and Thames Valley Berkshire, and the seventh highest rate of all 39 LEP areas. Likewise, the percentage of people qualified to Level 2 and above (at least GCSE level) was above the national level, at 78.0 per cent compared with 73.2 per cent. The proportion was higher than all comparator areas apart from Oxfordshire and Thames Valley Berkshire, and sixth highest of all LEP areas in England. Page 9

10 IN-COMMUTERS TO THE WEST OF ENGLAND ARE MORE LIKELY TO BE HIGHLY QUALIFIED The qualification rates of people working in the West of England are higher than those living in the West of England, with the highest number of in-commuters being those with degree-level qualifications or above. BY CONTRAST, YOUNG PEOPLE S QUALIFICATION RATES ARE BELOW-AVERAGE IN THE WEST OF ENGLAND ALTHOUGH THEY CATCH UP BY AGE 19 In 2012/13, the percentage of pupils at the end of key stage 4 achieving at least 5 A*-C GCSEs was below the England average in all four West of England local authorities. Rates ranged from 77.1 per cent in North Somerset to 82.2 per cent in Bath & North East Somerset below the England average of 83.1 per cent. Rates of GCSE improvement have also been low. In the same year, the percentage of pupils at the end of key stage 4 achieving at least 5 A*-C GCSEs including English and Maths was below the England average of 60.8 per cent in Bristol, North Somerset and South Gloucestershire, but above average in Bath & North East Somerset (63.6 per cent). Attainment of a Level 2 qualification improves by age 19. In 2013, 85.5 per cent of 19 year olds in the West of England had achieved a Level 2 qualification (5 A*-C GCSEs or equivalent). This was slightly above the England average (84.9 per cent). Within the West of England, rates ranged from a below-average 80 per cent in Bristol to 90 per cent in North Somerset. Attainment of a Level 3 qualification by age 19 is below average. As detailed in Figure 3.64, a total of 55.3 per cent of 19 year olds had achieved a Level 3 qualification in 2013 (A level and equivalent). This was slightly below the England average of 56.2 per cent. Within the West of England, rates ranged from a belowaverage 47 per cent in Bristol to 64 per cent in North Somerset. YOUNG PEOPLE S PARTICIPATION IN HIGHER EDUCATION IS ALSO BELOW AVERAGE Of the young people reaching the age of 18 in the West of England between 2005 and 2009, 31.2 per cent entered higher education. This was lower than the England average (34.2 per cent) and the 14 th lowest of the 39 LEP areas. SKILL LEVELS OF JOBS The West of England has a significant and increasing demand for highly-skilled jobs, reflecting the presence of knowledge-based industries and the high qualifications of its workers, Earnings are higher than average. THE WEST OF ENGLAND HAS AN ABOVE- AVERAGE PERCENTAGE OF RESIDENTS WORKING IN THE MOST HIGHLY SKILLED OCCUPATIONS In 2014, over one third of employed residents in the West of England (33.8 per cent) worked in Level 4 occupations 3 the most highly skilled jobs, including managers and senior officials and professionals. This was higher than across England (30.3 per cent) and joint third among comparator areas, after Oxfordshire and Thames Valley Berkshire. THE OCCUPATIONAL PROFILE OF WEST OF ENGLAND RESIDENTS HAS BECOME MORE HIGHLY SKILLED IN THE PAST TEN YEARS There has been a large increase in the number of people working as professionals and associate professionals over the past decade. Between 2004 and 2014, the number working as Level 4 professionals increased by 34.0 per cent (+32,700) while the number of people in Level 3 associate professional and technical occupations rose by 27.5 per cent (+18,500). THE EARNINGS OF PEOPLE LIVING OR WORKING IN THE WEST OF ENGLAND ARE ABOVE AVERAGE In 2014, the average earnings of West of England residents working full-time totalled 27,980 slightly above the England average of 3 Level 4 occupations: managers & senior officials and professionals; Level 3 occupations: associate professional & technical occupations and skilled trades; Level 2 occupations: administrative & secretarial, caring, leisure & other services, sales and customer service, and process, plant & machine operatives; Level 1 occupations: elementary occupations Page 10

11 27,500. People working full-time in the West of England earned 27,892 on average, above the England average ( 27,487) but 0.3 per cent lower than earnings for residents. However, workplace-based earnings in the West of England grew below the national rate between 2002 and 2014 a rise of 29.7 per cent, compared with 32.7 per cent across England and rose much more slowly than residence-based earnings. with the right skills, with an impact on business performance. KEY FACTS: QUALIFICATIONS, SKILLS AND EARNINGS Share of working age population qualified to degree-level or above (NVQ4+) in 2014: 41.2 per cent (England = 35.7 per cent) Share of working age population qualified to at least 5 GCSEs at grades A*-C or equivalent (NVQ4+) in 2014: 78.0 per cent (England = 73.2 per cent) Share of pupils gaining at least 5 GCSEs grades A*C in 2012/2013: 77.1 per cent (England = 83.1 per cent) Share of pupils gaining at least 5 GCSEs grades A*C including English and Maths in 2012/2013: 60.8 per cent (England = 63.6 per cent) Share of 19-year-olds achieving a Level 2 attainment in 2012/13: 86 per cent (England = 86 per cent) Share of 18-year-olds participating in higher education 2005 to 2009: 31.2 per cent (England = 34.2 per cent) Share of workplace jobs in level 4 (the most highly skilled) occupations: 33.8 per cent (England = 30.3 per cent) Share of vacancies that were hard-to-fill in 2013: 34.0 per cent (England = 28.6 per cent) Share of hard-to-fill vacancies due to skills shortages in 2013: 84.2 per cent (England = 78.0 per cent) Average annual salary for residents in full-time employment: 27,980 (England = 27,500) Average annual salary (workplace-based) for workers in full-time employment: 27,892 (England = 27,487) Growth in earnings (workplace-based) for full-time workers between 2002 and 2014: 29.7 per cent (England = 32.7 per cent) EMPLOYER SKILLS The West of England s labour market is showing signs of tightening. Employers have been reporting high demand for labour, and difficulties recruiting people Page 11

12 THERE IS EVIDENCE OF HIGH DEMAND FOR LABOUR, AND ASSOCIATED RECRUITMENT DIFFICULTIES Businesses in the West of England are more likely to report recruitment difficulties than nationally. The prevalence of hard-to-fill vacancies (H2FVs) and skills-shortage vacancies (SSVs) is above the national average, particularly in South Gloucestershire. A very large proportion of these vacancies are for professional jobs. Employers in the West of England are no more likely to report skills deficiencies among existing staff than nationally, although an above-average percentage of employers report that skills gaps are having a major impact on their business, particularly in Bristol. Commitment to staff training among employers in the West of England is similar to the national average. YOUNG PEOPLE LEAVING EDUCATION ARE WELL PREPARED FOR WORK Employers report that people employed straight from school, college or higher education are generally well prepared for work, and better prepared than nationally. HOUSING MARKET House prices are above the national average, and have risen markedly in the past 15 years, while affordability has declined rapidly. The supply of housing in the West of England has increased at a higher rate than nationally, and the greatest rise has been in one- and two- person properties. HOUSE PRICES IN THE WEST OF ENGLAND VARY WIDELY In 2012, the average (median) house price across England was 183,500. Within the West of England, average house prices ranged from 5 per cent below average in Bristol ( 175,000) to 25 per cent above average in Bath & North East Somerset ( 230,000). Average house prices in North Somerset and South Gloucestershire were 1 per cent above average at 185,000. AVERAGE HOUSE PRICES HAVE RISEN RAPIDLY OVER THE PAST 15 YEARS Between 1997 and 2012, average house price growth ranged from 200 per cent in North Somerset (slightly below the England average growth rate of 206 per cent) to 224 per cent in Bath & North East Somerset. THE HOUSING MARKET ACROSS THE WEST OF ENGLAND IS STILL BELOW ITS PRE- RECESSION PEAK Average house prices across the West of England peaked in 2007 and fell for the next two years. By 2012, prices in Bath & North East Somerset and Bristol had returned to 2007 levels, but they remained 1 per cent and 3 per cent below their peak in South Gloucestershire and North Somerset. By comparison, the average house price across England had recovered and risen to 3 per cent above the 2007 peak in the same period. Housing sales across the area are also well below their long-term average. Sales have fallen most sharply in South Gloucestershire, averaging 3,242 per year between 2008 and per cent below annual average sales. Sales also fell sharply in other West of England districts, but below the England average fall (46 per cent). This indicates a lack of confidence among consumers to take on large debts or major purchases, while potential buyers have suffered from stricter mortgage conditions. Lower quartile house prices have grown faster than the national average. Over the past 15 years, lower quartile house price growth ranged from 202 per cent in North Somerset to 225 per cent in Bristol above national average growth of 184 per cent. In most districts, apart from Bath & North East Somerset, lower quartile prices have risen faster than median prices. HOUSING AFFORDABILITY HAS DECLINED RAPIDLY OVER THE PAST 15 YEARS In 2013, average house prices in the West of England ranged from 6.2 times average earnings in Bristol to 8.7 times average earnings in Bath & North East Somerset. Housing in Bristol was more affordable relative to the English average (6.7 times average earnings), but less affordable in other West of England districts. Average house price to earnings ratios have increased sharply across the area since 1997, particularly in Bath & Page 12

13 North East Somerset (from 4.6 in 1997 to 8.7 in 2013). However, house price to earnings ratios in 2013 remained below their pre-recession 2007 peak. HOUSING IS LEAST AFFORDABLE FOR THOSE ON THE LOWEST INCOMES In all West of England districts, the lower quartile house price to earnings ratio in 2013 was higher than the average house price to earnings ratio. It was therefore relatively more expensive for those on the lowest incomes to buy the cheapest housing than for those on average incomes to buy average-priced housing. This was not the case across England. The difference was starkest in South Gloucestershire, where the lower quartile house price to earnings ratio was 7.8, compared with an average house price to earnings ratio of 7.0. HOUSING STOCK THERE HAS BEEN STRONG GROWTH IN THE WEST OF ENGLAND S DWELLING STOCK In 2014, there were 476,170 dwellings in the West of England. At district level, the highest number was in Bristol, with 192,350 homes 40 per cent of all dwellings in the West of England. Between 2004 and 2014, the number of homes in the area grew by 40,220, or 9.2 per cent, above the England level of 7.8 per cent. HOUSING GROWTH HAS BEEN CONCENTRATED IN THE PRIVATE SECTOR Over the past decade, growth in the number of private sector dwellings (both owner occupied and rented) has accounted for much of the housing growth across the West of England. There has also been strong growth in social housing owned by private registered providers, with a comparable fall in local authority owned and other public sector housing (largely due to stock transfers). A BELOW-AVERAGE PERCENTAGE OF NEW HOMES ARE AFFORDABLE IN THE WEST OF ENGLAND Between 2004/05 and 2013/14, there were 10,510 net new affordable homes across the West of England (homes newly built or acquired, less those sold or demolished). Almost half of these (5,120) were in Bristol. Net new affordable homes represented 26 per cent of all net additional homes during this period. This was lower than the England average (30 per cent). Within the West of England 23 per cent of additional homes were affordable in North Somerset, while at the other end of the scale, 38 per cent were affordable in Bath & North East Somerset. The number of net new affordable homes has fallen sharply since 2008/09 with no sign of recovery. This trend has been driven by a fall in net new affordable homes in Bristol. KEY FACTS: HOUSING 476,170 dwellings in 2014 Growth in dwelling stock between 2004 and 2014: 9.2 per cent (England = 7.8 per cent) Average household (residents per household) size in 2011: 2.3 (England = 2.4) Average house prices in 2012: Bristol 175,000; Bath and North East Somerset 230,000; North Somerset and South Gloucestershire 188,000 (England = 183,500) Growth in house prices between 1997 and 2012: Bristol +221 per cent; Bath and North East Somerset +224 per cent; North Somerset and South Gloucestershire +200 per cent (England = +206 per cent) Average house price as a multiple of median income in 2012: Bristol 6.2; Bath and North East Somerset 8.7; North Somerset 7.0; and South Gloucestershire 7.0 (England = 6.7) THE NUMBER OF ONE AND TWO PERSON HOUSEHOLDS HAS INCREASED OVER THE PAST TEN YEARS Between 2001 and 2011, almost three-quarters (73.2 per cent) of the additional households in the West of England were one and two person households much higher than across England (66.7 per cent). Within the area, percentages ranged from a below-average 58.1 per cent in Bath & North East Somerset to 84.3 per cent in North Somerset. DESPITE THIS TREND, AVERAGE HOUSEHOLD SIZE HAS REMAINED STABLE OVER THE PAST TEN YEARS Between 2001 and 2011, average household size has remained at 2.3 people in three West of England districts, while reducing slightly in South Gloucestershire. Page 13

14 COMMERCIAL AND INDUSTRIAL PROPERTY There is a significant volume of commercial and industrial floor space in the West of England, and rateable values for retail floor space are above the national average. There were 10,523,000 square metres of retail floor space eligible for business rates in 2012; 2,016,000 sq. metres of office floor space; and 5,363,000 sq. metres of industrial floor space. Rateable floor space for all uses, apart from industrial, increased between 2002 and Rateable values were 166 per sq. metre for retail in 2012 (above the England average of 150); 134 for offices (below the England average of 155); and 38 for industrial (slightly above the England average of 37). Rateable values per sq. metre for offices were only higher in the peer area of Thames Valley Berkshire ( 155). Retail floorspace values were generally high across the West of England. Somerset (-3.1 per cent) but above average in South Gloucestershire (-4.0 per cent) and Bristol (-7.1 per cent). In contrast, average vehicle speeds in North Somerset increased by 2.6 per cent during this period. KEY FACTS: PROPERTY AND INFRASTRUCTURE Retail floor space in 2012: 10,253,000 m 2 Office floor space in 2012: 2,016,000 m 2 Industrial floor space in 2012: 5,363,000 m 2 Rental valuation of retail space in 2012: 166 per m 2 (England = 150) Rental valuation of office space in 2012: 134 per m 2 (England = 155) Rental valuation of industrial space in 2012: 38 per m 2 (England = 37) Average vehicle speeds on locally managed A roads in 2014: Bristol 14.8 mph; Bath and North East Somerset 21.8 mph; North Somerset 30.8 mph; South Gloucestershire 24.1 mph (England = 24.4 mph) South Gloucestershire experienced the largest growth in retail floor space (+15.1 per cent); North Somerset witnessed a 20.1 per cent increase in office floor space; and all districts apart from North Somerset saw a decline in industrial floor space. TRAFFIC CONGESTION Traffic congestion is an issue in the West of England, with average vehicle speeds on locally managed A roads declining in every unitary authority area between 2012 and In 2014, average vehicle speeds on locallymanaged A roads during the weekday morning peak ranged from 14.6 miles per hour in Bristol to 30.8 miles per hour in North Somerset. Average vehicle speeds were below the England average of 24.4 miles per hour in all districts apart from North Somerset. Average vehicle speeds declined in Bath & North East Somerset, Bristol and South Gloucestershire between 2012 and 2014, mirroring the national trend. This decline was below the England average (-3.4 per cent) in Bath & North East Page 14