Centre for Cities update annual index of UK cities

The Centre for Cities have published Cities Outlook 2011 (pdf, 2.4mb), identifying the UK cities best placed for a private sector-led recovery.

According to the report, five cities to watch are Milton Keynes, Reading, Aberdeen, Leeds and Bristol. These cities have high potential to create private sector jobs and are less vulnerable to public sector job losses and spending cuts.

The report identifies five vulnerable cities that may not gain the benefits of national economic recovery for some time: Sunderland, Liverpool, Birkenhead, Swansea and Newport.

Performance of large cities, including Birmingham, will remain crucial in providing private sector jobs.

Related links

• Download the full report (pdf, 2.4mb)
• Centre for Cities press release
• City by city data

Local Enterprise Partnerships need to act to reinvigorate the private sector

Weaknesses in the structure of the West Midlands economy mean that it was hit particularly hard by the recent recession and is likely to see further job losses over the next five years.

Our latest briefing paper (pdf, 408kb), produced as part of our West Midlands Skills Assessment 2010, reveals that the West Midlands has a weaker private sector than other parts of the country. The West Midlands has poorer representation of higher value added activities and high growth firms with the potential to create new, skilled jobs.

As a result the West Midlands has seen its share of jobs in the public sector rise more rapidly than anywhere else in the country. It is particularly vulnerable to job losses from the spending cuts announced by the government.

We forecast that West Midlands Gross Value Added (GVA) will grow by only 8% (£8.8 billion) between 2010 and 2015 and there will be a net fall in employment of more than 38,000 people.

Local impact of public sector job cuts featured on BBC Politics Show

In advance of the government’s spending review announcement on Wednesday 20 October, the BBC Politics Show West Midlands discussed the impact of public sector job losses in the West Midlands.

They interviewed Andy Phillips, Head of Skills Research at the Observatory, and featured our recent briefing paper which examines the local impact of public sector job cuts (pdf, 351kb).

The story is available to watch on the BBC iPlayer for the next six days.

West Midlands particularly vulnerable to public sector job cuts

Public sector employment has grown significantly in recent years across the UK and has been the key driver of the economy’s expansion. But proposals announced by the government to make £83bn worth of cuts in public sector spending are forecast to lead to the loss of up to 600,000 public sector jobs across the UK over the next 6 years, according to a study¹ by Oxford Economics.

The West Midlands economy is particularly vulnerable to the impact of the cuts. Between 1998 and 2008 (latest available figures), the West Midlands saw the most significant increase in dependence on public sector employment in the country².

The share of jobs accounted for by the public sector increased from 22% in 1998 to 27% in 2008, a rise of 5 percentage points, bringing total public sector employment to some 637,000.

We forecast that between 2010 and 2016 there will be a net loss of nearly 50,000 jobs across the West Midlands and, based on the ratio of the number of private sector jobs dependent on public sector spending and the associated supply chain nationally, a further 310,000 jobs are at risk at private sector firms directly or indirectly reliant on public sector spending³.

West Midlands skills performance falters

The Observatory has published this year’s review of West Midlands skills performance .

Our summary skills index based on a range of measures (such as GVA per employee, investment in training, and qualification attainment amongst young people and adults) reveals the West Midlands skills performance has begun to widen again, from 1.1 points in 2007 to 2.3 points in 2009. As a result the West Midlands has dropped from 5th to 6th place in the league table of regions.

Up-skilling and diversification are key to growth and job creation across the West Midlands

Targeting investment on higher value added sectors such as digital media and medical technologies, and developing a workforce with the right skills to service those sectors would significantly increase job growth and the prosperity of the West Midlands according to new research.

The research (pdf, 498kb), undertaken by the West Midlands Observatory, shows that the potential benefits of targeting investment are substantial. If workforce skill levels in the West Midlands were increased to match the England average, growth in Gross Value Added (GVA) — the measure of economic output per head of population — over the next 5 years would increase by 2 percentage points from 10% to 12% and net new job creation would nearly double from 11,000 to 21,000. If in addition more businesses in higher value added sectors and clusters were attracted to the West Midlands, so that their share of economic activity reflected the position nationally, GVA would grow by some 23% by 2015 and more than 200,000 net new jobs would be created.

Local authorities, business groups and other key partners across the West Midlands are looking to achieve sustainable economic growth in jobs and GVA over the next 5 years. This new research shows how, in a time of austerity and funding cuts, the Observatory can provide authoritative and objective research to help decision makers target limited resources and do more with less.

The research (pdf, 498kb) provides an insight into the region’s existing and likely future skill needs. It has been produced to inform the development of skills and investment priorities that focus shrinking levels of public sector investment in areas that will maximise  impact.

A range of key investment locations across the region, including Longbridge and Eastside in Birmingham, Ansty Park in Coventry, i54 in Staffordshire, Coventry and Wolverhampton city centres and Dudley, Telford, Walsall and West Bromwich town centres, can play a key part in diversifying local economies.

Transformational change can generate substantial new jobs in West Midlands over next five years

The pace of economic growth in the West Midlands over the next five years is forecast to be modest. Only 11,000 net new jobs (representing growth of 5% in total employment) are expected to be created between 2010 and 2015.

However, the Observatory’s new report The West Midlands economy post recession: key issues and challenges (pdf, 844kb) includes scenarios illustrating the benefits for the West Midlands in terms of new job creation — if action is taken to support fundamental, transformational change.

Scenario one: up-skilling the workforce within existing businesses

If workforce skill levels in the West Midlands were raised to match the England average, it’s estimated that net increase in employment over the next five years would almost double to around 21,000 jobs.

The main beneficiaries would be sectors where skill gaps and shortages act as a significant constraint on growth, such as:

• ICT
• High value added business & professional services
• Wholesale & retail distribution
• Transport

Scenario two: up-skilling plus diversification of the economy

If more businesses in higher value added sectors and clusters were also attracted to the West Midlands, such that their share of GVA matched the England average, the impact would be much more significant with the creation of more than 200,000 net new jobs.

High value added activities such as high value added business & professional services (where more than 100,000 net new jobs would be created) and ICT (30,000 net new jobs) are notable beneficiaries.

There would also be modest increases in employment levels in engineering (nearly 3,000 net new jobs) and manufacturing (nearly 6,000 net new jobs).

Related links

Read more about the future of the West Midlands economy in our report:

• The West Midlands economy post recession: key issues and challenges (pdf, 844kb)
• Dataset: xls, 136kb | Available on Google Docs

Replacement demand set to be key source of jobs in West Midlands over next 5 years

An under–representation of higher value added sectors means that the pace of economic growth in the West Midlands over the next 5 years is forecast to be modest. Only 11,000 net new jobs (representing growth of 5% in total employment) are expected to be created between 2010 and 2015.

But the Observatory’s new report The West Midlands economy post recession: key issues and challenges (pdf, 844kb) predicts an additional 860,000 job vacancies are expected to arise between 2010-2015 due to ‘replacement demand.’

It’s estimated that nearly 510,000 jobs (58% of all job vacancies) will be due to labour turnover and more than 350,000 jobs (40% of all vacancies) will be due to older workers retiring.

Text description of this chart available. Chart prepared by West Midlands Regional Observatory based on Cambridge Econometrics forecasts and Office for National Statistics Labour Force Survey.

Replacement demand is forecast to be more significant in traditional private sector industries and public sector activities which have an ageing workforce. For example:

• 59,000 vacancies are expected to arise in manufacturing
• 50,000 vacancies are expected to arise in engineering
• 37,000 vacancies are expected to arise in construction

In health and social care, meanwhile, nearly 70,000 vacancies are expected to arise. The figure is more than 45,000 in education and more than 30,000 in public administration.

Many of the jobs on offer due to retirements are likely to require specific skills, qualifications and experience. Around 90% of these jobs are expected to be filled by people already in employment.

Recovery from the recession remains fragile in the West Midlands

According to recent research by the Observatory, recovery from the recession has been fragile. After rising in the second half of 2009, recruitment activity faltered in the early months of 2010.

Geographically, the areas expected to experience the most fragile economic recovery in terms of growth in GVA and jobs are traditional industrial areas, such as the Black Country and Stoke-on-Trent. These areas have historically been dependent on industries such as engineering, manufacturing and construction.

Recovery is expected to be strongest in areas clustered in the south and east of the West Midlands, in Solihull and Warwickshire. These areas benefit from a strong presence of high value added knowledge-based industries,  good communication links and environmental quality.

The pace of economic growth in the West Midlands over the next five years (2010–2015) is forecast to be modest. GVA is forecast to grow by 11% (£9 billion) over the period. This compares with growth of 15% (£11 billion) between 2000–2007.

Weaknesses in the West Midlands economy act as a drag on future prospects

There’s a need to drive sustainable economic growth in the West Midlands, which in turn can foster the investment and business success that will create job growth. This requires giving priority to growth sectors and the development of a world class skills base.

However, the Observatory’s new report, The West Midlands economy post recession: key issues and challenges (pdf, 844kb), highlights continuing under representation of higher value added sectors.

Lower value added private sector activities such as low value business services, wholesale and retail, hotels and catering, and cultural, recreational and sporting activities make a particularly significant contribution to the regional economy. These account for more than half of GVA and employment.

Share of employment in the West Midlands by broad sector in 2008

Source: Office for National Statistics Annual Business Enquiry
Share this chart | Data on Google Docs

Traditional private sector industries such as engineering and transport technologies, other manufacturing activities such as the interiors and lifestyle, and food and drink clusters, construction and building technologies also make a significant contribution. So do public sector activities such as public administration, education, and health and social care.

These sectors are an important source of jobs for people with fewer skills and can play a key role in reducing worklessness and economic and social deprivation.

But reducing the dependence of the West Midlands economy on these activities and attracting and developing more businesses in higher value added sectors such as higher value added business & professional services, environmental technologies, digital media and medical technologies is key to improving the West Midlands’ economic performance and generating more new highly skilled jobs.

However, to date, these sectors have generated only limited levels of GVA and employment.

As a result, the private sector in the West Midlands has grown relatively slowly in recent years. Between 1998–2008 employment increased by just 30,000 (growth of 2% which compares to an increase of 19% across the UK as a whole).

Related links

• Full report: The West Midlands Economy Post Recession: Key Issues and Challenges (pdf, 844kb)
• Dataset: XLS, 136kb | Available on Google Docs

Research published on prospects for the West Midlands economy post recession

At the end of June, the Observatory published The West Midlands Economy Post Recession: Key Issues and Challenges (pdf, 844kb), a major piece of research exploring the changing needs of the region’s economy and labour market as it emerges from recession.

The research is informing the decisions of employers, individuals, providers and the skills system as they look to focus their investment in key areas to maximise impact.

Firstly, the research considers the region’s recent poor economic performance and the key factors that have contributed to this.

We detail the weaknesses within the region’s economic structure and, in particular, the dependence on public sector and lower value added private sector activities, in terms of GVA and jobs, and the limited representation of high value added, knowledge-based sectors.

We also highlight the low rates of productivity in many of the sectors that dominate the regional economy and assess the skill gaps and shortages businesses in the West Midlands face and the impact on productivity and performance.

Observatory low carbon team update: June 2010

Opportunities for businesses in the low carbon economy have been the main focus of the team in recent weeks. We’ve also been producing our annual raft of monitoring work looking at all aspects of sustainable development and climate change.

Low carbon economy

Back in March, we published our report into the opportunites for growth into a low carbon economy in the West Midlands.

The research suggested that, in the West Midlands, sectors with prospects for growth into the low carbon economy include automotive & transport equipment, construction and public services amongst others.

The report highlights a number of potential low carbon opportunities. The manufacture of products for low carbon buildings is one, through providing insulation products, technical tiles and ceramics, and prefabricated building elements for construction.

Skillset launch Creative Media Workforce Survey 2010

Skillset, the sector skills council for the creative industries, have launched the national Creative Media Workforce Survey 2010:

Whether you are an employer, an employee or a freelancer, what you tell us about your skills needs, experience of training and recruitment, future plans and working patterns will help us produce the most comprehensive profile of working life in the UK’s Creative Media Industries.

D’log highlights why this survey is especially important this year.

For more details about the survey, visit www.skillset.org/playyourpart.

Observatory skills research team update: April 2010

This post is the first in a new series of weekly Observatory research updates; there will be one post from a different research team each week. We’re doing this in response to feedback we received in our recent website user survey. Please do get in touch with any feedback.

April was a very busy month for the Observatory’s Skills Team as we completed existing work and started new projects. This post rounds up recently published research and current projects.

How Sustainability West Midlands are using low carbon economy research

Here’s a short video with Dr Simon Slater, Executive Director at Sustainability West Midlands.

Local authority and business leaders in the West Midlands were asking Simon ‘what are the risks and what are the opportunities in the low carbon economy?’

In this video, Simon discusses how working with the Observatory to research and evidence regional growth into a low carbon economy is helping his organisation and partners in the region answer such questions.

(Watch the video on Viddler.com)