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West of England LEP Quarterly Economic Bulletin
January 2013
Business conditions
The UK economy made no progress in 2012. Real GDP growth was completely flat, whilst inflation and unemployment were stuck at high rates, averaging about 3% and 8% respectively. There was some adjustment from public sector to private sector employment, but this was more rebadging than rebalancing.
In year‐on‐year terms, UK industrial production fell every month, whilst the fiscal deficit grew larger (net debt now over 70% of GDP) and the trade deficit remained huge: again, little or no evidence of rebalancing towards a more productive, growing economy.
Meanwhile, the US 'fiscal cliff' and debt ceiling debates, the Euro‐zone's deep malaise, slower growth in the Far East, and continuing balance sheet adjustment in international banking, all show that global debt reduction ‐ though necessary for the long term ‐ continues to depress current growth.
One hopeful sign is that stock markets are making progress, reflecting positive corporate liquidity and profitability as well as uncertainty over alternative investments. Funds are available for corporate growth if confidence can be restored and uncertainty removed. Breaking these barriers is key to growth in 2013 and beyond.
Against this macro background, lack of demand is the most immediate brake on the West of England (WoE) economy. Since the downturn began, average real household incomes per head have been flat and savings ratios have increased. Although still high, liability/income ratios have come down. Again, this household adjustment is good for the long run, but it means low domestic consumption right now. The closures of Comet, Jessops, HMV and Blockbuster all reflect the downward pressure on discretionary spending.
At the same time, whilst many companies (large and small) are 'cash‐rich' and could invest more, they are held back by a high level of policy uncertainty (e.g. towards the UK's EU membership) and a lack of confidence about future returns (reflecting extremely low interest rates and weak demand prospects). On the supply side, whilst labour flexibility has helped to maintain high employment, productivity remains poor: UK output per hour was still 3.5% below pre‐downturn highs in the third quarter of 2012. This stark feature of the economy will have to improve before an investment‐led recovery can get underway.
The WoE economy cannot buck these overall macro trends entirely. Regional and local surveys of output and hiring and investment intentions have fluctuated but, essentially, they moved sideways through 2012. This makes the decrease in unemployment over the last year amazing. For example, the WoE claimant count level fell by 581 to 20,755 between December 2011 and December 2012, with the rate down 0.1% to 2.8% compared with a UK average of 3.7%. Within the WoE area, the latest rates range from 1.9% in Bath and NE Somerset through 2.0% in S Gloucestershire and 2.5% in N Somerset, to 3.8% in Bristol. The WoE economy is still 'making' jobs but it is not 'building' productivity, reducing the incentives to invest.
The WoE economy has some strong sectors and companies that are focused on development and growth through technical, product and process innovation and skills. The WoE Local Enterprise Partnership aims to support and grow such local, private‐sector enterprise, providing the space, information and opportunity for competitive ideas and plans to flourish. In a persistently difficult macro economic climate, it is these micro decisions -encouraging firms to "co‐operate to compete" ‐ that will make the real difference for local jobs and output.
The 4th quarter of 2012 saw yet another decline in the number of businesses being started up across the West of England, however trend data suggests that business start‐ups are always at the lowest during the 4th quarter. The number of business start ups for this quarter is 2.8 percentage points down on the same quarter for 2011 and 5.3 percentage points down on the previous quarter in 2012. If this trend continues for a sustained period of time it may be necessary to further examine the causes of this decline.
The double dip recession reported in the 1st quarter of 2012 and the contraction of the economy in the 4th quarter could be effecting business confidence and preventing people from starting up new businesses. Business start -ups are an indication of entrepreneurialism and innovation and it is within these business start‐ ups that the jobs of the future will be created.
In the 4th quarter of 2012 the number of visitors to attractions in the West of England were down on the 4th quarter of 2011; and significantly down on the previous quarter. Despite a decline in visitors to attractions room sales/occupancy in Bristol was up, this suggests that those coming to the area were here on business.
The West of England is in a strong position to target both the domestic and foreign holiday market due to its diverse offer, from the historical World Heritage City of Bath, the cultural vibrancy of Bristol, traditional seaside of Weston‐super‐Mare and beautiful surrounding English countryside. However, 2012 was one of the wettest years on record having a negative impact on domestic tourism, highlighting the vulnerability of the sector within the UK.
The West of England employment rate in the year to September 2012 stood at 72.3%. This is a decrease on the same period during the previous year. However the rate has now stabilised following a period of decline. The fluctuations in employment rate experienced in the West of England are common in city‐regions during times of economic downturn. Despite lagging behind the average economic rate of its Southern comparators, the West of England has a higher economic rate than that of England as a whole and the Core City LEP areas. Unsurprisingly the fall in employment rate has been mirrored by a rise in the unemployment rate.
The West of England is continuing to broadly follow the national trends; with the claimant rate for the West of England being 0.6% lower than it is for England. Changes to the way vacancy data is recorded means that we are no longer able to monitor the number of claimants per Jobcentre Plus advertised vacancy.
Despite a gradual decline in the number of claimants since March, the level of claimants remains high and an area of concern. Pockets of long‐term unemployment in the West of England remains at an unprecedented level and continues to be a particular issue amongst those aged 16‐24. If left unaddressed further polarisation is likely to occur amongst communities and those long term unemployed will find it increasingly difficult to re‐ enter employment (source: West of England Labour Market Report)
Source: http://www.westofenglandlep.co.uk/assets/files/About%20Us/Economic%20Intelligence/Q4%20Economic%20Bulletin.pdf
The UK economy made no progress in 2012. Real GDP growth was completely flat, whilst inflation and unemployment were stuck at high rates, averaging about 3% and 8% respectively. There was some adjustment from public sector to private sector employment, but this was more rebadging than rebalancing.
In year‐on‐year terms, UK industrial production fell every month, whilst the fiscal deficit grew larger (net debt now over 70% of GDP) and the trade deficit remained huge: again, little or no evidence of rebalancing towards a more productive, growing economy.
Meanwhile, the US 'fiscal cliff' and debt ceiling debates, the Euro‐zone's deep malaise, slower growth in the Far East, and continuing balance sheet adjustment in international banking, all show that global debt reduction ‐ though necessary for the long term ‐ continues to depress current growth.
One hopeful sign is that stock markets are making progress, reflecting positive corporate liquidity and profitability as well as uncertainty over alternative investments. Funds are available for corporate growth if confidence can be restored and uncertainty removed. Breaking these barriers is key to growth in 2013 and beyond.
Against this macro background, lack of demand is the most immediate brake on the West of England (WoE) economy. Since the downturn began, average real household incomes per head have been flat and savings ratios have increased. Although still high, liability/income ratios have come down. Again, this household adjustment is good for the long run, but it means low domestic consumption right now. The closures of Comet, Jessops, HMV and Blockbuster all reflect the downward pressure on discretionary spending.
At the same time, whilst many companies (large and small) are 'cash‐rich' and could invest more, they are held back by a high level of policy uncertainty (e.g. towards the UK's EU membership) and a lack of confidence about future returns (reflecting extremely low interest rates and weak demand prospects). On the supply side, whilst labour flexibility has helped to maintain high employment, productivity remains poor: UK output per hour was still 3.5% below pre‐downturn highs in the third quarter of 2012. This stark feature of the economy will have to improve before an investment‐led recovery can get underway.
The WoE economy cannot buck these overall macro trends entirely. Regional and local surveys of output and hiring and investment intentions have fluctuated but, essentially, they moved sideways through 2012. This makes the decrease in unemployment over the last year amazing. For example, the WoE claimant count level fell by 581 to 20,755 between December 2011 and December 2012, with the rate down 0.1% to 2.8% compared with a UK average of 3.7%. Within the WoE area, the latest rates range from 1.9% in Bath and NE Somerset through 2.0% in S Gloucestershire and 2.5% in N Somerset, to 3.8% in Bristol. The WoE economy is still 'making' jobs but it is not 'building' productivity, reducing the incentives to invest.
The WoE economy has some strong sectors and companies that are focused on development and growth through technical, product and process innovation and skills. The WoE Local Enterprise Partnership aims to support and grow such local, private‐sector enterprise, providing the space, information and opportunity for competitive ideas and plans to flourish. In a persistently difficult macro economic climate, it is these micro decisions -encouraging firms to "co‐operate to compete" ‐ that will make the real difference for local jobs and output.
The 4th quarter of 2012 saw yet another decline in the number of businesses being started up across the West of England, however trend data suggests that business start‐ups are always at the lowest during the 4th quarter. The number of business start ups for this quarter is 2.8 percentage points down on the same quarter for 2011 and 5.3 percentage points down on the previous quarter in 2012. If this trend continues for a sustained period of time it may be necessary to further examine the causes of this decline.
The double dip recession reported in the 1st quarter of 2012 and the contraction of the economy in the 4th quarter could be effecting business confidence and preventing people from starting up new businesses. Business start -ups are an indication of entrepreneurialism and innovation and it is within these business start‐ ups that the jobs of the future will be created.
In the 4th quarter of 2012 the number of visitors to attractions in the West of England were down on the 4th quarter of 2011; and significantly down on the previous quarter. Despite a decline in visitors to attractions room sales/occupancy in Bristol was up, this suggests that those coming to the area were here on business.
The West of England is in a strong position to target both the domestic and foreign holiday market due to its diverse offer, from the historical World Heritage City of Bath, the cultural vibrancy of Bristol, traditional seaside of Weston‐super‐Mare and beautiful surrounding English countryside. However, 2012 was one of the wettest years on record having a negative impact on domestic tourism, highlighting the vulnerability of the sector within the UK.
The West of England employment rate in the year to September 2012 stood at 72.3%. This is a decrease on the same period during the previous year. However the rate has now stabilised following a period of decline. The fluctuations in employment rate experienced in the West of England are common in city‐regions during times of economic downturn. Despite lagging behind the average economic rate of its Southern comparators, the West of England has a higher economic rate than that of England as a whole and the Core City LEP areas. Unsurprisingly the fall in employment rate has been mirrored by a rise in the unemployment rate.
The West of England is continuing to broadly follow the national trends; with the claimant rate for the West of England being 0.6% lower than it is for England. Changes to the way vacancy data is recorded means that we are no longer able to monitor the number of claimants per Jobcentre Plus advertised vacancy.
Despite a gradual decline in the number of claimants since March, the level of claimants remains high and an area of concern. Pockets of long‐term unemployment in the West of England remains at an unprecedented level and continues to be a particular issue amongst those aged 16‐24. If left unaddressed further polarisation is likely to occur amongst communities and those long term unemployed will find it increasingly difficult to re‐ enter employment (source: West of England Labour Market Report)
Source: http://www.westofenglandlep.co.uk/assets/files/About%20Us/Economic%20Intelligence/Q4%20Economic%20Bulletin.pdf
