Transcript Add title - St. Joseph's Boys' High School, Newry
Responding to the challenge
11 th December 2012 Neil Gibson Director: Oxford Economics
Newry & Mourne Enterprise Agency
Agenda
Global economy still fragile NI tracking below the UK average Newry – unique location offers opportunity (and risk) Key forecast questions Summary: Making choices
2
Global economy still fragile
Global economy slowing again
World GDP (year-on-year), 1995 - 2015 World: GDP growth
% year 6 5 Forecast 4 1 0 3 2 -1 -2 -3 -4 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: Oxford Economics 15
World trade % growth (year on year), 1991 - 2022
Forecast 10 5 0 -5 -10
Source: Oxford Economics
The world economy emerged from recovery in Q4 2009, with 4 quarters of consistent growth, but 2011 saw a slowdown that is set to continue into 2013. . .but no return to recession
Eurozone debt problems causing global problems
Discretionary fiscal tightening, 2011-13
% of GDP, total 2011-13 Germany France UK Eurozone Italy Greece Ireland Portugal Spain 0 2 4 Source : Oxford Economics/ Haver Analytics 6 8 10
BRICs: Industrial output
% year (3 month average) 20 15 10 5 India China 0 -5 Brazil -10 -15 Russia -20 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: Haver Analytics / Oxford Economics 5
UK – could there be a triple dip?
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
-2.5
Source: Oxford Economics
GDP (% growth q-o-q), UK, 1998 - 2022
Forecast 6
Oxford forecast 0.1% growth in 2012Q4
Labour market, surprisingly, performing rather well
Workforce jobs and employee jobs, UK, 2000 – 2012
28 27 26 25 33 32 31 30 29 Workforce jobs Employee jobs
Source: ONS, Workforce jobs, Seasonally adjusted
Workforce jobs only 0.5% below peak Employee jobs 2% below peak
Employee jobs, UK, December 2011 Top 5
Accommodation and food Manufacturing Profl, scientific and tech activ.
Information and comms Real estate activ.
Bottom 5
Human health and social work Public admin and defence Other service activ.
Construction Wholesale and retail trade
Total – June 2012 Change trough, current (000's)
86 70 52 26 23
%
4.6
3.0
2.7
2.5
6.6
Change trough, current (000's)
-8 -10 -10 -30 -85
169 %
-0.2
-0.7
-1.7
-2.6
-1.9
0.6
Source: ONS, Workforce jobs, Seasonally adjusted
7
NI tracking below the UK average
Labour market lagging the UK. . .
Workforce jobs, UK & NI, March 2007 – June 2012
104 102 100 98 96 94 NI UK
Source: ONS, Workforce jobs, Seasonally adjusted Note: March 2007 = 100
9
Where is NI underperforming?
Number of jobs below UK trend, NI, trough - current
Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas,& steam Water supply; sewerage, etc Construction Wholesale and retail trade Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional services Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation Other service activities
Total 000s
0 0 -6 1 1 1 -8 0 -2 1 1 -2 -6 -1 0 -2 -3 1 -2
-28
Source: ONS, WFJ Note: Low = June 2011 and most underperforming sectors are shaded in pink
120 115 110 105 100 95 90 85 80
Self – employed jobs, UK & NI, 2005 - 2012
Source: ONS, Claimant count
NI UK 10
6.0
5.0
4.0
3.0
2.0
1.0
0.0
Unemployment now amongst the highest in the UK
Claimant Count rate, UK regions, average 2007 & Sep 12
Sep-12 Avg 2007
Source: ONS, Claimant count
Change in unemployment, Top 10 LAD’s, Trough - Current LA
Magherafelt Banbridge Dungannon Ballymoney Cookstown Craigavon Castlereagh Newry and Mourne Armagh South Gloucestershire
Top 10 Region % change
NI NI NI NI NI NI NI NI NI SW 401% 335% 324% 287% 285% 274% 273% 272% 270% 238%
Source: ONS, Claimant Count
11
Jobs outlook remains service sector focussed
Sectoral employment growth, NI, 2012 - 2022
Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas,& steam Water supply; sewerage, etc Construction Wholesale and retail trade Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional services Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation Other service activities
Total
Source: Oxford Economics Note: includes self employment, all negative growth is shaded in pink
2012 - 2022 (000's) %
-0.8
-0.4
-3.7
0.2
-0.2
3.5
8.1
4.5
4.9
1.9
0.0
1.2
5.2
8.8
-6.8
-3.4
1.9
2.9
2.9
30.7
-2.5% -27.2% -4.6% 13.0% -3.5% 5.6% 5.7% 13.9% 10.6% 11.7% -0.1% 17.1% 21.1% 19.5% -10.4% -4.8% 1.6% 17.3% 14.6%
3.8%
12
A long road back
780 760 740 720 700 680 660 880 860 840 820 800
Total employment, Northern Ireland, 1998 - 2025
Loss of 49,800 jobs
Forecast
No return to peak forecast before 2025
Source: Oxford Economics, QES
13
Newry – unique location offers opportunity (and risk)
Unemployment problems for Newry & Mourne
Monthly unemployment, Newry & Mourne, March 2011 – October 2012
8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
Unemployment roughly equivalent to level in 1998 Q3
15
Source: Nomis Claimant Count
Who is unemployed?
Unemployment by age group, 2012
Under 18, 1 Aged 50+, 636 Aged 18-24, 951 16 Aged 25-49, 2,132 Elementary, 958
Unemployment by duration, 2012
Managers, 66 Professionals, 118 Assocate professionals & techincal, 144 Administrative & secretarial, 215 Skilled trades, 844
Source: Nomis Claimant Count
Process, plant & machine ops, 588 Personal services, 246 Sales & customer service, 541
Matching skills to job demand a challenge
Unemployment by sought occupation, 2012
Managers 2% Professionals 3% Elementary 26% Assocate professionals & techincal 4% Administrative & secretarial 6% Skilled trades 23% Process, plant & machine ops 16%
Source: Nomis Claimant Count
Sales & customer service 14% Personal services 6% 17
An era of slow job growth ahead
Total employment, Newry & Mourne, 1995 - 2025
45 40 25 20 35 30 Forecast
Source: Oxford Economics
18
Newry forecast to create 2,300 additional jobs by 2022 (6%)...
...on back of 3,100 job losses between 2008 and 2012
Sectoral outlook reflects border location
Employment change by sector, Newry & Mourne, 1998 - 2022
Agriculture, forestry and fishing Mining and quarrying Manufacturing Electricity, gas, & steam Water supply; sewerage, waste management Construction Wholesale and retail trade Transportation and storage Accommodation and food service activities Information and communication Financial and insurance activities Real estate activities Professional, scientific and technical activities Administrative and support service activities Public administration and defence Education Human health and social work activities Arts, entertainment and recreation Other service activities Total
1998 - 2008 2008 - 2012
-420 0 890 0 250 2450 2250 520 1080 150 160 140 410 940 -70 720 1160 120 200
10950
-420 120 -380 0 200 -1710 -380 220 -260 380 -120 -50 80 60 110 -480 -410 -40 20
-3060 2012 - 2022
-70 -30 110 0 100 110 690 350 310 80 -70 30 240 270 -120 -90 120 90 200
2300
Source: Nomis Claimant Count Note: Top 2 performing sectors are shaded in yellow and bottom 2 performing sectors are shaded in pink
19
Scaling the challenge
A further 1,900 resident jobs would be required in Newry to match the Northern Ireland resident employment rate A further 6,400 resident jobs would be required in Newry to match the UK resident employment rate Residence based wages in 2012 were £403.90 on average per week in Newry - 4.9% below the NI average, and 17.6% below the UK average Workplace based wages in 2012 were £401.60 on average per week in Newry - 5.4% below the NI average, and 18.1% below the UK average Newry’s unemployment would need to fall by 2,700 people to get back to its 2007 level of unemployment 20
Key forecast questions
Key questions
Austerity – more to come?
Will welfare reform impact?
Will big changes to funding regime hurt?
Can the export base grow sufficiently?
Will the low skilled find work?
Can a ‘rebalancing’ occur?
22
Austerity – more to come?: UK public finances in perilous state Government gross debt stock % GDP (2011)
Slovakia Finland Germany Spain Netherlands Austria UK Belgium US France Ireland Portugal Italy Greece Japan 0 20 40 60 80 100 120 140 160 180 200
Source: Oxford Economics
UK: Government expenditure and receipts
% of GDP 50 Forecast 48 46 Government expenditure 44 42 40 38 Government receipts 36 34 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 Source: Oxford Economics
UK debt per head estimated at £17,300 (UK debtbombshell .com) Oxford Economics estimate closer to £20,000 per head UK national debt increases £310,212 per minute (debt-clock.org) By the end of this presentation approximately £12.5 million will be added to national debt
23
Austerity – more to come? Next CSR in NI likely to be tougher Departmental expenditure limits, NI, 2010/11 – 2014/15 % change 2010 - 2011 to 2014 - 2015 Cash terms (£bn)
Resource DEL Capital DEL Total DEL
Real terms (£bn 2010- 11 prices)
Resource DEL Capital DEL Total DEL 1.0% -34.3% -2.9% -8.0% -40.1% -11.5%
Source: NI Executive budget report 2011-15, 7th March 2011.
Note: Real term estimates based on Treasury inflation forecast which is 2.75% on average over the period 2010/2011- 2014/15
Government balance (subvention), NI, 2003/04 – 2015/16
0 -2 -4 -6 -8 -10 -12 Forecast -14
Source: Oxford Economics (2011 analysis)
Balance / subvention • UK finances weakening and debt targets likely to be missed • Debt stock rising and adding a bigger burden • NI ‘case’ losing traction – other areas making a strong case • Change of government could change strategy – but not that much (‘blame the old regime’) 24
Austerity more to come? Time to talk about big areas of spend Identifiable expenditure by function, Northern Ireland (£m)
1. General public services 2. Defence 3. Public order and safety 4. Economic affairs
of which: Enterprise and economic develoment Science and technology Employment policies Agriculture, fisheries and forestry Transport
5. Environment protection 6. Housing and community amenities 7. Health 8. Recreation, culture and religion 9. Education 10. Social protection
Total identifiable expenditure
Source: HM Treasury PESA
2010-11
410 0 1430 1630 370 70 240 290 650 250 880 3520 440 2750 7980
19290
25
Will welfare reform impact? – Short answer is yes!
NI and UK: Composition of gross disposable household income (2010)
Self-employed income Wage earnings Net property income Social benefits less contributions Net current transfers Taxes on income and w ealth Gross disposable household income
NI
18% 69% 10% 13% 4% -14% 100%
UK
16% 84% 12% 6% 0% -19% 100%
pp diff
2 -15 -2 6 4 5 0 Source: ONS, Oxford Economics 26
Will welfare reform impact? – But surely reform is inevitable?
27
Benefit claimants per 1000 working age population people, UK regions, 2011
IB ESA DLA IS JSA
NI Claimants
51900 24400 184200 82800 59900
Claimants per 1000 working age population NI
46 22 165 74 54
UK
49 19 87 45 39
Source: DWP & DSD
Newry & Mourne (claimants per 1000 working age):
IB: ESA: DLA: IS: JSA: 46 23 171 77 62
Will big changes to funding regime hurt – again short answer is yes!
Total employment – corporation tax scenario, Indicative estimates of potential SFA job loss Deadweight
25% 50% 75%
Jobs 'lost' over next 10 years (000s)
45 30 15
Source: Oxford Economics
Note: A review is underway by Invest NI to better understand possible impact This assumes a complete end to SFA Assumes approximately 6,000 jobs safeguard or created annually 950 900 850 800 750 700 650 Forecast Base Central
Source: Oxford Economics
Note: published July 2011. Baseline has changed
Lower corporation tax = 58,200 additional jobs by 2030
28
7000 6000 5000 4000 3000 2000 1000 0
Can the export base grow sufficiently? This will be very very tough Service exports, NI, 2000 - 2011 Manufacturing exports, NI, 2000 - 2011
Manufacturing 300 250 200 150 100 50 0 Services
Source: Manufacturing sales and export survey (current prices)
Exports, UK, 2000 - 2022
15 Forecast 10 29 5 0 -5 -10
Source: Oxford Economics (2009 prices) Source: Exporting NI services (current prices)
Concern over services exports
Note: dashed line in both charts indicates sectoral reclassification to SIC07 from SIC 03
Can the export base grow sufficiently? Significant potential Imports, selected global emerging economies, 2022
China India Egypt Russia Brazil Indonesia Vietnam Phillipines Nigeria Bangladesh Sri Lanka Iraq Mongolia
Total
Source: Oxford Economics Note: Ranked in order of value
Imports, 2022 0.01% (£m)
226 72 65 35 26 15 14 9 7 3 2 1 1
475
If NI could provide 0.01% of imports to these emerging economies, it would be worth £475m (equivalent to 1.7% of GDP, though actual impact would be smaller due to import content)
30
Can the export base grow sufficiently? Euro weakening possible UK: Exchange rates
2.2
2.0
US$/£ Forecast 1.8
1.6
1.4
1.2
Euro/£ 1.0
1990 1993 1996 1999 2002 2005 2008 2011 2014 Source: Oxford Economics
Exchange rates £1 = $1.60
£1 = €1.24
11/12/12 Source: xe.com
Signals improved export competitiveness
31
Where will the low skilled work? Low skills of inactive a major challenge NI: Working age population economic activity status and benefit claimants by highest qualification (2011) Total (000s) No quals Other quals Level 1 Level 2 Level 3 Level 4+
Employed Unemployed Economically inactive Long-term sick Looking after family & home Early retired Student Other 775 62 317 90 73 41 86 27 16% 26% 54% 49% 29% 25% 41% 4% 4% 2% 3% 0% 0% 0% 8% 14% 10% 12% 14% 9% 10% 15% 21% 9% 9% 14% 39% 15% 22% 20% 13% 14% 14% 20% 27% 34% 16% 11% 14% 29% 7% 7% Economically inactive - w ant to w ork Economically inactive - do not w ant to w ork Employment rate Benefit claimants (latest) Jobseekers allow ance Income support Incapacity benefit Employment and support allow ance Disability living allow ance Source: LFS, DSD 51 267 67% 61 72 65 47 192 40% 48% 48% 55% 73% 1% 3% 5% 78% 14% 9% 17% 81% 16% 14% 6% 47% 17% 17% 8% 84% 4% 9% 9% 32
Where will the low skilled work? Which sectors offer low skilled work Entrants to employment with no qualifications by sector, NI, 2009-2011
30% 25% 20% 15% 10% 5% 0%
Range of sectors ‘off limits’ to those with no quals...finance, professional servs, info & comms
20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
% employed stock with no qualifications NI, 2009-2011 2 out of every 3 workers with no qualifications are employed in retail, manufacturing, agri, health and construction
Source: LFS
33
Can a rebalancing occur? – agri food an area of potential
Employment in agri – food, NI, 1998 - 2022
55 53 51 49 47 63 61 59 57
Source: Oxford Economics
Forecast
Employment in agri – food, NI, 2010 -2012 Agriculture
Employees Self employed Total employment 0.1
-3.6
-3.5
Manufacturing of food etc
0.7% -14.8% -9.7% Employees Self employed Total employment
2010 - 2012 000s %
-0.1
0.0
0.0
-0.4% 6.2% -0.2%
Source: Oxford Economics
34
Can a rebalancing occur? – manufacturing a mixed bag
85 80 75 70 115 110 105 100 95 90
Employment in manufacturing, NI, 1998 - 2022
Forecast
Source: Oxford Economics
£1388m additional GVA by 2022 in manufacturing sector 3,700 less jobs by 2022 in manufacturing sector % growth GVA in manufacturing, NI, 1998 - 2022
0 -2 -4 6 4 2 -6 -8
Source: Oxford Economics
Forecast 35
Can a rebalancing occur? - Commodity prices will impact
World agricultural products
Grain and oilseed prices, $ per bushel 18 16 Soybeans 14 12 10 8 6 4 2 0 2004 2005 Corn 2006 2007 2008 2009 Wheat 2010 Source : Oxford Economics/Haver Analytics 2011 2012
World food prices near crisis levels: Worst drought in more than 50 years in US sent corn and soybean prices soaring also droughts in Russia and other Black Sea exporting counties Shale oil could impact oil price World: Oil, food and metals prices
160 F'cast 140 120 100 World food prices (2007=100) 80 60 World base metal (2007=100) 40 20 Oil price (US$ pb) 0 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 Source : Oxford Economics 36
Can a rebalancing occur? – Wages an issue
Average hourly compensation in manufacturing, selected countries, 2011
Sri Lanka China Mexico Taiwan Brazil Singapore UK (minimum) Korea Israel UK (average) France Germany 0 5
Source: Bureau of labour statistics
10 15
Average hourly compensation (£)
20 25 37
Can a rebalancing occur? – public service will necessitate
Employment in public services, NI, 1998 - 2022
240 230 220 210 270 260 250 Forecast
8,300 less jobs by 2022 in public services
Source: Oxford Economics
38
Summary: Making Choices
Are we ready?
Policy has changed in certain respects; new strategies with some overlap, though not enough. Invest NI has been transforming and focus has shifted to exports and short term job support Corporation tax debate lumbers on, decisions getting closer but is it too late?
Legislative changes very limited Public sector changes are underway, but piecemeal and danger of ‘cheapest is best’ approach Welfare reform, regional pay and austerity all generated strong objections locally, but little alternatives presented Longer term strategic challenges not prominent: pension crisis, elderly care, subvention dependence 40
And at a local level?
New powers ■ What is the plan?
■ What could you do if you had the powers? Close to existing business (issues, plans, concerns) Close to capacity and potential (site register, planning consents, USP of locations) Postulate an alternate income model – what rates / taxes could work (vacant rates, eyesores, environmental legislation) Co – ordinate the agencies and the support that flows in (“total place”) P&L account for economic development in the area Could a jobs plan work – 2K minimum, 5K stretch target?? Co-ordinated jobs register for the area – help ever business to get the staff they need – a no unfilled vacancies policy.
Research – a ‘trace’ project of the young people and school leavers over last 5 years – which subjects have mattered, what characteristics (beyond family background etc.). 41 What has worked for Newry people
What is required?
Decisions on major policy choices Reform of tax raising policy: rates, water, corporation tax etc Public expenditure needs line by line expenditure review, no preconceptions over in house or out sourced Appropriate principles: cheapest does not always mean best value, competition does not mean privatisation Recovery will be long and slow: growth should not be taken for granted.
Creating jobs whilst spending less is not easy.
Make choices clearer: Have the debate!
42
Contact Details:
Oxford Economics Lagan House Sackville Street Lisburn County Down BT27 4AB UK
Tel:
028 9266 0669
Fax:
028 9267 0895