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Responding to the challenge. 11 th December 2012 Neil Gibson Director: Oxford Economics. Newry & Mourne Enterprise Agency. Agenda. Global economy still fragile. Global economy slowing again. World GDP (year-on-year), 1995 - 2015. World trade % growth (year on year), 1991 - 2022.

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Responding to the challenge
Responding to the challenge

11th December 2012

Neil Gibson

Director: Oxford Economics

Newry & Mourne Enterprise Agency




Global economy slowing again
Global economy slowing again

World GDP (year-on-year), 1995 - 2015

World trade % growth (year on year), 1991 - 2022

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

4



Uk could there be a triple dip
UK – could there be a triple dip?

GDP (% growth q-o-q), UK, 1998 - 2022

Oxford forecast -0.1% growth in 2012Q4

Source: Oxford Economics


Labour market surprisingly performing rather well
Labour market, surprisingly, performing rather well

Workforce jobs and employee jobs, UK, 2000 – 2012

Workforce jobs only 0.5% below peak

Employee jobs 2% below peak

Employee jobs, UK, December 2011 – June 2012

Source: ONS, Workforce jobs, Seasonally adjusted

Source: ONS,

Workforce jobs, Seasonally adjusted



Labour market lagging the uk
Labour market lagging the UK. . .

Workforce jobs, UK & NI, March 2007 – June 2012

Source: ONS, Workforce jobs, Seasonally adjusted

Note: March 2007 = 100


Where is ni underperforming
Where is NI underperforming?

Number of jobs below UK trend, NI, trough - current

Self – employed jobs, UK & NI, 2005 - 2012

Source: ONS, Claimant count

Source: ONS, WFJ

Note: Low = June 2011 and most underperforming sectors are shaded in pink


Unemployment now amongst the highest in the uk
Unemployment now amongst the highest in the UK

Claimant Count rate, UK regions, average 2007 & Sep 12

Change in unemployment, Top 10 LAD’s, Trough - Current

Source: ONS, Claimant count

Source: ONS, Claimant Count


Jobs outlook remains service sector focussed
Jobs outlook remains service sector focussed

Sectoral employment growth, NI, 2012 - 2022

Source: Oxford Economics

Note: includes self employment, all negative growth is shaded in pink


A long road back
A long road back

Total employment, Northern Ireland, 1998 - 2025

Source: Oxford Economics, QES



Unemployment problems for newry mourne
Unemployment problems for Newry & Mourne

Monthly unemployment, Newry & Mourne, March 2011 – October 2012

Unemployment roughly equivalent to level in 1998 Q3

Source: Nomis Claimant Count


Who is unemployed
Who is unemployed?

Unemployment by age group, 2012

Unemployment by duration, 2012

Source: Nomis Claimant Count


Matching skills to job demand a challenge
Matching skills to job demand a challenge

Unemployment by sought occupation, 2012

Source: Nomis Claimant Count


An era of slow job growth ahead
An era of slow job growth ahead

Total employment, Newry & Mourne, 1995 - 2025

Newry forecast to create 2,300 additional jobs by 2022 (6%)...

...on back of 3,100 job losses between 2008 and 2012

Source: Oxford Economics


Sectoral outlook reflects border location
Sectoral outlook reflects border location

Employment change by sector, Newry & Mourne, 1998 - 2022

Source: Nomis Claimant Count

Note: Top 2 performing sectors are shaded in yellow and bottom 2 performing sectors are shaded in pink


Scaling the challenge
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



Key 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?


Austerity more to come uk public finances in perilous state
Austerity – more to come?: UK public finances in perilous state

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


Austerity more to come next csr in ni likely to be tougher
Austerity – more to come? Next CSR in NI likely to be tougher

Departmental expenditure limits, NI, 2010/11 – 2014/15

Government balance (subvention), NI, 2003/04 – 2015/16

Source: NI Executive budget report 2011-15, 7th March 2011.

Source: Oxford Economics (2011 analysis)

Note: Real term estimates based on Treasury inflation forecast which is 2.75% on average over the period 2010/2011- 2014/15

  • 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’)


Austerity more to come time to talk about big areas of spend
Austerity more to come? Time to talk about big areas of spend

Identifiable expenditure by function, Northern Ireland (£m)

Source: HM Treasury PESA



Will welfare reform impact but surely reform is inevitable
Will welfare reform impact? – But surely reform is inevitable?

Benefit claimants per 1000 working age population people, UK regions, 2011

Newry & Mourne (claimants per 1000 working age):

IB: 46

ESA: 23

DLA: 171

IS: 77

JSA: 62

Source: DWP & DSD


Will big changes to funding regime hurt again short answer is yes
Will big changes to funding regime hurt – again short answer is yes!

Total employment – corporation tax scenario, NI, 1990-2030

Indicative estimates of potential SFA job loss

Source: Oxford Economics

Note: A review is underway by Invest NI to better understand possible impact

This assumes a complete end to SFA

Source: Oxford Economics

Lower corporation tax = 58,200 additional jobs by 2030

Note: published July 2011.

Baseline has changed

Assumes approximately 6,000 jobs safeguard or created annually


Can the export base grow sufficiently this will be very very tough
Can the export base grow sufficiently? This will be very very tough

Service exports, NI, 2000 - 2011

Manufacturing exports, NI, 2000 - 2011

Source: Manufacturing sales and export survey (current prices)

Source: Exporting NI services (current prices)

Exports, UK, 2000 - 2022

Concern over services exports

Note: dashed line in both charts indicates sectoral reclassification to SIC07 from SIC 03

Source: Oxford Economics (2009 prices)


Can the export base grow sufficiently significant potential
Can the export base grow sufficiently? Significant potential very tough

Imports, selected global emerging economies, 2022

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)

Source: Oxford EconomicsNote: Ranked in order of value

30


Can the export base grow sufficiently euro weakening possible
Can the export base grow sufficiently? Euro weakening possible

Exchange rates

£1 = $1.60

£1 = €1.24

11/12/12

Source: xe.com

Signals improved export competitiveness



Where will the low skilled work which sectors offer low skilled work
Where will the low skilled work? Which sectors offer low skilled work

Entrants to employment with no qualifications by sector, NI, 2009-2011

Range of sectors ‘off limits’ to those with no quals...finance, professional servs, info & comms

% 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


Can a rebalancing occur agri food an area of potential
Can a rebalancing occur? – agri food an area of potential skilled work

Employment in agri – food, NI, 1998 - 2022

Employment in agri – food, NI, 2010 -2012

Source: Oxford Economics

Source: Oxford Economics


Can a rebalancing occur manufacturing a mixed bag
Can a rebalancing occur? – manufacturing a mixed bag skilled work

Employment in manufacturing, NI, 1998 - 2022

3,700 less jobs by 2022 in manufacturing sector

% growth GVA in manufacturing, NI, 1998 - 2022

Source: Oxford Economics

£1388m additional GVA by 2022 in manufacturing sector

Source: Oxford Economics


Can a rebalancing occur commodity prices will impact
Can a rebalancing occur? - Commodity prices will impact skilled work

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


Can a rebalancing occur wages an issue
Can a rebalancing occur? – Wages an issue skilled work

Average hourly compensation in manufacturing, selected countries, 2011

Source: Bureau of labour statistics


Can a rebalancing occur public service will necessitate
Can a rebalancing occur? – public service will necessitate skilled work

Employment in public services, NI, 1998 - 2022

8,300 less jobs by 2022 in public services

Source: Oxford Economics



Are we ready
Are we ready? skilled work

  • 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


And at a local level
And at a local level? skilled work

  • 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.). What has worked for Newry people


What is required
What is required? skilled work

  • 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!


Contact Details: skilled work

Oxford Economics

Lagan House

Sackville Street

Lisburn

County Down

BT27 4AB

UK

Tel: 028 9266 0669

Fax: 028 9267 0895

[email protected]


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