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  1. Reaching for recovery – what can we expect, what can we do? Neil Gibson Director of Regional Services Oxford Economics June 2009

  2. Overview • Recession – painful and possibly prolonged • End of ‘golden era’ • How has Lisburn performed? • What has changed – updated forecasts for Lisburn • Risks and opportunities facing Lisburn • Reaching for recovery – how and when? • Reacting to recessions and recovery – role of policy

  3. Recession – painful and possibly prolonged?

  4. Most severe peace time recession since 1930s

  5. What caused it? • In summary • Debt • Confidence • Complacency • Essentially the rapid escalation of financial sector debt (and personal sector debt in some countries) unwound when uncertainty over the asset values arose • Spectacular collapse in confidence, liquidity and valuations (plus the Lehman’s collapse) left financial world close to collapse • World ‘bail out’ (largely) to avoid deep recession and stabilise spending • Now a legacy of scarred consumers, nervous business and indebted governments (in West) makes outlook fragile

  6. All major economies feeling the strain Acute where combination of house price crash and trade exposure But… Trade most acute

  7. The unsustainable construction boom…

  8. Recessions have many impacts… Job loss Leavers from education Finances Spenders and savers Consumers Housing Crime Closing Start - up Environment Recession Businesses Society Image & physical space Psychology Downsizing / layoffs Advertising / marketing Benefits Press Governments Spending Governance Financing projects Strategy

  9. End of ‘golden era’

  10. End of an ‘era’ for all Year when employment reaches 2007/2008 peak

  11. A wide reach sectorally… NI quarterly change in employee jobs Source: DETI Note: Blue shading refers to employee job change greater than or equal to +1000; red shading refers to employee job change less than or equal to -1000

  12. And for the short term… Employment forecast, 2008 – 2010, Northern Ireland

  13. Unemployment a concern – now and in the future Total claimant unemployment in NI Claimant count April 2009 = 46,800 Oxford Economics forecast 2010 = 60,500 Source: NOMIS

  14. Unemployment - everywhere affected… Unemployment change, April 2008 – April 2009 NI change = 22,000 / 89% Lisburn change = 1,300 / 100%

  15. House price correction severe

  16. How has Lisburn performed?

  17. Last decade characterised by strong employment growth & low unemployment Total employment Total unemployment Source: NOMIS Source: DETI, Oxford Economics

  18. Population led by migrants recently Migration and Natural Change, Lisburn

  19. Public sector growth greater than NI Sectoral job change over the last decade Source: DETI Census of Employment, Oxford Economics Note: Blue shading refers to % job growth higher than NI; red shading refers to % job growth less than NI

  20. Jobs – city centre, outer urban, rural… Total employee jobs (2005-07) Distribution of sector jobs by area (2005) Source: DETI Census of Employment, Oxford Economics

  21. What has changed – updated forecasts for Lisburn…

  22. Reassessing our forecasts – 2 year on • Clearly too optimistic! • Warnings on house prices, construction and retail provided • Warning over considering all developments together even more important now • No progress on major construction we had expected • Did not see the global collapse coming and this has triggered the recession • The public sector squeeze resulting from the collapse in tax revenues extending the length of the recession • Perhaps 2007 forecasts are more of an “aspiration” now, though sectors need to be different • Think more carefully about balance between export, local demand, local services (at NI level at least)

  23. Change in outlook from 2007 Source: Oxford Economics

  24. Strong demographics despite tail off in migration Total population and natural increase Net migration Source: NISRA, Oxford Economics Source: NISRA, Oxford Economics

  25. Job loss across all sectors – lower value of Sterling expected to help agriculture Total employment Agriculture employment Source: DETI, Oxford Economics Source: DETI, Oxford Economics

  26. Significant revision for construction, retail and hotel outlooks Construction employment Retailing and hotels employment Source: DETI, Oxford Economics Source: DETI, Oxford Economics

  27. Aspired to model not broken but different Professional services employment Health and education employment Source: DETI, Oxford Economics Source: DETI, Oxford Economics

  28. Lower employment & higher unemployment rates Resident employment rate Unemployment rate Source: Census, LFS, Oxford Economics Source: Census, LFS, Oxford Economics

  29. GVA - significant downward revision Source: Oxford Economics

  30. Risks and opportunities facing Lisburn…

  31. Risks for Lisburn to face and opportunities to embrace

  32. Reaching for recovery: how and when?

  33. What will bring recovery? • The impact of the significant policy stimuli • The end of ‘de-stocking’ across production sectors • A pick up in global demand and world trade • A return of confidence to both consumers and lenders • Tempering of costs and wage brokering • Fiscal stability and the write off debt • Increased liquidity and ultimately lending (though watch the assessment of risk – some ‘bad bets around’) • Housing market stability – improved transactions and ultimately prices • Signs (although tentitive) of many of these coming through

  34. Could it stall? • Unfortunately yes – very possibly • EU exporters (Germany esp.) could see significant defaults and closures • Financial lending to Eastern Europe etc. could default more significantly • Protectionism could de-rail world trade growth • Commodity prices could rise again (esp. oil) • Possibility of global conflict escalating (related to economics or not)

  35. Oil prices likely to rise Value today $72 per barrel

  36. Euro – likely to fall (rather than Sterling rise!) Value today Euro / £ = 1.17 US$ / £ = 1.64

  37. Services still key to job creation (really?)

  38. And so to green? • Green jobs touted as key • What market? • What type of jobs? • Displacement (building green not grey houses) • Lifestyle sectors vulnerable or now key? • Is the financial and professional services sector broken (no – but different) • Could on-shoring of industrial jobs occur (unlikely to great extent – but possible with sharp oil price rises) • Jobs related to care for the elderly likely • Advanced skilled jobs (STEM, arts and design etc.) as harder to replace • Could there be a re-birth in academia? • Tourism (relations with emerging nations important)

  39. Reacting to recessions and recovery – role of policy

  40. Still an era of debt (from consumers to govt) ROI and UK public finances outlook Note no NI budget – a telling difference In some ways, ‘hands are tied’

  41. The key recession risks… • Leavers from education: ‘lost generation’? • Laid off workers (skills mismatch) • A new era of decay (especially cities)? • Job loss • ‘Benefit locked’ migrants • ‘property locked’ migrants • Crime • Incomplete regeneration • Disused sites – potential of Laganbank Quarter and Maze not fully realised • Unfinished buildings, developments, housing estates • No longer viable cultural and leisure activities • PPP, funding etc. • Housing offer • Limited new build – no further development of Ballantine Garden Village • Price falls welcome, but could rise sharply and become unaffordable again – significant reductions witnessed in Thaxton Village development • Skills and young people crisis – what jobs? • Will the sectors of recent growth return? – Construction and retail will remain key areas for future growth in Lisburn but on a much smaller scale • Cycle of fear and retraction • Impact on ‘pension pots’ and retirement The biggest costs are personal – they can last a lifetime

  42. Themes of response • Lead by example (efficiency, approach) • Sensitive and empathetic • Decisive and clear • Spending government (taxpayer) money wisely • Incentivise and support work (not workless) • Lessons learnt? • Manage expectation – past will not return in the same way

  43. Remember all is not lost!.. • Recessions end • Some signs of ‘bottoming out’ – all is not lost! • Not everything is declining • Key strategic assets remain (educational establishments, skills, infrastructure) • Sterling, inflation and interest rates • Natural cleansing process • Some ‘bloat in certain sectors’ • Kick back on wage levels will improve competitiveness • The role of govt is back centre stage, a new real challenge for governance and policy

  44. Contact:Neil GibsonDirector Regional Services, Oxford EconomicsTel: 028 9266 0669Mob: 07803728994 Email:

  45. Annex

  46. Businesses • Finances • Cash-flow advice – money is cheap • Potentially trading capital support (but take care – assessing risk not easy) • Start-up • Advice on recession response • Support on premises – engagement with landlords • Closing • Advice and support on the decision making process (pointing towards other options and guidance – closing a last resort – a restructuring package expensive though) • Legal matters (redundancies etc.) • Support and counselling • Downsizing and layoffs • Legal advice • Potential training options (management, business readiness, sales skills in particular – top-up courses) i.e. Lisburn City Council’s Sustainable Business Development programme • Advertising and marketing • Pays big dividends in recovery but hard to fund (would help in attracting firms such John Lewis) • Support and guidance – perhaps a role of the university school leavers (projects and quasi enterprises) • Financing projects • Advice on the options and returns (the longer term picture) • Leading the search in ‘new lands’ e.g. pension funds, oil money

  47. Governments • Financing projects • Bring together depts. and bodies with funding needs • Leading the search in ‘new lands’ e.g. pension funds, oil money • Spending • Route and branch review of spending and likely incomes – a recession response team? • Prioritising those most effective • Realism over how many can be helped and the understanding that all will suffer (avoid a further ‘benefits’ trap) • Fastracking and borrowing (issuing money? Lending?) • Strategy • Review of strategy – acceptance of changing times – note streamline the process (dynamic and responsive – quicker to market) • Understanding of targets being missed – prioritise people on the front line not ‘rewording strategies’ • Weighting priorities – front-line vs. economic development vs. society etc. • What are priority sectors (if they even exist) – green, professional services, pharma, engineering? i.e. Lisburn City Council’s Competitive Edge programme (SME Development Programme 2007-13) • Governance • Role of council / RDA / other bodies – a chance to de-clutter? • Efficiency drive and clearing the blockages and increasing the networking within public sector