Regional Skills Assessment Edinburgh and South East Scotland City Region Deal Insight Report

Transcription

1 Regional Skills Assessment Edinburgh and South East Scotland City Region Deal Insight Report

2 2 Contents 1 Introduction 3 The importance of skills planning in Scotland 4 Regional Skills Assessments and Skills Planning 6 National Skills Issues 7 Content 7 2 The Edinburgh and South East Scotland City Deal Region 8 The Edinburgh and South East Scotland City Deal Economy and Place 9 Edinburgh and South East Scotland City Deal s People 18 3 Demand for Skills in Edinburgh and South East Scotland City Region Deal 25 Employment 26 Occupations 29 Sectors 36 Qualifications 42 4 Concluding Remarks 46 Contact Us 59 Appendix 1: Oxford Economics Definitions 60 Appendix 2: Key Sector Definitions 62

3 1 Introduction

4 Regional Insight Report 1 Introduction 4 The Importance of Skills Planning in Scotland Skills, alongside other wider and social and economic conditions, help to achieve the stated Scottish Government purpose of: creating a more successful country, with opportunities for all of Scotland to flourish, through increasing sustainable economic growth Significant public sector funding (some 2 billion) is invested annually to support skills development in Scotland. This, alongside employer and other partner investment, amounts to a substantial resource. To ensure it is invested wisely it is important to ensure that there is a robust evidence base to guide decisions. Current Scottish Government Strategy for skills includes Scotland s Economic Strategy, Scotland s Labour Market Strategy and Scotland s Youth Employment Strategy and also the recent UK Industrial Strategy. These, alongside the Scottish Skills Planning Model (Figure 1.1), influence skills investment. The skills planning model is evolving. Phase 2 of the Enterprise and Skills Review that reported earlier this year included a range of proposals to achieve the dual goals of (1) a dynamic, inclusive globally competitive economy and (2) a high performing, inclusive labour market. Work is ongoing on these proposals that include regional partnership models, learner journey models and, of most relevance to skills planning, proposals for skills alignment. Figure 1.1 Scottish Skills Planning Model The vision for skills alignment is for skills services to be fully aligned to deliver the learning and skills necessary for sustainable and inclusive economic growth. A project is in place to achieve this; the purpose of which is to align the relevant functions of the Scottish Funding Council (SFC) and Skills Development Scotland (SDS) to ensure that Scotland s people and businesses are equipped with the right skills to succeed in the economy, not just now but in the future. The proposals include the development of a five step planning model (Figure 1.2) and a Governance Structure (Figure 1.3). Figure 1.2 Five Step Model

5 5 At the time of writing, SFC and SDS are engaged with Scottish Government to develop a detailed implementation plan to carry through the reforms identified. Work that has been agreed to take place in the short term includes: The development of Terms of Reference for a strategic Skills Hub of the Strategic Board Skills Committee; Development of the five step model to confirm the deliverables of each stage; and The appointment of a Director of Skills Alignment reporting jointly to the Directors of SDS and SFC. Evidence developed through Regional Skills Assessments now and in their future evolution can help inform Step One of the five step model. This iteration, unlike in previous versions, focuses much more on demand side evidence to support Step One of the proposed planning process. Figure 1.3 Governance Regional Skills Assessments and Skills Planning Regional Skills Assessments (RSAs) were first launched in 2014 and have evolved over time as a result of feedback from an independent review (2015 by the Training and Employment Research Unit) and ongoing partner consultation, as part of a continuous improvement process. Their purpose is to: Support partners in strategic skills investment planning including: The two national skills agencies SDS and SFC (in conjunction with Regional Colleges, Strategic Bodies and College Boards) Enterprise Agencies and regional and local partnerships; and Identify gaps in evidence that require to be addressed. To ensure an inclusive approach to their development, dissemination and utilisation, RSAs are produced by SDS in partnership with Highlands and Islands Enterprise (HIE), Scottish Enterprise (SE), SFC and the Scottish Local authority areas Economic Development Group (SLAED). RSAs include the use of recently published datasets. Inevitably, when using published data there is a time lag but the data contained is

6 Regional Insight Report 1 Introduction 6 the most up to date available at the time of writing. Feedback from partners has indicated that an area of evidence they wished to see more was in relation to forecasting. Given this, RSAs also include forecast data that has been commissioned through Oxford Economics. These forecasts are based on three factors: National/regional outlooks all the forecasting models they operate are fully consistent with the broader global and national forecasts which are updated on a monthly basis; Historical trends in an area (which implicitly factor in supply side factors impinging on demand), augmented where appropriate by local knowledge and understanding of patterns of economic development; and Fundamental economic relationships which interlink the various elements of the outlook. As with all forecasts, certain caveats need to be applied. They are based on what we know now and include past and present trends projected into the future. They can therefore be affected by potential disruptors (e.g. Brexit) and unforeseen events and their value is in identifying likely directions of travel rather than predicting exact figures. The more disaggregated they become, especially at smaller geographical units, the less reliable they are likely to be. The historical data on which the forecasts are based is subject to revision and may be volatile, particularly at a sub-regional and sub-sectoral level. Therefore forecasts at a higher, less disaggregated level are more robust than the detailed breakdowns. They also cannot take into account recent developments that may be happening at local level or an individual firm s perspective, so inevitably they lack nuance. Finally, the occupational (SOC) and sectoral (SIC) classifications should be looked at to understand how an occupation or industry is defined. Links have been given to facilitate this in the relevant sections. Education, for example, is an industrial sector that takes in a wide variety of teaching and educative functions e.g. driving instructors. It is recommended therefore that users examine trends over time rather than focusing on changes in individual years, use caution at the more granular level and examine occupational and sectoral definitions where relevant. National Skills Issues Prior to the publication of RSAs, SDS has published a national skills assessment Jobs and Skills in Scotland. This report highlights key strengths of Scotland s skills alongside challenges to be addressed, as well as pointing to drivers that will have an impact on skills and skills planning and outlining potential forecasts for the future. Nationally, it is recognised that, following the recession: Employment in Scotland has recovered and is above pre-recession levels; Many key sectors have had good employment growth despite difficult trading conditions (see Appendix 2); Scotland has maintained a highly skilled workforce; and The economy offered a range of opportunities for young people after school. That said, on demand for skills, growth rates for the Scottish economy remain behind that of the UK and, although productivity has improved, Scotland s record remains poor. Also, although employment has recovered since the recession we have seen: A rise in non standard jobs - part time employment, self employment and nonpermanent employment have grown; An hour glass labour market structure which presents challenges for progression in the workplace, underemployment and under utilisation

7 Regional Insight Report 1 Introduction 7 of skills; and Low pay and in-work poverty as of continuing concern. The report points to key areas of uncertainty for the skills environment such as the impact of Brexit, productivity challenges, societal change and automation. It also provides some indicative forecasts for the future through modelling by Oxford Economics that highlight the potential: Political uncertainty is likely to restrict the pace of economic development in the short term, and this will curtail job creation. Growth is forecast to accelerate towards the end of this decade, but Scotland is projected to underperform the UK as a whole; Total employment in Scotland is forecast to rise by 84,800 by 2027, equivalent to an average annual growth rate of 0.3 per cent. The comparable figure for the UK is 0.5 per cent; The next decade will see a shift in the sectoral composition of employment in Scotland. Rising employment in Business services, Wholesale and retail trade, Construction and Health and social work will be accompanied by a reduction in Manufacturing and Public administration; These sectoral changes will affect the occupational profile of Scotland s workforce. There will be an increase in the number of Elementary Clerical and service occupations and Business and public service professionals. But job losses in manufacturing will see fewer Process, plant and machine operatives and Skilled metal and electrical trades; and Scotland s largest urban centres will lead job creation. Together, Edinburgh and Glasgow are forecast to account for three in every four new jobs created. Employment is forecast to fall in around a third of Scottish council areas over the forecast period. Finally, the report outlines four significant challenges and opportunities in relation to jobs and skills: 1. Boosting productivity will be vital for our long term prosperity. 2. Our growth needs to be more inclusive. 3. Scotland s demographics represent some significant challenges - and Brexit may exacerbate these. 4. The world of work is changing - we need to support businesses and individuals to navigate and embrace that change. Content It is within this national context that this RSA has been developed. The RSA for Edinburgh and South East Scotland City Region Deal is in three parts (1) a summary A3 infographic (2) an insight report and (3) a slidepack of charts and tables for utilisation by partners. This report the insight report - is in three parts: The Edinburgh and South East Scotland City Region Deal an introduction to the region s economy and its people; Demand for skills past, current and forecast demand for total employment, occupations and sectors; and Concluding remarks Please note that more detailed implications for skills planning in the Edinburgh and South East Scotland City Region Deal can be found in the Borders, Dumfries and Galloway, Edinburgh, East and Midlothian, Fife, and West Lothian Regional Skills Assessments which have also published. Further, summaries of the local authorities in the Edinburgh and South East Scotland City Region Deal can be found in the accompanying local authority reports.

8 2 Region The Edinburgh and South East Scotland City Deal

9 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 9 The Edinburgh and South East Scotland City Region Deal 1 is made up of six local authority areas: City of Edinburgh; East Lothian; Fife; Midlothian; Borders; and West Lothian. This section outlines key characteristics of the City Deal region focusing on the City Deal region s economy and its people. Edinburgh and South East Scotland s Economy and Place GVA and Productivity In relation to the Scottish economy, the Edinburgh and South East Scotland City Deal region area is mostly characterised by high output (although low in East Lothian, Midlothian and West Lothian) and high productivity (although again low in East Lothian, Midlothian and West Lothian - Figure 2.1). The City Deal region is a mixed urban and rural economy and is home to Edinburgh City, which has the second highest local authority area output in Scotland. Based on 2015 data, the region contributed 33,110 million in GVA ; accounting for one quarter of output for Scotland. At 13 per cent of the total City Deal region s output (2015 figures), the Financial and insurance activities sector accounted for the highest sectoral output in the region, followed by Wholesale and retail trade and Real estate activities (both 11 per cent). The City Deal region s productivity (measured as GVA per job, 2015) was 47,185, above the Scotland average of 45,900. There was however variation across the city deal region: Edinburgh City made the greatest contribution within the City Deal region, accounting for 14 per cent of Scotland s GVA output. The remaining local authority areas ranged from five per cent in Fife to one per cent in East Lothian and Midlothian; and Edinburgh City ( 52,030) had the highest productivity in the City Deal region, and the third highest productivity in Scotland. Productivity in the remaining five local authority areas ranged from 44,724 in Fife to 38,008 in the Borders - i.e. all local authorities with the exception of Edinburgh City were below the Scottish average. Looking to the future, GVA growth in the Edinburgh and South East Scotland City Region Deal area is forecast 3 to average two per cent per year between 2017 and This is faster than forecast growth for Scotland (1.7 per cent) and in line with that of the UK. The pace of growth is expected to slow in the short term as the consumer sector loses momentum in the face of rising inflation, businesses invest cautiously due to Brexit-related uncertainty, and fiscal policy remains tight, before accelerating towards the end of the forecast period. Private services, which account for almost 60 per cent of the Edinburgh and South East Scotland City Region Deal s economy, are expected to support growth faster than the Scottish average over the forecast period. The fastest growing sector is projected to be Professional, scientific and technical activities with growth of 3.6 per cent per year, with Administration and support services, and Information and communication also forecast to average growth in excess of three per cent. Other notable contributions to growth are expected from the large Financial and insurance activities industry and Wholesale and retail trade sectors. The strength of Private services is expected to easily offset the weaker outlook for parts of the Public services sector, particularly Public administration, and the Manufacturing sector. 1 Hereafter referred to in text as the City Deal region. 2 GVA is the measure of the value of goods and services pro duced 3 Forecasts by Oxford Economics

10 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 10 Figure 2.1 Distribution of GVA ( million, constant 2013 prices) and Productivity (per job) by City Region Deal, 2015 Source: Oxford Economics Productivity Aberdeen City Region Deal Low GVA, High Productivity High GVA, High Productivity 1 Edinburgh and South East Scotland City Region Deal 0 Output (GVA) Low GVA, Low Productivity Glasgow City Deal High GVA, Low Productivity Stirling and Clackmannanshire City Region Deal Inverness and Highlands City Region Deal Note: the data is scaled - the units used are standard deviations from the mean.

11 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 11 Figure 2.2 Distribution of GVA ( million, constant 2013 prices) and Productivity (per job) by local authority, 2015 Source: Oxford Economics Economic inactivity rate, working age population Low GVA, High Productivity Glasgow City Dundee City East Ayrshire North Ayrshire 1 Edinburgh City South Ayrshire Inverclyde West Dunbartonshire Fife Stirling East Lothian Aberdeen City Clackmannanshire High GVA, High Productivity North Lanarkshire East Dunbartonshire West Lothian Dumfries and Galloway Midlothian Renfrewshire South Lanarkshire East Renfrewshire Moray Perth and Kinross Falkirk Argyll and Bute Angus Highland Scottish Borders Working Age Population (ILO) Eilean Siar 1 Aberdeenshire Low GVA, Low Productivity 2 High GVA, Low Productivity Shetland Islands Note: the data is scaled - the units used are standard deviations from the mean.

12 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 12 The Business Base There is a total of 42,120 businesses operating within the City Deal region, over two-fifths of which (43 per cent) are based in Edinburgh City, with a further 22 per cent in Fife. The largest sector (in terms of the business base) within the City Deal region is Professional, scientific, and technical, accounting for 19 per cent of all businesses. This is, however, not uniform across the region, ranging from 12 per cent in the Borders to 24 per cent in Edinburgh City. The latter is true with the exception of the Borders, where almost one-quarter of businesses (24 per cent) are in this sector, compared to ten per cent nationally. This is perhaps to be expected, given the rurality of the area and is substantially higher than, for example, Edinburgh City, where just one per cent of businesses operate in this sector. Construction is the second largest sector at the City Deal level (ten per cent of all businesses) and is typically among the largest sectors for each of the local authority areas. Whilst broadly in keeping with the national sectoral breakdown, there are some broad differences between the local authority areas and the national split. These include: A greater share of businesses operating within the Construction sector (except for Edinburgh City); and A lower share of businesses operating within the Agriculture, forestry and fishing sector.

13 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 13 Table 2.1 Sectoral Breakdown of Business Base, (2016) Source: UK Business Counts. Edinburgh and SES East Lothian Edinburgh City Fife Midlothian Borders West Lothian Agriculture, forestry & fishing 6% 10% 1% 7% 5% 24% 3% 10% Production 5% 5% 3% 7% 7% 5% 7% 6% Construction 10% 12% 8% 12% 15% 12% 12% 11% Motor trades 3% 2% 1% 3% 4% 3% 4% 3% Wholesale 3% 3% 2% 3% 4% 3% 4% 3% Retail 8% 8% 7% 9% 6% 7% 7% 8% Transport & storage 2% 3% 1% 3% 3% 2% 5% 3% Accom.& food services 8% 8% 9% 8% 7% 7% 7% 8% Information & communication 9% 7% 13% 5% 7% 4% 10% 6% Financial & insurance 3% 1% 5% 1% 2% 1% 1% 2% Property 3% 3% 5% 2% 2% 2% 3% 3% Professional, scientific & technical 19% 17% 24% 18% 16% 12% 17% 19% Business administration & support services 7% 8% 7% 7% 8% 6% 7% 7% Public administration & defence 4 <1% 0% <1% <1% 0% 0% 0% <1% Education 1% 1% 1% 1% 1% 1% 1% 1% Health 4% 4% 5% 4% 4% 3% 4% 4% Arts, entertainment, recreation & other services 8% 7% 8% 8% 8% 6% 7% 7% Scotland Total 42,120 3,065 18,075 9,215 2,270 5,035 4, ,905 4 Please note from ONS: All figures are rounded to avoid disclosure. Values may be rounded down to zero and so all zeros are not necessarily true zeros. Totals across tables may differ by minor amounts due to the disclosure methods used. Furthermore, figures may differ by small amounts from those published in ONS outputs due to the application of a different rounding methodology.

14 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 14 The business density of the City Deal region (number of businesses per 10,000 population) is 309. Within the region there are differences between local authority areas, with business density ranging from 248 in West Lothian (ranked 25th out of the 32 Scottish local authority areas) to 440 in the Borders (ranked 6th of 32). In terms of business size (2016), the composition at the City Deal region level is identical to Scotland in that micro businesses (employing zero to nine people) make up the majority of businesses within the region (88 per cent). This trend is generally the same throughout the local authority areas within the region, albeit to varying degrees as set out in Table 2.2. Midlothian has the lowest share of micro businesses (84 per cent), with a subsequently higher proportion of medium sized businesses (ten 49 employees, 13 per cent).

15 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 15 Table 2.2 Proportions of businesses by size band, 2016 Source: UK Business Counts % of businesses by size band East Lothian Edinburgh City Fife Midlothian Borders West Lothian Edinburgh and SES % 87% 88% 86% 90% 88% 88% 88% % 10% 10% 13% 8% 10% 10% 10% % 2% 2% 1% 1% 2% 2% 2% 250+ <1% 1% <1% <1% <1% <1% <1% <1% Scotland

16 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 16 The number of business births within a region can indicate dynamism in that region s economy. By business births per 10,000 of the population, the Edinburgh and South East Scotland City Region Deal ranks 2rd out of the five City Deal regions with 44 business births per 10,000 population. However, much like business density, there are wide local authority area differences, with Edinburgh City the highest-ranking local authority in Scotland (with a birth rate of 60) compared to Midlothian, ranked 26th (with a birth rate of 32). It can be said, therefore, that Edinburgh City drives business births within the region - Figure 2.3 sets this out in more detail. Looking at births, deaths and survival rates together over time enables us to see the broader picture however. Prior to and in the early part of the recession, the business birth rate had increased in the City Deal region before decreasing to 2010; since then, however, there has been almost annual growth and this has been particularly strong in the past two years. Overall, the business birth rate has increased from 31 in 2005 to 44 in The business death rate has also increased over the period, however, only marginally from 30 in 2005 to 31 in Despite decreasing in the initial part of the decade, the business death rate increased during and immediately after the recession, however, it has fluctuated in the years since. If we look at the business survival rate, using 2010 as the baseline year, we see that the rate of business failure slows if businesses are able to survive the first three years. Figure 2.3 Business births and deaths per 10,000 population ( ) and Business survival index ( ) Source: ONS Business Demography and Mid-Year Population Estimates per 10,000 population Business Births per 10,000 population Business Survival Rates, Recession ( ) Note: for Business Survival Rates only available for in Evidence Base. Business Deaths per 10,000 population Index, 2010 =

17 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 17 Business Expenditure on Research and Development (BERD) The value of Business Expenditure on Research and Development (BERD) varied across local authority areas and against the national average within the City Deal region. Measured by BERD per head of the population, expenditure in West Lothian was 791 compared to a Scotland average of the highest of any Scottish local authority Edinburgh City also had a high BERD ( 428 the third highest in Scotland), more than twice the Scotland average, due to the presence of universities and the high value financial services sector. East Lothian by comparison was low ( 50), reflecting the industrial structure within this local authority which consists predominantly of public services and tourism related sectors, which typically have low BERD. Fife and the Borders also had low levels of BERD. However, compared to other rural regions such as Dumfries and Galloway, expenditure in the Borders was higher, possibly due to the prominence of Manufacturing in the local economy which typically has a higher level of BERD. Earnings The average weekly resident earnings in each local authority across the City Deal region varied. Edinburgh City was the only local authority in the region with resident earnings above the national average ( 470; 36 greater). However, other local authority areas were below the national average, including the Borders, West Lothian, and East Lothian, with differences of 37, 12, and 9, respectively. The variation was, however, greater in terms of average weekly workplace earnings. Workplace earnings were 48 higher than the national average in Edinburgh City. By comparison, workplace wages were 39 lower than the national level in East Lothian and Fife. The largest shortfall in earnings was in the Borders, where workplace earnings were 68 lower than the national average. Further information is provided in Table 2.3. Table 2.3 Resident and workplace based earnings, 2016 (Median) Source: Annual Survey of Hours and Earnings, 2016 Provisional figures. Figures based on weekly pay of all workers. Area Resident Earnings Workplace Earnings East Lothian Edinburgh City Fife Midlothian Borders West Lothian Scottish Average The difference between where a person lives (resident earnings) and where they work (workplace earnings) can tell us whether: Individuals are more likely to travel to other local authority areas to work and, therefore, Whether their skills are retained within that local authority area or leak outside. Commuting flows can also help us understand this. Difference between resident and workplace earnings

18 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 18 Commuting Levels of out commuting vary across the City Deal region, ranging from 13 per cent in Edinburgh City to 63 per cent in Midlothian. The most common destination is Edinburgh City, with people commuting to the city for employment, and overall, there is a high degree of people commuting across the city deal area as a whole. If we look at the 2011 Census, this is confirmed: Over half (56 per cent) commute out of the East Lothian local authority area, with 47 per cent going to Edinburgh City (itself higher than the share of people commuting internally within East Lothian - 44 per cent). Overall, 55 per cent commute elsewhere within the City Deal region; Just 13 per cent of people commute outside Edinburgh City, with the most common destinations being the bordering local authority areas of West Lothian (three per cent), Midlothian (three per cent) and East Lothian (two per cent); In Fife, 23 per cent of people commute out of the area. Of those commuting out of Fife, the most common destination is Edinburgh City (11 per cent); overall, 13 per cent travel elsewhere within the City Deal region; Almost two-thirds (63 per cent) commute outwith Midlothian, with 54 per cent to Edinburgh City. As with East Lothian, the proportion travelling to Edinburgh is greater than the share of people commuting internally within Midlothian (37 per cent); There is a relatively small proportion of people commuting outwith the Borders, with just under one-fifth (18 per cent) doing so. Of those who do, 16 per cent travel elsewhere within the City Deal region; and Two-fifths of those within West Lothian commute out of the area. Of those who do, the most common destination is Edinburgh City (27 per cent). Overall, 30 per cent commute outside of West Lothian to somewhere else across the City Deal region. These patterns are perhaps to be expected given that the City of Edinburgh is of international standing and attraction, and the wide range of employment opportunities that exist within Edinburgh, which is home to half of all employment within the region (as of 2017). Looking at those commuting out of each local authority area by occupational grouping, we can see that the largest grouping of out commuters in each area is in higher level occupations (SOC 1-3) 5. This ranges from 41 per cent in Midlothian to 65 per cent in Edinburgh City. This suggests that those with higher skill levels may travel further to access suitable employment opportunities; in this case particularly to Edinburgh City where much of the region s employment is based by 2027, the City is forecast to have 52 per cent of total regional employment, and an even higher 61 per cent of SOC 1 3 occupations.

19 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 19 Table 2.4 Edinburgh and South East Scotland local authority areas out commuting proportions by occupational grouping (SOC 6 ) Source: Origin Destination statistics by Local Authority, open access (WB07BUK_la), UK Data Service. Note: denominator = total trips out of the local authority SOC 1-3 SOC 4-6 SOC 7-9 East Lothian 48% 31% 22% Edinburgh City 65% 18% 17% Fife 54% 25% 21% Midlothian 41% 35% 24% Borders 64% 22% 14% West Lothian 50% 27% 24% 5 Managers, Directors and Senior Officials (SOC 1), Professional Occupations (SOC 2) and Associate Professional and Technical Occupations (SOC 3) 6 A link to the Standard Occupational Classification is here: ard-occupational-classification/ons_soc_hierarchy_view. html

20 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 20 Deprivation 7 The City Deal region has 13 per cent of Scotland s most deprived deciles, far less than, for example, the Glasgow City Region Deal (63 per cent) and reflecting the fact that Edinburgh City has far lower levels of deprivation (five per cent) than Glasgow City (35 per cent). There are nonetheless spatial concentrations of deprivation within the local authority on the peripheries of the city (e.g. Wester Hailes, Niddrie, Muirhouse) however much of central Edinburgh City is dominated by the least deprived datazones. Outside of Edinburgh City, there are concentrations of deprivation in Fife (e.g. Leven, Methil and Kirkcaldy) and in West Lothian as well as concentrations of more affluent datazones with the least deprivation (Linlithgow and St Andrews). East Lothian and Midlothian have lower concentrations as well as clusters of low deprivation in East Lothian along the coast. That said, SIMD identifies deprived areas - not people. Guidance on the use of SIMD by Scottish Government highlights that: Not all deprived people live in deprived areas: Two out of three people who are income deprived do not live in deprived areas; and Not everyone in a deprived area is deprived: Just under one in three people living in a deprived area are income deprived 8. This is important when analysing deprivation, particularly in rural areas. The Borders is not so densely populated but some of the population centres like Selkirk, Hawick and Galashiels have areas of deprivation, although in the main Borders shows less extensive deprivation than neighbouring Dumfries and Galloway. 7 A link to the Standard Occupational Classification is here: ard-occupational-classification/ ONS_SOC_hierarchy_view. html 8

21 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 21 Figure 2.4 Deprivation in Edinburgh and South East Scotland by SIMD (2016)9 Deciles 1-10 Source: Scottish Government and Ordnance Survey, 2016 Fife Edinburgh City East Lothian West Lothian Midlothian Scottish Borders Edinburgh and South East Scotland City Region Deal (SIMD 2016) Deciles 1-2 (Most Deprived) Deciles 3-4 Deciles 5-6 Deciles 7-8 Deciles 9-10 Data contains Scottish Government data Crown copyright Base: Ordnance Survey Crown copyright 2016 & database right See SIMD interactive map here: simd2016/btttftt/11/ / /.

22 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 22 Edinburgh and South East Scotland s People In introducing the City Deal region s people we outline information on demography, labour market participation, qualifications and attainment and deprivation. Demography The total population of the Edinburgh and South East Scotland City Region Deal in 2016 was 1.4m people. This equates to one-quarter of the total national population (5.4m). Edinburgh City is the most populous local authority within the region, accounting for 37 per cent of the total population (c.507,000 people). Fife is the second largest local authority in terms of population, comprising 27 per cent of the regional total (c. 370,000 people). Almost two-thirds of the regional population (65 per cent) are of a working age (aged 16 64), with 18 per cent 65 or older and 17 per cent younger than 16. This pattern of a majority of people being of working age is evident across each of the local authority areas within the region, ranging from 60 per cent in the Borders to 70 per cent in Edinburgh City. The Borders has the highest rate of people aged 65 or older (24 per cent), whilst Edinburgh City has the lowest (15 per cent). Based on 2014 population projection data, it is estimated that the City Deal region population by 2039 will be 1,519,975; an increase of 170,404 (or 13 per cent) on 2014 figures. This outstrips (by more than double) the national rate of growth of six per cent over the same period. Whilst the population of each of the local authority areas is forecast to grow by 2039, the rates vary - by local authority, population projections by 2039 are: East Lothian - a population of 120,288, an increase of 17 per cent since 2014; Edinburgh City a population of 594,712, an increase of 20 per cent since 2014; Fife a population of 386,963, an increase of five per cent since 2014; Midlothian a population of 108,369, an increase of 24 per cent since 2014; Borders a population of 117,120, an increase of three per cent since 2014; and West Lothian a population of 192,523, an increase of eight per cent since Across all comparator areas, there is significant growth forecast in the number of those aged 65 and over, with this age group expected to increase by 61 per cent at the city deal region level (Table 2.5). In both East Lothian and Midlothian, the population of every age group is forecast to increase, including Midlothian having the largest increase of under 16s of any of the comparator areas. In contrast to the national level, the working age population of the City Deal region is forecast to increase by 2039 (by two per cent, compared to a decrease of five per cent nationally). At the local authority level, increases in the working age population are forecast for Midlothian (15 per cent), Edinburgh City (12 per cent), and East Lothian (four per cent). The largest decrease is forecast for the Borders (15 per cent).

23 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 23 Table 2.5 Population projections, % change by age band, Source: National Records of Scotland Edinburgh and SES 8% -1% 4% 3% 35% 95% East Lothian 12% 2% 6% 1% 42% 104% Edinburgh City 16% -1% 17% 24% 47% 83% Fife 2% -3% -8% -12% 22% 91% Midlothian 25% 18% 16% 11% 34% 106% Borders 0% -7% -16% -20% 21% 89% West Lothian -2% -3% -7% -4% 45% 131% Scotland 1% -8% -2% -6% 27% 85%

24 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 24 Labour Market Participation The overall employment rate in the Edinburgh and South East Scotland City Region Deal (73 per cent) was in line with the national average in The employment rate was highest and above the national average in Midlothian (76 per cent) and West Lothian (75 per cent), in line with the national average in East Lothian (73 per cent), and lowest in Edinburgh City and Fife both at 72 per cent. As Figure 2.5 shows, each local authority in the City Deal region had a different pattern of labour market participation; Midlothian and West Lothian had low unemployment and low inactivity, Edinburgh City and Fife had low unemployment and high inactivity and Borders was one of only two local authority areas in Scotland to have high unemployment and low inactivity. As of 2016, 28,600 working age people were unemployed in the City Deal region, accounting for 22 per cent of the national total (128,400) 10. Where 37 per cent of those unemployed were from Edinburgh City and 27 per cent from Fife, only nine per cent and five per cent were from East Lothian and Midlothian, respectively. The ILO unemployment rate in the region was six per cent, which was higher than the national average (4.9 per cent). suggesting a sub-optimally performing economy. The economic inactivity rate for the City Deal was 24 per cent in 2016, slightly higher than the national rate (23 per cent) 11. People can be economically inactive for a number of reasons, for instance they might be a student, looking after their family and home, long term or temporary sick, discouraged or retired (before aged 65). In the City Deal region, the economic inactivity rate was highest (25 per cent) in Edinburgh City which due to the presence of a number of universities and college campuses might be expected a number of those inactive will be students. The economic inactivity rate in East Lothian was in line with the national average (23 per cent) whilst Fife, West Lothian, Midlothian and the Borders had economic inactivity rates below the national average. 10 Source: ILO Unemployment rate. 11 Source: Annual Population Survey, Economic Inactivity Rate

25 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 25 Figure 2.5 Unemployment (ILO) and Economic Inactivity by City Deal region, January to December 2016 Source: Annual Population Survey (resident based) Economic Inactivity Rate by City Region Stirling and Clackmannanshire City Region Deal 1.0 Low Unemployment, High Inactivity Edinburgh and South East Scotland City Region Deal Glasgow City Deal High Unemployment, High Inactivity Unemployment (ILO) Rate by City Region Low Unemployment, Low Inactivity 1.0 Aberdeen City Region Deal High Unemployment, Low Inactivity Inverness and Highlands City Region Deal Note: the data is scaled - the units used are standard deviations from the mean.

26 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 26 Figure 2.6 Unemployment (ILO) and Economic Inactivity by Local Authority, January to December 2016 Source: Annual Population Survey (resident based) Economic inactivity rate, working age population Glasgow City Dundee City East Ayrshire North Ayrshire Low Unemployment, High Inactivity 1 Edinburgh City South Ayrshire Inverclyde West Dunbartonshire Fife Stirling East Lothian Aberdeen City Clackmannanshire High Unemployment, High Inactivity North Lanarkshire East Dunbartonshire West Lothian Dumfries and Galloway Midlothian Renfrewshire South Lanarkshire East Renfrewshire Moray Perth and Kinross Falkirk Argyll and Bute Angus Highland Scottish Borders Working Age Population (ILO) Eilean Siar 1 Aberdeenshire 2 Low Unemployment, Low Inactivity High Unemployment, Low Inactivity Shetland Islands Note: the data is scaled - the units used are standard deviations from the mean. ILO Unemployment estimate for Orkney Islands is not available since the group sample size is zero or disclosive (0-2) and thus omitted.

27 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 27 Working Age Qualifications (16-64) Those in the Edinburgh and South East Scotland had higher levels of advanced qualifications (SCQF 7 12) compared to the national average (49 per cent compared to 44 per cent in 2016). The proportion with intermediate qualifications (SCQF Levels 5 and 6) in the region was in line with the national average 28 per cent. There were fewer people within the City Deal region with no qualifications than at the national average seven per cent compared to ten per cent. Within the City Region Deal the qualification profile of the local authority areas varied. Edinburgh City (59 per cent), East Lothian (46 per cent) and Fife (44 per cent) were the local authority areas in the City Region Deal that had the same or a higher proportion of residents with higher level qualifications (SCQF 7-12) than the national average. Edinburgh City was the only local authority in the City Region Deal that had a below average (23 per cent) proportion of the population with intermediate qualifications (SCQF 5-6). In the other five local authority areas, this ranged from 35 per cent in Midlothian to 28 per cent in East Lothian. No local authority in the City Region Deal had a greater proportion of people with no or low (SCQF 1-4) qualifications. The local authority areas in the City Region Deal ranged from 19 per cent in the Borders, in line with the national average, to 11 per cent in Edinburgh City.

28 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 28 School Leavers Destinations In 2015/16, 36 per cent of school leavers in Edinburgh and South East Scotland went into higher education; this was just below the Scottish average (37 per cent). Within the region, the proportion going into higher education varied from 38 per cent in West Lothian to 29 per cent in Midlothian (the third lowest in Scotland). The proportion of school leavers going into higher education has increased in all local authority areas in City Deal region since 2009/10, except the Borders, which has been static. The proportion of school leavers going into further education has decreased since 2009/10, with four percentage points fewer leavers in the City Deal region taking this option and decline occurring in all of the local authority areas in the region. Overall almost one quarter (23 per cent) of school leavers in Edinburgh and South East Scotland went into further education as their initial leaver destination. This was slightly higher than the national average (22 per cent). By local authority the proportions varied, from 28 per cent in the Borders, to 16 per cent in East Lothian. Employment as an initial leaver destination has increased in the City Deal region and Scotland as a whole since 2009/10. Within the City Deal region, nearly one-third (30 per cent) of school leavers entered employment after school. Within the City Region Deal the proportion was highest in Midlothian (39 per cent) and East Lothian at 37 per cent. Fife had the lowest proportion of school leavers entering employment (25 per cent). At seven per cent across the City Region Deal, the share of school leavers becoming unemployed after school was below the national average (eight per cent) Borders had three per cent school leavers becoming unemployed after school which was the lowest rate in the City Region Deal and one of the lowest in Scotland. The highest rate in the region was eight per cent in Fife, which was in line with the national average. No local authority areas in the City Region Deal saw an increase in the proportion of school leavers entering unemployment from 2009/10. Over the period 2009/10 and 2015/16, overall within the City Region Deal there has been an increase in the proportion of school leavers entering higher education or employment. Decreases have occurred in the proportion of young people entering further education or unemployment. However, as mentioned this does vary by local authority. The economic downturn may have affected the destinations of school leavers in 2009/10, with young people becoming unemployed due to labour market contraction at the time and entering further or higher education due to a lack of opportunities in the labour market. Economic recovery will account for the increase in the proportion of young people entering employment after school, and reductions in other post school destinations. In terms of the 2017 Annual Participation Rate (16-19 year olds) 12 Midlothian had the highest rate (93.6 per cent) and was in excess of the Scotland average (91.1 per cent). East Lothian (93.1 per cent) and the Borders (92.5 per cent) also had rates in excess of the national average. Edinburgh City and West Lothian (both 90.8 per cent) and Fife (87.7 per cent) all had a participation rate below the national average Annual Participation Measure, % of year olds participation 1st April 2016 to 31st March As agreed by Scottish Ministers, from August 2017, the Annual Partic ipation Measure will be adopted within the Scottish Gov ernment s National Performance Framework. It is replacing the school leaver destination follow up as the source of the indicator, increase the proportion of young people in learn ing, training or work, published through Scotland Performs. See below for details: dia/43580/2017_annual-participation-measure-report -29th-august-2017.pdf

29 Regional Insight Report 2 The Edinburgh and South East Scotland City Region Deal 29 Table 2.6 School Leaver Destinations, 2009/10 and 2015/16 Source: Scottish Government School Leavers Destination Dataset Destination Higher education (%) Edinburgh And SES Edinburgh City East Lothian Fife Midlothian Borders West Lothian 2009/10 32% 35% 35% 31% 28% 34% 30% 2015/16 36% 37% 37% 36% 29% 35% 38% Change 3% 2% 2% 5% 1% 0% 8% Further education (%) 2009/10 27% 23% 22% 32% 24% 31% 25% 2015/16 23% 22% 16% 26% 21% 28% 20% Change -4% -1% -6% -6% -3% -3% -5% Employment (%) 2009/10 21% 23% 26% 17% 28% 20% 24% 2015/16 30% 30% 37% 25% 39% 28% 31% Change 8% 8% 12% 8% 10% 8% 7% Unemployment (%) * 2009/10 15% 16% 13% 16% 16% 11% 17% 2015/16 7% 7% 5% 8% 7% 3% 8% Change -8% -9% -8% -8% -9% -8% -8% * Unemployment Seeking and Unemployment Not Seeking

30 3 Demand for Skills in Edinburgh and South East Scotland

31 Regional Insight Report 3 Demand for Skills in Edinburgh and South East Scotland 31 Demand 13 for Skills in Edinburgh and South East Scotland This section outlines past, current and forecast trends for total employment and sectors, occupations and qualifications. These forecasts have been developed by Oxford Economics 14 and, like any forecasts, they are based on what we know now; past and present trends projected into the future. They can therefore be affected by potential disruptors (e.g. Brexit) and unforeseen events and their value is in identifying likely directions of travel rather than predicting exact figures. Finally, the more disaggregated they become, especially at smaller geographical units, the less reliable they are likely to be. cent nationally). Having grown from the start of the millennium, employment in the Edinburgh and South East Scotland City Region Deal underwent a period of decline from 2006, but rebounded from 2010 onwards. There has been largely uninterrupted growth since, a trend which is forecast to continue over the forecast period, with an overall increase of six per cent forecast from 2017 to This is double the national growth rate of three per cent forecast over the same period. Total Employment As shown in Figure 3.1, total employment (jobs) within the City Deal region currently ( ) sits at just over 710,000, representing regional employment growth of nine per cent since 2000 (compared to ten per 13 Note: the analysis here is workplace based. Note the forecast period for skills demand is defined as follows: Total employment: 2017 and 2027; Total requirement: 2017 and 2027 (inclusive). For more information on Oxford Economics definitions please see Appendix For more information of the methodology used in the Oxford Economic forecasts, please see the Regional Skills Assessments section of the Skills Development Scotland website: partnerships/regional-skills-assessments/ 15 Note 2017 is itself a forecast

32 Regional Insight Report 3 Demand for Skills in Edinburgh and South East Scotland 32 Figure 3.1 Total Employment Projections (jobs), Source: Oxford Economics. '000s Total employment (jobs) At local authority level, the overall trend is driven by Edinburgh City, which has 50 per cent of the region s employment in 2017, with the next largest being Fife with 21 per cent and West Lothian with 12 per cent. All six areas saw employment increase during the 2000s and then decline during the recession, followed by a partial or full recovery. However, the overall rate of growth has varied substantially, from Borders and Fife which saw overall increases of just one per cent between 2000 and 2017, to Midlothian, which increased by 34 per cent. The forecast rate of growth over the forecast period is highest in City of Edinburgh (ten per cent) and Midlothian (nine per cent), followed by West Lothian (five per cent), East Lothian (three per cent), and Fife (one per cent) The Borders is the only local authority area forecast to decrease (by one per cent).

33 Regional Insight Report 3 Demand for Skills in Edinburgh and South East Scotland 33 Figure 3.2 Total Employment (jobs) projections, by status and gender Source: Oxford Economics. '000s Male full-time Male part-time Female full-time Female part-time Moving on to employment by gender and status (full-time/part-time), Figure 3.2 illustrates the change in employment types over time. Male full-time employment has been on an upwards trend over recent years, and is expected to continue increasing moderately. Similarly, female full-time employment has been on a fairly consistent trend of growth, which is projected to continue to 2027 (an increase of ten per cent is forecast). In line with the national trend, parttime employment is forecast to increase for both males and females