WE KNOW THE ECONOMY ECONOMIC BULLETIN Issue 18 July 2016 WE ARE A PRIVATE/PUBLIC PARTNERSHIP THAT IS GROWING THE ECONOMY OF THE BRISTOL & BATH CITY REGION. SKILLS MANAGING FUNDS INWARD INVESTMENT PLACE & INFRASTRUCTURE MARKETING
INTRODUCTION This quarterly economic bulletin is intended to provide an overview of the economic health of the West of England looking at a variety of indicators. This bulletin is divided into four sections: 1. Business Conditions 2. Sectors (selected) 3. Employment / Labour Market 4. Property and Planning Comparator LEPs Where comparable statistics are available, the West of England LEP is benchmarked against other Core City LEP areas. The comparator LEP Core City areas are Greater Birmingham and Solihull, Leeds City Region, Liverpool City Region, Greater Manchester, North Eastern (Newcastle-upon-Tyne), Derby, Derbyshire, Nottingham and Nottinghamshire, and Sheffield City Region. The West of England is also compared to a number of southern LEP areas. These LEP areas are Gloucestershire, Greater Cambridge and Greater Peterborough, Oxford City Region, Swindon and Wiltshire, and Thames Valley Berkshire. SUMMARY TABLE (Positive, Neutral, Negative, increase, decrease, - no change) Data Sets Business Start-ups - The 2 nd quarter of 2016 saw an 8.2 percentage increase in the number of businesses being started up in the West of England compared to Q2 the previous quarter. Headline Data Direction of Change 2,082 Employment Rate - The employment rate amongst the working age population stood at 77.1% in the year to March 2016, an increase on the same period the previous year by 1.3 percentage points (pp). 77.1 Unemployment Rate In the year to March 2016 the unemployment rate for the working age population stood at 4.1%, a reduction on the same period the previous year by 1.8 pp Jobseeker s Allowance Claimant Rate - As of June 2016 the claimant rate in the West of England stood at 0.9%. This is a decrease of 0.3 pp on the same month the previous year. Advertised Jobs During Q2 2016 there were approximately 54,882 online advertisements for jobs in the West of England area. An increase of 24% on the same period in 2015. House Prices In March 2016 the average house prices across the West of England continued to increase. House prices are becoming increasingly unaffordable. Median annual earnings are being vastly outstripped by house prices - varying from 6.6 times average earnings in North Somerset and 9.4 times in B&NES. 4.1 0.9 54,882 253,119 Inward Investment New Jobs - 279 new jobs have been committed in Q2 2016 by 14 successful projects 279 new jobs committed 1
1. BUSINESS CONDITIONS Note: Whilst this section looks at the current economic climate in light of the UKs decision to leave the European Union, the indicators set out in this bulletin primarily cover the period April June 2016 and pre-date the decision. International Context 1 The UKs decision to leave the European Union on the 23 rd June has impacted upon the global economic outlook. The uncertainty that surrounds Brexit has shocked an already fragile global recovery. In their July update the IMF revised down there global economic forecasts for 2016 and 2017, both by 0.1 percentage points to 3.1 and 3.4% respectively. Had the vote gone the other way the IMF have announced that they would of revised the figures up due to better than expected performance in early 2016. The IMFs Brexit related revisions to growth impact mainly on the advanced European economies, with a muted impact elsewhere such as the US and China. Moving forwards the current uncertainty surrounding the UKs withdrawal from the EU will lessen however the situation will remain fragile and volatile for some time. National Context 2 The decision to leave the European Union, has entered the UK into a period of economic uncertainty. There was an immediate shock to financial markets following the announcement to leave; and as of mid-july the pound had weakened by about 10 percent. The Bank of England has made reassurances that they are ready to support the financial system, and believe that the financial sector is now much more resilient to shocks than in 2008. Whilst a weaker pound is good for exporters and the domestic tourism industry; those who import goods are seeing price rises which will likely affect supply chains and inevitably fall to the consumer affecting household budgets. Furthermore, business surveys have indicated a decline in confidence; the current period of uncertainty is resulting in a more cautious approach with many companies choosing to delay investment and recruitment decisions. Reassurances from the Bank of England, the appointment of Theresa May as Prime Minister and the appointment of the Cabinet have helped ease some of the volatility in the short term. However, current uncertainty around what trade deals will look like in the future is subduing growth prospects. Local Context A snap poll carried out by Business West 3 after the vote saw a call for stability, clarity and action. As at the national level local businesses will be reluctant to make investment and recruitment decisions whilst there is a lack of clarity. However, uncertainty also creates opportunity; the West of England has a reputation for being inventive, innovative and entrepreneurial which puts the local economy in a good position to respond positively to the current national and global economic challenges. As covered in past bulletins national and local growth prospects have been weakened by low productivity growth and competitiveness. Whilst uncertainties surrounding Brexit will not improve these factors in the short term it may present opportunities to address them in the medium-long term. 1 http://www.imf.org/external/pubs/ft/weo/2016/update/01/ 2 http://www.strategiceconomics.co.uk/ 3 http://www.businesswest.co.uk/eu 2
BUSINESS START UPS Indicator 2 nd Quarter 2016 % Change on 2 nd Quarter 2015 % Change on 1 st Quarter 2016 Direction of Change on 1 st Quarter 2016 Business Start-ups in the West of England 2,082-1.9 8.2 Business Start-up rate (per 10,000 working age population) 28.4 N/A N/A Source: BankSearch The 2 nd quarter of 2016 saw a decrease in the number of business start-ups compared to the same quarter in 2015, decreasing by 1.9%. However, there was an increase when compared to the previous quarter, with an additional 157 businesses, resulting in an increase of 8.2%. When comparing the 2 nd quarter of 2016 with the same quarter of 2015 the largest increases in start-ups were in construction; and accommodation and food. Business start-up data fluctuates quarter to quarter. 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. However, rising start-ups can also signal times of economic distress; survival and positive churn within these start-ups are what matters. Graph 1: Business Start-ups in the West of England Source: BankSearch 3
2. SECTORS (SELECTIVE INDICATORS) This section primarily covers indicators for retail and tourism, which provide a dynamic picture of the health of the local economy. Both retail and tourism are influenced by disposable income. a) Retail Nationally in June 2016, the volume of retail sales is estimated to have increased by 4.3% compared with June 2015 although the quantity bought decreased marginally on the previous month, decreasing by 0.9% on May 2016. The underlying pattern in the data, as suggested by the 3 month on 3 month movement in the quantity bought, showed growth for increasing by 1.6 % (source: Retail Sales June 2016, ONS). B&NES The last twelve months has seen continuing demand for retail space in the city centre with over 100,000sqft of retail lettings completed. Vacancy rates have remained below national averages at the end of 2015 the vacancy rate stood at 2.6%. The demand for retail space has seen prime Zone A rental levels rise beyond 200 per sqft with further rental growth predicted in 2016. Bristol As of July 2016 there was a city wide retail vacancy rate of 7.2%. The vacancy rate has now risen for two quarters in a row. However it is unchanged on July 2015 and remains below the level (7.5%) of July 2014. Overall the city wide retail vacancy rate for Bristol hasn t changed significantly over the last two years. North Somerset As of April 2016 there was a retail vacancy of 14.5% in Weston-super-Mare town centre. This is an increase on April 2015 by 1.5p.p, with four more units becoming vacant. A number of the vacancies are within the wider town centre area with the primary frontage maintaining the same number of vacant units as the previous year. South Gloucestershire As of July 2016 the retail vacancy rate remained at 4.9%. The trend continues in South Gloucestershire of smaller high streets and town centers seeing longer-term unoccupied premises. 4
b) Tourism Indicator 1 st Quarter 2016 % Change on 1 st Quarter 2015 Direction of Change on 1 st Quarter 2015 Visitors to attractions in the West of England* 1,003,994 17.3 Total Room Sales (Bristol) 390,618 2.4 Source: Destination Bristol Notes: *Number of visitors to attraction in the West of England equals the sum of visitors to attractions in Bath, Bristol and rural Somerset, Wiltshire and Gloucestershire. The totals are for a regular sample of attractions to allow trends to be identified and the figures do not represent the total number of visitors to all attractions In Q1 of 2016 the number of visitors to attractions in the WE increased on the same quarter for 2015 by 17.3%. Room sales were up on the same period for 2015 by 2.4%. The West of England is in able 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 countryside. The tourism sector may be set to benefit from the UKs decision to leave the European Union, as the weaker pound attracts international visitors and encourages Britons to take staycations. Graph 2: Number of visitors to attractions in the West of England 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 - Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Source: Destination Bristol 2010 2011 2012 2013 2014 2015 2016 5
Graph 3: Room Sales by Quarter in Bristol Based Hotels and Guest Houses Source: Destination Bristol Graph 4: Total Passenger Numbers at Bristol Airport Source: Civil Aviation Authority Like the rest of the visitor economy passenger numbers are prone to seasonal fluctuations with a higher number of passengers during the summer months. Quarter 1 of 2016 saw approximately 1,358,550 passengers go through Bristol Airport; this is 14% higher than the 1 st quarter of 2015. 6
3. EMPLOYMENT /LABOUR MARKET England Indicator April 2015- March 2016 WE WE April 2015- Apr 2014- March 2016 Mar 2015 Employment Rate 73.9 77.1 75.8 Direction of Change Unemployment Rate 5.2 4.1 5.9 Source: Annual Population Survey, NOMIS The West of England employment rate in the year to March 2016 stood at 77.1 % (approx. 549,600 people). This is an increase on the same period the previous year by 1.3percentage points (p.p). The West of England has a higher economic rate than that of England as a whole and the Core City LEP areas. When compared to data released for the year to September 2015 it suggests that employment growth in the West of England is slowing (graph 5). Note smaller areas are more susceptible to survey based confidence limits consequently the West of England seemingly experiences greater fluctuations, making the data appear erratic. Unemployment rates within the West of England for the working age population (16-64) in the year to March 2016 stood at 4.1% (approx. 23,400 people), a reduction on the same period the previous year by 1.8p.p. The unemployment rate for the West of England remains below the average for England and the Core City LEP areas. Graph 5: Employment Rate (16-64) Source: Annual Population Survey, NOMIS 7
Graph 6: Unemployment Rate (16-64) Source: Annual Population Survey, NOMIS Indicator West of England June 2016 West of England June 2015 Direction of Change comparison with this month last yr Jobseeker s Allowance Claimant Count 6,740 8,758 Jobseeker s Allowance Claimant Rate 0.9 1.2 Source: NOMIS, ONS As of June 2016 the claimant rate in the West of England stood at 0.9%. This is a decrease of 0.3 p.p on the same month the previous year. The West of England continues to follow national trends with the claimant rate for the West of England being 0.4 p.p lower than it is for England. Graph 7 identifies that since July 2013 there has been a decline in the number of claimants within the West of England. However, pockets of long-term unemployment in the West of England remain. 8
Graph 7: Claimant Rate Monthly Time Series Source: NOMIS, ONS Indicator WE Job Vacancies Advertised Q2 2016 WE Job Vacancies Advertised Q2 2015 Direction of Change Job Vacancies Advertised 54,882 44,337 During Q2 2016 there were approximately 54,880 online advertisements for jobs in the West of England area. An increase of 24% on the same period in 2015. Please note that the data is only representative of those jobs advertised online and may not capture job placements advertised internally within an organisation or through other methods such as an advert in a shop. This more traditional form of job advertisement tends to effect particular sectors such as the construction industry and independent retailers. 9
Graph 8: Jobs Advertised in the West of England Quarterly Time Series Source: Labour/ Insight Burning Glass Vacancies by Occupation Sought June 2016 Occupation Advertised Sought Vacancies Occupation Ratio Occupation unknown 124 460 3.7 Managers and Senior Officials 1,635 345 0.2 Professional Occupations 5,377 80 0.0 Associate Professional and Technical Occupations 3,821 80 0.0 Administrative and Secretarial Occupations 1,469 535 0.4 Skilled Trades Occupations 1,301 190 0.1 Personal Service Occupations 577 160 0.3 Sales and Customer Service Occupations 1,076 3,915 3.6 Process, Plant and Machine Operatives 734 145 0.2 Elementary Occupations 683 825 1.2 Source: Labour/ Insight Burning Glass / Claimant Count, ONS There is a clear mismatch between advertised vacancies and occupation sought. The majority of jobs advertised are within professional occupations and, associate professional and technical occupations, which require higher and rather specific skills/qualifications; however there are a lower number of people currently claiming JSA seeking these types of occupations. Conversely there are a high number of people seeking lower skilled occupations, such as sales and customer service occupations. 10
Top 10 Occupations Advertised during Q2 of 2016 Occupation Number of Job Advertisements Programmers and software development professionals 3,182 Other administrative occupations n.e.c. 2,243 Nurses 1,738 Business sales executives 1,537 IT business analysts, architects and systems designers 1,273 Sales accounts and business development managers 1,210 Managers and proprietors in other services n.e.c. 1,205 Web design and development professionals 1,202 Customer service occupations n.e.c. 978 Human resources and industrial relations officers 934 Source: Labour/ Insight Burning Glass (Apr. 01, 2016 - Jun. 30, 2016) During Q2 of 2016 the skill with the greatest demand was Sales with 2,412 advertisements citing it as a requirement. This was followed by Business Management (2,051ads), Business Development (1,830 ads) and JavaScript (1,638 ads). Top 10 Skills Advertised during Q2 of 2016 Skills Job Postings Sales 2,412 Business Management 2,051 Business Development 1,830 JavaScript 1,638 SQL 1,610 Mathematics 1,599 Repair 1,296 Microsoft C# 1,284 Java 1,242 C++ 1,191 Source: Labour/ Insight Burning Glass (Apr. 01, 2016 - Jun. 0, 2016 11
4. PROPERTY AND PLANNING a) House Prices Indicator West of England in March 2016 Comparison with this month last year House Prices 253,119 House Sales 2,188 Source: West of England figure calculated by the West of England Office using Land Registry Data. In March 2016 the average house prices across the West of England increased by c. 5,500 on the previous month of February 2016 and now stands at 253,119. Average house prices now exceed the maximum cap for a help to buy ISA of 250,000. There was a significant increase in price when comparing on the same month during the previous year, with an increase of 29,950. The average house prices in the West of England remain higher than that of England and Wales, although following a similar trend pattern. It should be noted that there are marked variations between the UAs within the West of England, with average house prices in B&NES being significantly higher than the other authorities. There are also marked variations within individual authorities. Affordability Median Annual Earnings 2014 Average House Prices 2015 Ratio B&NES 28,131 265,151 9.4 Bristol 27,378 205,755 7.5 North Somerset 29,497 195,822 6.6 South Gloucestershire 29,074 208,633 7.2 Source: Land Registry; Annual Survey of Hours and Earnings, Office for National Statistics. Direction of Change In 2015 average house prices continued to outstrip median annual earnings varying from 6.6 times average earnings in North Somerset and 9.4 times in B&NES. House prices could present an issue in the West of England as economic growth could be seriously limited across the partnership area if workers cannot afford to live in the area. It could also worsen the unsustainable pattern of in-bound commuting from more affordable areas within and outside the partnership area; this in turn has a knock on effect for the success of businesses operating in the area. 12
Graph 9: Average House Prices Annual Time Series Source: West of England figure calculated by the West of England Office using Land Registry Data. b) Invest Bristol & Bath Inward Investment Project Graph 10: Cumulative Activity Apr Jun 2016 Source: Invest in Bristol and Bath, Agilebase database 13
Apr-Jun 2016 was a strong quarter for Invest Bristol & Bath (IBB) with 45 new inward investment leads and 14 new successful locations and/or expansions in the West of England area. The number of strategic leads and projects IBB are engaged with and actively supporting has increased from the same quarter in 2015 and the team has continued to receive and work on a high number of new opportunities both in the run-up to and following the result of the EU referendum. Graph 11: Total new jobs April June 2016 NB; job numbers are provided as an estimate of job creation over a three year period as indicated by the investing company and independently verified. Source: Invest in Bristol and Bath, Agilebase database IBB are increasing our jobs related outputs year on year and focusing on a growing number of large strategic projects. 279 new jobs have been committed in Q2 2016 by 14 successful projects. In particular, Strava, a San Francisco based social network for athletes will move its international operation from London to Bristol. The company chose Bristol as the location for their international HQ because of the area s growing reputation as one of the UK s pre-eminent creative and technology hubs. 14
Graph 12: Priority sector activity New Activity Apr - Jun 16 Source: Invest in Bristol and Bath, Agilebase database Graph 13: Priority sector activity New Jobs Committed 2015/2016 Source: Invest in Bristol and Bath, Agilebase database Since April 2016, IBB has handled 45 new leads and projects across all five of the West of England priority growth sectors. There has been a lot of activity and successful projects in the High Tech and Creative/Digital sectors which are key clusters in the West of England area and a focus of IBB s campaign work during 2015/16. 15
Graph 14: Current Pipeline Source: Invest in Bristol and Bath, Agilebase database NB; job numbers are provided as an estimate of job creation over a three year period as indicated by the investing company and independently verified. IBB continue to work on a strong pipeline of 135 active leads and projects, in addition to 53 early stage opportunities. The IBB pipeline of active projects indicates there are 7,805 potential new jobs for the region of which IBB are confident that 818 new jobs will be committed by the end of the financial year 2016/17. b) Commercial Data Office Take-up Indicator Q2 2015 (sq ft) Q2 2016 (sq ft) Direction of Change Bristol City Centre Take-up 159,839 185,789 Bristol Out of Town Take-up 65,716 60,603 Source: Bristol Property Agents Association At time of writing updated data for Q1 2016 was unavilable Notes: Bristol out of town take up data includes South Gloucestershire and parts of North Somerset. Take up data from agents is currently unavailable for B&NES and is not comprehensive for NS although we continue to work on this and we welcome any support. Q2 office take up in Bristol city centre totalled 185,789 sq ft, the third highest quarter, and the highest Q2 total since 2008. Q2 take up data is down compared to Q1 2016 and the market witnessed a hiatus pre referendum with most occupiers putting key decision making on hold, the half year totals for 2016 are still very high for the city centre, and in line with the 3 and 5 year half year averages for the out of town market. 16
Office Rents Indicator Rents ( psf) Net effective rent Q2 2016 Q1 2016 Q2 2016 Q1 2016 Bristol City Centre Rents a,b 28.50 28.50 24.94 24.94 Direction of Change - Bristol Out of Town Rents a,b 21.00 21.50 - - Bath Rents b 26.00 26.00 - - - Source: a The Big Nine Regional Office Market Report, GVA Market Monitor South West of England & South Wales 2016, Alder King Office rents in Bristol City Centre and Bath have remained static on the previous quarter, however out of town rents have declined marginally by 50p per sq ft. This report has been produced using a variety of national and locally sourced data sets that provide an overview of the health of the West of England economy. http://www.westofenglandlep.co.uk/about-us/economic-intelligence/reports-and-surveys Queries: For any queries on this bulletin please contact: Charlotte Hopley, Senior Economic Intelligence Officer, West of England LEP Email: Charlotte.Hopley@westofengland.org Tel: 0117 9036816 17