WE KNOW THE ECONOMY ECONOMIC BULLETIN Issue 20 January 2017 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 4 th quarter of 2016 saw a 1.7 percentage decrease in the number of businesses being started up in the West of England compared to Q4 the previous year. Headline Data Direction of Change 1,870 Employment Rate - The employment rate amongst the working age population stood at 77.0% in the year to September 2016, decreasing on the same period the previous year. 77.0 Unemployment Rate In the year to September 2016 the unemployment rate for the working age population stood at 3.8%, a reduction on the same period the previous year by 0.2 pp Jobseeker s Allowance Claimant Rate - As of December 2016 the claimant rate in the West of England stood at 0.8%. This is a decrease of 0.3 pp on the same month the previous year. Advertised Jobs During Q4 2016 there were approximately 50,043 online advertisements for jobs in the West of England area. An increase of 10.7% on the same period in 2015. House Prices As of September 2016 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. 3.8 0.8 50,043 266,725 Inward Investment New Jobs - Since April 2016, 924 new jobs have been committed by 37 successful projects. 924 new jobs committed 1
1. BUSINESS CONDITIONS International Context The IMF has estimated global output growth at about 3 percent for the third quarter of 2016 broadly unchanged relative to the first two quarters of the year. However, this growth masks developments in different country groups with stronger-than-expected pickup in growth in advanced economies, matched by an unexpected slowdown in some emerging market economies. The IMF are projecting economic activity to pick up in 2017 and 2018, however there is a wide dispersion of possible outcomes around the projections, given uncertainty around the policy stance of the new US administration and new trade agreements for the UK following Brexit. National Context According to data from the Office of National Statistics, during the last quarter of 2016 the national economy grew by 0.6%. This growth was driven by strong consumer spending and expansion of the dominant services sector. The economy grew by a total of 2% in 2016, and whilst this was stronger than anticipated following the decision on Brexit, growth was down from 2.2% in 2015. In light of stronger growth at the end of 2016, the Bank of England has revised its growth forecasts for 2017 to 2%, up from 1.4% in November. This revision is based on stronger than expected domestic demand; however, the Bank of England forecast lower growth in 2018 as it is anticipated that inflation of food, fuel and manufactured goods will suppress domestic spending. The UK is faced with a growing productivity challenge. Productivity in the UK is substantially behind our competitors: workers in France, Germany and the US produce on average as much in four days as UK workers do in five. Within the UK the majority of productivity gains have been within London and the South East. In January, the government launched its National Industrial Strategy. The objective of the strategy is to improve living standards by increasing productivity and driving growth across the whole country. The strategy is being developed around 10 pillars, building on national and local strengths to deliver a high-skilled, competitive economy that benefits people throughout the UK. https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/586626/buil ding-our-industrial-strategy-green-paper.pdf Local Context The international and national context will impact on the local economy, though this is often not visible in the data for some time. High level economic indicators for the West of England continue to show a strong local economy, albeit slowing. Bristol is one of only three cities, alongside London and Aberdeen, with above average productivity. This is the result of having a highly skilled workforce and a range of cutting edge and innovative companies in the area. Despite this, as with the UK economy overall, it is productivity where there is the most room for improvement. As a result productivity is a strong focus of the emerging West of England economic strategy which will form part of our response to the National Industrial Strategy. 2
BUSINESS START UPS Indicator 4 th Quarter 2016 % Change on 4 th Quarter 2015 % Change on 3 rd Quarter 2016 Direction of Change on 4 th Quarter 2015 Business Start-ups in the West of England 1,870-1.7-1.8 Business Start-up rate (per 10,000 working age population) 25.5 N/A N/A - Source: BankSearch The 4 th quarter of 2016 saw a decrease in the number of business start-ups compared to the same quarter in 2015, falling by 1.7%. There was also a decrease on the previous quarter, resulting in a decrease of -1.8%. When comparing the 4 th quarter of 2016 with the same quarter of 2015 the largest increase in start-ups was in insurance companies & pension funds, followed by financial intermediation (exc. insurance & pension funds). 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 December2016, the volume of retail sales is estimated to have increased by 4.3% compared with December 2015 although decreased by 1.9% on the previous month. The underlying trend remains one of growth with the 3 month on 3 month movement in the quantity bought increasing by 1.2% (source: Retail Sales in Great Britain: Dec 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 October 2016 there was a city wide retail vacancy rate of 7.4%. The vacancy rate has now risen for three quarters in a row. However, the overall city wide retail vacancy rate for Bristol hasn t changed significantly over the last two years. North Somerset As of October 2016 there was a retail vacancy of 14.5% in Weston-super-Mare town centre. This is a decrease on April 2016 by 1.8% with 11 units becoming occupied. A number of the vacancies are within the wider town centre area with the primary frontage having a 9% vacancy rate, a decrease since April 2016 of three units. South Gloucestershire As of January 2017 the retail vacancy rate across South Gloucestershire decreased to 4.7%. The trend continues in South Gloucestershire of smaller high streets and town centers seeing longer-term unoccupied premises. 4
b) Tourism Indicator 4 th Quarter 2016 % Change on 4 th Quarter 2015 Direction of Change on 4 th Quarter 2015 Visitors to attractions in the West of England* 1,109,280 14.8 Total Room Sales (Bristol) 443,712 6.6 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 Q4 of 2016 the number of visitors to attractions in the WE increased on the same quarter for 2015 by 14.8%. Room sales were up on the same period for 2015 by 6.6%. The West of England is 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 source: Destination Bristol 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 6
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 3 of 2016 saw approximately 2,484,000 passengers go through Bristol Airport; this is 11% higher than the 3 rd quarter of 2015. 3. EMPLOYMENT /LABOUR MARKET England Indicator Oct 2015- Sept 2016 WE Oct 2015- Sept 2016 WE Oct 2014- Sept 2015 Direction of Change Employment Rate 74.1 77.0 77.9 Unemployment Rate 5.1 3.8 4.0 Source: Annual Population Survey, NOMIS The West of England employment rate in the year to September 2016 stood at 77.0 (approx. 550,300 people). The West of England has a higher economic rate than that of England as a whole and the Core City LEP areas. Since June 2015 employment growth in the West of England has been 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 Sept 2016 stood at 3.8% (approx. 21,600 people), a reduction on the same period the previous year by 0.2p.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 Dec 2016 West of England Dec 2015 Direction of Change comparison with this month last yr Jobseeker s Allowance Claimant Count 5,828 7,504 Jobseeker s Allowance Claimant Rate 0.8 1.1 Source: NOMIS, ONS As of December 2016 the claimant rate in the West of England stood at 0.8%. 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 0.3 p.p lower than it is for England. Graph 7 identifies that since January 2014 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 Q4 2016 WE Job Vacancies Advertised Q4 2015 Direction of Change Job Vacancies Advertised 50,043 45,210 During Q4 2016 there were approximately 50,043 online advertisements for jobs in the West of England area. An increase of 10.7% 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 December 2016 Occupation Advertised Sought Vacancies Occupation Ratio Occupation unknown 57 370 6.5 Managers and Senior Officials 1,485 225 0.2 Professional Occupations 4,659 50 0.0 Associate Professional and Technical Occupations 3,966 75 0.0 Administrative and Secretarial Occupations 1,792 440 0.2 Skilled Trades Occupations 949 180 0.2 Personal Service Occupations 702 130 0.2 Sales and Customer Service Occupations 1,080 3,625 3.4 Process, Plant and Machine Operatives 751 105 0.1 Elementary Occupations 568 610 1.1 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 Q4 of 2016 Occupation Number of Job Advertisements Programmers and software development professionals 2,974 Other administrative occupations 1,544 Human resources and industrial relations officers 1,517 Business sales executives 1,515 Nurses 1,318 Web design and development professionals 1,058 Managers and proprietors in other services 1,045 Sales accounts and business development managers 1,010 IT business analysts, architects and systems designers 947 Chartered and certified accountants 797 Source: Labour/ Insight Burning Glass (Oct. 01, 2016 - Dec. 31, 2016) During Q4 of 2016 the skill with the greatest demand was customer service with 3,936 advertisements citing it as a requirement. This was followed by business management (3,423 ads), Microsoft Excel (3,096 ads) and Project Management (2,673 ads). Top 10 Skills Advertised during Q4 of 2016 Skills Job Postings Customer Service 3,936 Business Management 3,423 Microsoft Excel 3,096 Project Management 2,673 Sales 2,587 Business Development 2,242 Microsoft Office 1,992 Contract Management 1,943 Customer Contact 1,715 SQL 1,604 Source: Labour/ Insight Burning Glass (Oct. 01, 2016 - Dec. 31, 2016) 4. PROPERTY AND PLANNING a) House Prices Indicator West of England in Sept 2016 Comparison with this month last year House Prices 266,725 House Sales 1,497 Source: West of England figure calculated by the West of England Office using Land Registry Data. In Sept 2016 the average house prices across the West of England was 266,725; exceeding 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 over 26,500. Over the year to September 2016 house prices have increased by 9% in B&NES and N.Somerset, 10% in S. Gloucestershire and 16% in Bristol. 11
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. Graph 9: Average House Prices Annual Time Series Source: West of England figure calculated by the West of England Office using Land Registry Data. 12
b) Invest Bristol & Bath Inward Investment Project Graph 10: Cumulative Activity Apr 2016 Jan 2017 Source: Invest in Bristol and Bath, Agilebase database Since April 2016, Invest Bristol & Bath (IBB) have generated 133 new inward investment leads, including 45 new projects and 30 qualified leads, and have successfully located 37 projects in the West of England area. The number of new leads generated is comparable to the same period in 2016 with a quiet summer followed by an increase of activity between November and January. A number of planned events and marketing campaigns to the end of March will contribute to an increase of new leads during the next quarter. 13
Graph 11: Total new jobs April 2016 Jan 2017 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. Since April 2016, 924 new jobs have been committed by 37 successful projects. IBB is on target to meet its target to create 1,050 new jobs by end of March, and very likely to meet its stretch target of 1,465 new jobs. Some of the recent successes include a number of tech and digital companies setting up and expanding in the West of England area, including a Japanese tech company setting up their European headquarters in Bristol. Graph 12: Priority sector activity New Activity Apr 16 - Jan 17 Source: Invest in Bristol and Bath, Agilebase database 14
Graph 13: Priority sector activity New Jobs Committed 2016/2017 Source: Invest in Bristol and Bath, Agilebase database Since April 2016, IBB has handled 133 new leads and projects across all five of the West of England priority growth sectors. Not surprisingly, 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 2016/2017. Graph 14: Current Pipeline 100 80 60 40 20 0 Pipeline Projects Active Leads Active Qualified Leads Active Projects 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 132 active qualified leads and projects, in addition to 68 early stage opportunities. 15
The IBB pipeline of active projects indicates there are 7,594 potential new jobs for the region of which IBB are confident that 600 new jobs will be committed by the end of the financial year 2016/17. b) Commercial Data Office Take-up Indicator Q4 2015 (sq ft) Q4 2016 (sq ft) Direction of Change Bristol City Centre Take-up 93,604 267,239 Bristol Out of Town Take-up 94,708 110,949 Source: Bristol Property Agents Association 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. Office take up in both the city centre and out of town was up on in the 4 th quarter of 2016 when compared to the same period in 2015. The number of transactions has picked up following the summer which saw a slow down due to the referendum. Office Rents Indicator Rents ( psf) Net effective rent Q4 2016 Q3 2016 Q4 2016 Q3 2016 Bristol City Centre Rents a,b 28.50 28.50 24.94 24.94 Bristol Out of Town Rents a,b 21.00 21.00 - - Bath Rents b 26.00 26.00 - - Source: a Bristol Property Market Update Spring 2017, GVA b Market Monitor South West of England & South Wales 2016, Alder King Direction of Change - - - Office rents in Bristol City Centre, out of town and Bath have all remained static on the previous quarter. 16
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