NIERC REPORT SERIES NO 19 SOFTWARE AND COMPUTER SERVICES EMPLOYMENT IN THE UK REGIONS AND IRELAND,

Transcription

1 NIERC REPORT SERIES NO 19 SOFTWARE AND COMPUTER SERVICES EMPLOYMENT IN THE UK REGIONS AND IRELAND, A Review of the New Annual Business Inquiry Data for Great Britain and Equivalent Data for Northern Ireland and the Republic of Ireland Mike Crone NORTHERN IRELAND ECONOMIC RESEARCH CENTRE

2 Software and Computer Services Employment in the UK Regions and Ireland, A Review of the New Annual Business Inquiry Data for Great Britain and Equivalent Data for Northern Ireland and Republic of Ireland Mike Crone October 2001 Northern Ireland Economic Research Centre

3 Copyright 2001 NIERC All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic chemical, mechanical, optical, photocopying, recording or otherwise without prior permission in writing from the copyright owner. Published by: Northern Ireland Economic Research Centre, University Road, Belfast, BT7 1NJ Tel: Fax: ISBN: Price: 10 Stg

4 Contents List of Tables..... i List of Figures..... ii Preface...iii Acknowledgements...iii Executive Summary... v 1. Data Issues National Trends The Regional Pattern The County Pattern A Detailed Look at Northern Ireland and its Comparators Software and Computer Services in the Republic of Ireland Appendices...33

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6 List of Tables Table 1: Employment in Division 72 Computer and Related Activities in Great Britain, (Various Official Data Series)... 5 Table 2: UK Employment in Division 72, Table 3: Regional Employment in Division 72, Table 4: Regional Location Qotients for Division 72, Table 5: Division 72 Employment by County, Table 6: County Location Quotients for Division 72, Table 7: Comparison of Division 72 in Northern Ireland and Selected Non-core Counties Table 8: Employment in Software and Computer Services in the Republic of Ireland, i

7 List of Figures Figure 1: Employment in Division 72 Computer and Related Activities in Great Britain, (Various Official Data Series) 5 Figure 2: Comparison of 1998 AES and ABI Employment Data for Division Figure 3: Division 72 Employment by County in Figure 4: Division 72 Employment by County in Figure 5: County Location Quotients for Division 72 in Figure 6: County Location Quotients for Division 72 in Figure 7: Absolute Increase in Division 72 Employment by County, Figure 8: Percentage Increase in Division 72 Employment by County, Figure 9: Division 72 Employment in Republic of Ireland and Selected UK Regions and Sub-regions, Figure 10: Republic of Ireland Employment in Software and Computer Services Sector Comparison of Data Sources.. 31 Figure 11a: Software Industry Employment (National Software Directorate) Figure 11b: NACE 223 Employment (Census of Industrial Production). 32 ii

8 Preface The information technology industries including software and computer services are among the leading growth sectors of the UK economy and have been the subject of much discussion among policy-makers. In a previous report (Crone, 2000) various official data sources were used to describe the pattern of software and computer services employment in the UK and Ireland in the period Since the original report there has been a significant revision to the way official employment data are collected. The Annual Employment Survey covering Great Britain has been replaced by the Annual Business Inquiry (ABI). The new series provides employment data for 1998 and 1999, which were not covered by the previous NIERC report, and revised data for This updated report uses the new ABI data, and equivalent data for Northern Ireland, to provide a descriptive account of the UK regional and county patterns of employment in software and computer services in the period Comparative data for the Republic of Ireland are also reviewed. As with the original report, the aim is to provide a useful reference point for policy-makers and researchers with an interest in this dynamic sector of the economy. 1 M. Crone (2000) Computer Services and Software Employment in the UK and Ireland, : An Exploration of Official Data with Particular Reference to Northern Ireland. NIERC Report Series No 16. iii

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10 Acknowledgements This report was commissioned and funded by the Research and Evaluation Branch of the Department for Employment and Learning (DEL) in connection with the work of the Northern Ireland Skills Task Force. I would like to thank DETI Statistics Branch for their helpful feedback on an earlier draft and for supplying the Northern Ireland data. I am also grateful to Richard Johnston and Kerry Hazley (NIERC) for their assistance in retrieving the ABI data and preparing the maps. v

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12 Executive Summary This report uses new Annual Business Inquiry data for Great Britain, and equivalent data for Northern Ireland, to investigate the national, regional and sub-regional pattern of employment in the UK software and computer services sector between 1995 and Comparative data for the Republic of Ireland are also reviewed. The key findings include: New Employment Data 1. The introduction of the Annual Business Inquiry (ABI) has led to a significant downward revision in Great Britain employment data for computer and related activities (Division 72 of SIC1992). For 1998, the year of overlap between the ABI and the Annual Employment Survey (AES), the Office for National Statistics now believes that the AES overestimated the level of employment in computer and related activities in GB by approximately 33,000 (8.2 per cent). AES employment numbers for have been re-scaled (i.e. revised down) in line with the new ABI numbers for National Trends 2. Division 72 Computer and related activities (also referred to here as computer services ) continued to be one of the fastest growing sectors of the UK economy during the late 1990s. By December 1999, employment in this sector had reached around 434,000 (2.27 per cent of private sector employment). In the period , employment in Division 72 grew by 83 per cent (equivalent to a compound annual rate of 16.3 per cent). Growth in (CAGR 17.1 per cent) was faster than in (CAGR 15.4 per cent) and also faster than in the period ( ) covered by the original NIERC report (CAGR 12.9 per cent). vii

13 Regional Pattern 3. At the regional level, the UK computer services industry (Division 72) is highly concentrated in the Greater South East. In 1999, London, South East England and East of England together accounted for 60 per cent of computer services employment. Location quotients for 1999 reveal a regional hierarchy led by these three core regions, with North East England, Northern Ireland and Wales at the bottom. Overall, there has been little change in this regional hierarchy during the 1990s. Sub-regional Pattern 4. At county level, an even more uneven pattern emerges. The 1999 Top 10 counties by employment accounted for 60.4 per cent of the UK total. In absolute terms, London had the most computer services employees (nearly 100,000 or 23 per cent of the UK total). Beyond the capital a Western Arc of non-metropolitan counties in the Greater South East (including Berkshire, Surrey, Hertfordshire, Buckinghamshire, Oxfordshire, Cambridgeshire and Hampshire) was the dominant concentration of employment. Outside the Greater South East the largest centres of computer services employment were the Metropolitan counties of West Midlands (Birmingham), Greater Manchester, Avon (Bristol) and West Yorkshire (Leeds), each having more than 10,000 employees in Only 12 of the 67 UK counties 2 exceeded the UK average share of employment in computer services in 1999 (i.e. a location quotient greater than 100) and all of these were located in the South of England. The 1999 LQ was in excess of 150 in Berkshire, Surrey, Hertfordshire, Buckinghamshire, Oxfordshire and Cambridgeshire. The leading Northern counties in terms of location quotients were Nottinghamshire (LQ 94; 6,500 employees), Cheshire (90; 7,600), Warwickshire (87; 3,700), Lothian (86; 5,400), and Hereford & Worcester (86; 4,500). 2 These 67 counties include the 46 English and 8 Welsh counties (prior to the introduction of unitary authorities in 1995), 12 Scottish regions and Northern Ireland (refer map in Appendix B). viii

14 6. The pattern of employment growth in computer services in the late 1990s was also highly uneven. In general, the largest absolute increases in employment in the period were in the established concentrations. However, a few counties jumped up the county hierarchy after experiencing exceptional growth, including Oxfordshire (up 138 per cent during the period; adding 4,800 jobs), Lancashire (170 per cent; 4,000 jobs), Merseyside (143 per cent; 3,700 jobs), Northamptonshire (158 per cent; 3,100 jobs) and Northern Ireland (188 per cent; 2,600 jobs). Northern Ireland 7. Northern Ireland (NI) had a lower share of private sector employment in computer services than any other UK region until 1998, when it overtook Wales (1.03 per cent in 1999 compared to 0.94 per cent in Wales and the UK average of 2.27 per cent). A 1999 location quotient of 45 ranked NI 43 rd among the 67 UK counties. NI s computer services employment was still lower than many comparable sub-regions at this date (e.g. Merseyside, LQ 84; Tyne & Wear, 62; South Yorkshire, 56; Strathclyde, 49). However, the relative position of NI improved dramatically during the 188 per cent increase in employment was the third biggest among the UK counties - and there is anecdotal evidence that this growth has continued during 2000 and Republic of Ireland 8. Division 72 (computer services) employment data for the ROI come from the Annual Services Inquiry. The most recently published data refer to 1997 when employment was approximately 9,700. Division 72 employment in ROI grew at a CAGR equivalent to 17.4 per cent during On comparison with UK data for , it is clear that ROI s growth in computer services employment in this period was unsurpassed among the UK regions and counties. In 1997, the ROI computer services sector was larger than its counterparts in the UK s less successful regions but was still quite modest when compared to the leading UK counties. ix

15 9. Other figures published by the National Software Directorate give a much higher estimate for employment in the Irish software industry and more up-to-date data. They suggest employment increased from 8,000 in 1991 to 25,000 in 1999 (CAGR 15.6 per cent). The suggested explanation for the observed discrepancy lies in the structure of the ROI software industry. It is believed that the NSD definition of the software industry includes activities such as CD-ROM manufacturing which are classified under NACE heading 223 Reproduction of Recorded Media in official statistics. Heading 223 accounted for some 6,100 employees in x

16 1. Data Issues Defining the Sector The fast growing IT sector (sometimes referred to as software or ICT ) has recently been a focus of attention for economic development agencies. Gauging the level of employment in this sector is not always straightforward since some definitions of the sector do not accord with the classification system used for official employment statistics. The key sector for official purposes is Division 72 Computer and related activities in the 1992 Standard Industrial Classification which is an aggregation of a number of different activities including software consultancy and supply, hardware consultancy, data processing, database activities, computer maintenance and other computer related activities (see Appendix A for full definition) 3. As this report it is based on an investigation of official data its primary focus is Division 72 (also referred to here as computer services ). Readers should be aware that in official employment statistics each separate business is classified according to its primary business activity. This means that employment in an IT department in a bank or financial institution, for example, would not be counted in the official figure for Division 72. Implications of the New Annual Business Inquiry for Great Britain Until 1998, official employment data in Great Britain were collected by the Annual Employment Survey (AES), which itself replaced the biennial Census of Employment from In 1998, a new data series, the Annual Business Inquiry (ABI), was introduced. In this first year the ABI was conducted in parallel with the AES. The main reasons for changing the methodology were: (1) many businesses did not complete forms to include all parts of their business under the AES; (2) the AES system for estimating employment in businesses not 3 The term ICT (Information and Communication Technology) has become common currency in government circles but was initially poorly defined. However, the Office for National Statistics and the Organisation for Economic Co-operation and Development (OECD) have recently issued a definition of the ICT sector, based on a grouping of various divisions of the 1992 Standard Industrial Classification (refer Appendix C). By this definition, ICT is considerably more broad-based than Division 72, including the IT hardware manufacturing and telecommunications industries as well as software and computer services. 1

17 surveyed was shown to be flawed; (3) the AES did not conform to Eurostat regulations (Johnston, 2001) 4. The main differences in methodology are: (1) the ABI form is sent to company headquarters and asks for total employment over the whole business whereas the AES asked for employment in each workplace and then summed these figures to provide an employment figure for the whole business; (2) the ABI uses ratio estimation for non-sampled businesses whereas the AES used regression; (3) the ABI is conducted in December whereas the AES was conducted in September (ibid.). Together these changes were expected to increase accuracy, consistency and simplicity. Johnston (2001) has shown that total employment in GB under the 1998 ABI was revised up by approximately one million (4.2 per cent) on the AES figure, from just under 24 million to just under 25 million. Because of this discrepancy, which ONS attributes to the elimination of undercounting under the old methodology, all AES data from have been re-scaled to give a continuous series of consistent ABI data for We now need to consider the implications of this revision for Division 72 before moving on. Comparison of the new 1998 ABI and old 1998 AES employment numbers for Division 72 shows that the ABI number represents a downward revision of approximately 33,000 jobs (- 8.2 per cent) compared to the AES (Table 1 and Figure 1). As with total employment, the AES employment numbers for Division 72 in have been re-scaled (i.e. revised downward) in line with the new ABI numbers (Table 1 and Figure 1). Thus, Office for National Statistics (ONS) now believes that the AES was overestimating the level of employment in computer services in the period This downward revision in Division 72 is counter-intuitive, since the AES was thought to undercount employment (an assertion apparently supported by the overall upward revision), and is not easily explained. A further consequence of the adoption of the ABI is revealed when the geographical pattern of the revisions is examined. As Figure 2 illustrates, the overall downward revision in Division 72 was not evenly distributed across GB. Upon closer examination, a number of observations can be made about the county pattern of revisions: 4 R. Johnston (2001) One Million New Employees: Revisions to ONS Employment Data. NIERC, Mimeo. 2

18 ! In around a quarter of counties, the revisions were quite small (+5% to 5%). Notably, this was the case in London and West Midlands (the two largest conurbations), and also in some of the counties from the Western Arc (Berkshire, Hertfordshire and Cambridgeshire).! In a further quarter of counties, including other counties from the Western Arc (Surrey, Buckinghamshire, Bedfordshire and Hampshire), the revisions were larger but close to the GB average revision (-5% to 15%).! In around a third of counties, however, there were major downward revisions ( 25% or more). Interestingly, there were two distinct groups here. The first group experiencing major downward revisions were Northern conurbations (e.g. Strathclyde, Greater Manchester, West Yorkshire and South Yorkshire). The second group were counties on the outer fringes of the Greater South East (Hereford & Worcester, Warwickshire and Northamptonshire in the south Midlands; Norfolk, Suffolk, Essex, Kent, West Sussex and East Sussex in the east; and Dorset, Devon and Cornwall in the South West).! Finally, a smaller group of counties experienced sizeable upward revisions (including Oxfordshire, Cheshire and Nottinghamshire). There is no obvious connection between these counties. This analysis shows that the introduction of the ABI has implications for our understanding of the pattern of computer services employment in the period up to 1998, as previously discussed by Crone (2000). Most notably, it seems the geographical extent of the dominant Greater South East concentration was overestimated in the old AES data. Specifically, counties on the eastern and midlands fringe of the Greater South East actually lag further behind the leading counties of the Western Arc than was previously thought. Secondly, some of the leading Northern conurbations have considerably fewer employees, and are placed lower down the county hierarchy, than was previously thought. 3

19 Northern Ireland Data Northern Ireland (NI) is not directly affected by the change from AES to ABI since it has its own statistical series for measuring employment the biennial Census of Employment and Quarterly Employment Survey. The data used in this report for Division 72 employment in NI (the most recently revised employee jobs figures) were supplied by DETI Statistics Branch in July 2001 and are sourced to the Quarterly Employment Survey (QES). The figures for 1995, 1997 and 1999 (Census years) are equivalent to the Census of Employment figures for these years 5. QES data are also available for the inter-census years (1996 and 1998). Since Division 72 data are not available at county level in NI, the region is also considered as a county in the ensuing analysis, which is not unreasonable given its relative size. Although there is no direct effect, the introduction of the ABI in GB does have some indirect implications for the assessment of NI s relative position in the UK county and regional hierarchy. Specifically, the downward revision in GB computer services employment has the effect of moving NI s location quotient for Division 72 closer to the UK average (LQ from 38 under 1998 AES to 46 under 1998 ABI). 5 ABI data refer to employment in December of each year but the Northern Ireland Census of Employment refers September. September Quarterly Employment Survey data are used here for consistency with the Census. 4

20 Table 1: Employment in Division 72 Computer and Related Activities in Great Britain, (Various Official Data Series) Data Series \ Year Census of Employment 169, , Annual Employment Survey , , , ,708 - Annual Business Inquiry , , , , ,461 Revision (ABI-AES) ,215-32,118-37,300-32,987 - Source: Office for National Statistics. Figure 1: Employment in Division 72 Computer and Related Activities in Great Britain, (Various Official Data Series) 450, , ,000 Census of Employment Annual Employment Survey Annual Business Inquiry 300, , , , , Note: the chart refers to Great Britain and excludes Northern Ireland, where employment is measured separately by a biennial Census of Employment and Quarterly Employment Survey. Source: based on data supplied by Office for National Statistics. 5

21 Figure 2: Comparison of 1998 AES and ABI Employment Data for Division 72 % Change 5 to 241 (9) -5 to 5 (18) -15 to -5 (15) -25 to -15 (15) -80 to -25 (9) Notes: negative figures indicate a downward revision in the ABI figures as compared with the equivalent AES figures; specific counties can be identified by referring to Appendix B; source data for the map can be found in Appendix D. Source: author s analysis of data from ONS. 6

22 2. National Trends Coe (1996) has shown previously how employment in the UK computer services industry underwent a remarkable expansion in the 1980s 6. Employment in Activity Heading 8394 of the 1980 Standard Industrial Classification (the official classification prior to 1992) increased from 54,800 in September 1981 to 147,500 in September 1991 equivalent to a compound annual growth rate (CAGR) of 10.4 per cent. Crone (2000) showed how this expansion continued between 1991 and Under the SIC 1992 definition (i.e. Division 72) UK employment in computer services increased from 170,400 in 1991 to 353,900 in September 1997 (based on Census of Employment and Annual Employment Survey data) equivalent to a CAGR of 13.0 per cent. Based on the new ABI data for the period , and equivalent data for NI, it appears that UK employment in Division 72 grew at an even greater rate during the late 1990s (Table 2). The expansion from 237,839 in December 1995 to 434,431 in December 1999 equates to a CAGR of 16.3 per cent. Notably, growth in Division 72 employment during the period (CAGR 17.1 per cent) was faster than in the period (CAGR 15.4 per cent). Table 2: UK Employment in Division 72, Year Great Britain 169, , , , , , ,461 Northern Ireland 1,030-1,130-1,380 1,680 2,240 3,420 3,970 United Kingdom 170, , , , , , ,431 Sources: GB data from Census of Employment, 1991 and 1993 and Annual Business Inquiry , Office for National Statistics. NI data from Quarterly Employment Survey, DETI Statistics Branch. 6 N. M. Coe (1996) The Growth and Locational Dynamics of the UK Computer Services Industry, Unpublished PhD Thesis, University of Durham. 7

23 3. The Regional Pattern 7 Absolute Employment The previous NIERC report (Crone, 2000) showed that, as with other financial and business service activities, the pattern of computer services employment was highly concentrated in the Greater South East (i.e. London plus the South East and East regions) in the early and middle 1990s. This uneven regional distribution, especially the dominance of London and the South East, has been a hallmark of the UK computer services industry since its foundation in the 1960s (Coe, 1996). The new ABI data for confirm that the dominance of the Greater South East persisted through the late 1990s (Table 3). In 1999, the London, South East and East regions together accounted for 60.1 per cent of UK employment in computer services, compared to 60.3 per cent in 1995 (ABI data) and 58.7 per cent in 1991 (Census of Employment data). In fact, the two leading regions (London and South East) accounted for nearly half of all UK computer services employment (49.3 per cent in 1999 and 48.5 per cent in 1995). It is important to note that, in order to maintain their overall dominance through the late 1990s, the three regions of the Greater South East generated a net increase of well over 100,000 computer services jobs (Table 3). Beyond the Greater South East, the other leading regions in terms of computer services employment were the North West, West Midlands, and South West, each having between 29,000 and 36,000 employees in 1999 (Table 3). Location Quotients 8 Location quotients, which allow us to standardise for differences in region size, give a relative comparison of the significance of computer services in each region. Location 7 The regional pattern is analysed in terms of the 12 UK Government Office Regions (London, South East, East of England, South West, West Midlands, East Midlands, Yorkshire and the Humber, North West, North East, Wales, Scotland and Northern Ireland). 8

24 quotients for 1999 show at least three distinct sub-groups among the UK regions (Table 4):! The first group is comprised of three regions - South East, London, and East with location quotients greater than 120, confirming the relative as well as absolute dominance of the Greater South East. In particular, the South East region, with a location quotient of 181 in 1999 (4.09 per cent of private sector employment) is shown to be strongly over-represented in computer services.! The intermediate group of regions in 1999, with location quotients between 70 and 90, comprised the South West, West Midlands, North West and East Midlands. Three of these regions are geographically contiguous to the Greater South East.! At the bottom of the regional hierarchy in 1999 was a group of regions comprising Yorkshire and the Humber, Scotland, North East England, Northern Ireland and Wales. All of these regions had location quotients between 40 and 60, with Wales being the worst placed region (LQ 41). It is notable that these regions are the most peripheral being located in the North of England and the Celtic Fringe. Comparison of regional location quotients in 1999 (Table 4) with those in 1991 (from Crone, 2000) reveals that the regional hierarchy has not changed dramatically during the 1990s. The degree of regional unevenness has lessened somewhat, with the range of location quotients decreasing from in 1991 to in However, the three Greater South East counties led the regional hierarchy throughout the decade and Wales and Northern Ireland were always in the bottom two places. The major changes in the regional hierarchy during the 1990s were as follows:! The West Midlands relative position worsened, with its location quotient falling from 98 in 1991 to 78 in 1999;! Scotland s relative position also worsened, with its location quotient falling from 61 in 1991 to 52 in 1999; 8 Location quotients were calculated with a denominator of private sector employment calculated as total employment minus Sections L, M, N and O of SIC1992. A location quotient of 100 indicates that the region or county has the same share of employment in Division 72 as the UK as a whole. 9

25 ! East Midlands relative position improved, with its location quotient rising from 60 in 1991 to 71 in 1999;! Northern Ireland moved off the bottom of the regional hierarchy, with its location quotient rising from 29 in 1991 to 45 in Table 3: Regional Employment in Division 72, Change Number % South East 60,492 72,984 84,090 93, ,359 53, London 54,913 59,665 71,276 89,693 99,769 44, East 28,072 30,849 35,078 39,636 46,827 18, North West 19,605 20,551 25,050 29,408 35,960 16, West Midlands 17,148 20,842 23,013 27,129 31,175 14, South West 17,075 19,098 21,401 25,333 29,307 12, East Midlands 11,883 12,953 15,900 19,769 21,057 9, Yorkshire & the Humber 10,418 12,492 13,861 14,934 19,373 8, Scotland 9,354 14,530 14,054 16,285 18,248 8, North East 3,864 4,607 5,935 7,605 7,320 3, Wales 3,635 3,501 4,703 5,321 7,066 3, Northern Ireland 1,380 1,680 2,240 3,420 3,970 2, UK total 237, , , , , , Note: regions ranked by employment in Sources: Annual Business Inquiry, Office for National Statistics and NI Quarterly Employment Survey, DETI Statistics Branch. Table 4: Regional Location Quotients for Division 72, Change in LQ South East London East South West West Midlands North West East Midlands Yorkshire & the Humber Scotland North East Northern Ireland Wales Note: regions ranked by location quotient in Source: author s calculations using data from Annual Business Inquiry, Office for National Statistics and NI Quarterly Employment Survey, DETI Statistics Branch. 10

26 4. The County Pattern 9 Absolute Employment At the county level of investigation, an even more uneven pattern of computer services employment is unveiled. At the end of the 1990s UK computer services employment was highly concentrated among a small group of leading counties (Table 5 and Figures 3 and 4). The 1999 Top 10 counties by employment accounted for 60.4 per cent of the UK total (compared to 63.5 per cent in 1991) and the 1999 Top 20 for 76.8 per cent (compared to 81.4 per cent in 1991). Apart from London (nearly 100,000 employees, 23 per cent of the UK total), the 1999 Top 10 was dominated by a Western Arc of non-metropolitan counties in the Greater South East led by Berkshire with 33,500 employees (ranked 2 nd ) and Surrey with 25,500 employees (3 rd ). Also included were Hertfordshire (4 th ), Hampshire (5 th ) and Buckinghamshire (8 th ). These five counties are characterised by medium-sized towns interspersed with rural areas. The remainder of the 1999 Top 10 was comprised of metropolitan counties containing large urban centres, including West Midlands (6 th ), Greater Manchester (7 th ), Avon (9 th ) and West Yorkshire (10 th ), all of which had more than 10,000 employees (Table 5 and Figure 4). Among the counties ranked 11 th to 20 th in 1999 were a second tier of non-metropolitan counties from the Greater South East (Cambridgeshire, Oxfordshire, Essex, Kent, and West Sussex). Also inside the Top 20 were two other Northern conurbations (Strathclyde and Merseyside) along with two North West counties (Cheshire and Lancashire) and the county of Nottinghamshire (East Midlands). Table 5 also shows the changes in county computer services employment between (also depicted in Figures 7 and 8). The first point to note is that all counties benefited from the continuing expansion of UK computer services employment in the 9 For the purpose of this analysis, the UK is divided into 67 counties, comprising 46 English and 8 Welsh counties (those that existed prior to the introduction of unitary authorities in 1995), 12 Scottish regions 11

27 late 1990s but to varying degrees. In general, the largest absolute increases in employment in the period were in the established concentrations. For example, more than 10,000 jobs were added in London, Berkshire and Surrey, and between 5,000 and 10,000 in Hertfordshire, West Midlands, Avon, Hampshire, Buckinghamshire and Greater Manchester. Overall, however, there were few radical changes to the county hierarchy over the period. Among the few significant changes were:! Oxfordshire climbing six places to 12 th due to a 138 per cent increase in computer services employment over the period;! Lancashire climbing eleven places to 18 th by virtue of a 170 per cent increase;! Merseyside climbing six places to 19 th due to a 143 per cent increase;! Northamptonshire climbing ten places to 24 th due to a 158 per cent increase;! Northern Ireland climbing six places to 32 nd due to a 188 per cent increase;! Wiltshire falling fifteen places to 30 th after only increasing employment in computer services by 12 per cent over the period. Location Quotients As with the regional pattern, location quotients can be used to give a better indication of the relative strength or weakness of each county in computer services (effectively standardising for county size). This is important because smaller counties that are relatively strong in computer services would not be detected in a consideration of absolute employment. Only 12 of the 67 UK counties exceeded the UK average share of employment in computer services in 1999 (i.e. a location quotient greater than 100) indicating a highly skewed county pattern (Table 6). All of these 12 counties were located in the South of England. Figures 5 and 6 show county location quotients for computer services employment in 1995 and It is immediately striking that the Western Arc (noted above) is the dominant cluster for computer services employment in relative as well as absolute terms. In the case of Berkshire, the 1999 LQ of 409 indicates a very strong and Northern Ireland (not subdivided). These counties are depicted on the map in Appendix B. 12

28 concentration of computer services employment. The 1999 LQ was also in excess of 150 in Surrey, Hertfordshire, Buckinghamshire, Oxfordshire and Cambridgeshire. Figures 5 and 6 also provide a further illustration of the broad North-South (or coreperiphery) contrast in the pattern of UK computer services employment. In 1999 the leading Northern counties in terms of location quotients were Nottinghamshire (LQ 94; 6,500 employees), Cheshire (90; 7,600), Warwickshire (87; 3,700), Lothian (86; 5,400), and Hereford & Worcester (86; 4,500). Notably, these are not the leading Northern counties in terms of absolute employment. The metropolitan counties of Greater Manchester, West Midlands, West Yorkshire and Strathclyde, whilst having a more jobs in total, do not have as high a share of employment in computer services. 13

29 Table 5: Division 72 Employment by County, (Top 40 in 1999) County Change Rank Number % Rank London 1 54,913 59,665 71,276 89,693 99,769 44, Berkshire 2 14,726 18,209 20,460 27,674 33,453 18, Surrey 3 13,305 15,112 18,062 21,663 25,423 12, Hertfordshire 4 10,889 10,725 12,588 16,951 20,859 9, Hampshire 5 11,024 15,585 17,902 14,666 16,584 5, West Midlands 6 9,044 10,514 11,508 13,783 15,356 6, Greater Manchester 7 9,488 8,922 10,981 11,700 14,767 5, Buckinghamshire 8 8,306 9,515 10,490 11,754 13,714 5, Avon 9 5,564 7,006 7,465 9,618 11,861 6, West Yorkshire 10 5,630 6,793 7,043 7,645 10,603 4, Cambridgeshire 11 4,831 5,424 5,623 7,404 8,277 3, Oxfordshire 12 3,466 4,099 4,731 6,247 8,264 4, Essex 13 5,604 7,739 8,724 6,751 7,938 2, Cheshire 14 4,724 4,908 5,557 8,149 7,617 2, Strathclyde region 15 3,534 7,480 5,401 5,607 7,302 3, Kent 16 3,399 3,873 4,325 4,804 6,575 3, Nottinghamshire 17 3,857 4,831 5,753 7,938 6,498 2, Lancashire 18 2,372 3,613 4,195 4,798 6,408 4, Merseyside 19 2,605 2,552 3,616 4,025 6,336 3, West Sussex 20 3,447 3,645 4,722 4,256 6,246 2, Bedfordshire 21 3,676 3,843 4,108 4,984 5,523 1, Lothian region 22 2,603 3,315 3,872 5,388 5,421 2, Gloucestershire 23 2,665 2,667 3,060 3,775 5,055 2, Northamptonshire 24 1,935 2,228 2,988 3,209 4,996 3, Staffordshire 25 2,205 2,284 2,844 3,835 4,996 2, Derbyshire 26 3,017 2,855 3,571 4,300 4,865 1, Tyne and Wear 27 2,481 3,185 3,976 4,746 4,463 1, Hereford and Worc. 28 2,740 2,637 3,535 3,341 4,462 1, South Yorkshire 29 2,266 2,541 3,356 3,433 4,312 2, Wiltshire 30 3,829 3,979 3,914 4,637 4,287 0, East Sussex 31 2,672 2,798 3,215 2,337 3,982 1, Northern Ireland 32 1,380 1,680 2,240 3,420 3,970 2, Warwickshire 33 2,347 3,266 2,977 3,257 3,657 1, Leicestershire 34 2,433 2,466 2,717 3,248 3,530 1, Dorset 35 2,031 1,936 2,407 2,763 2,794 0, Shropshire ,141 2,149 2,913 2,704 1, North Yorkshire 37 1,527 1,571 1,999 2,084 2, Suffolk 38 1,825 1,952 2,526 1,999 2, Devon 39 1,429 1,617 1,909 1,847 2, Somerset 40 1,114 1,360 2,000 1,991 2,223 1, Note: counties ranked by employment in Sources: Annual Business Inquiry, Office for National Statistics and NI Quarterly Employment Survey, DETI Statistics Branch. 14

30 Table 6: County Location Quotients for Division 72, (Top 43 in 1999) County Change Rank LQ Rank Berkshire Surrey Hertfordshire Buckinghamshire Oxfordshire Cambridgeshire Avon Bedfordshire London Hampshire Gloucestershire West Sussex Northamptonshire Nottinghamshire East Sussex Wiltshire Cheshire Warwickshire Lothian region Hereford and Worc Shropshire Merseyside Essex Greater Manchester West Midlands Derbyshire Somerset West Glamorgan Staffordshire Lancashire West Yorkshire Dorset Kent Tyne and Wear Grampian region South Yorkshire Gwent Leicestershire Suffolk South Glamorgan Strathclyde region North Yorkshire Northern Ireland Note: counties ranked by location quotient in Source: author s calculations using data from Annual Business Inquiry, Office for National Statistics and NI Quarterly Employment Survey, DETI Statistics Branch. 15

31 Figure 3: Division 72 Employment by County in 1995 Employment (000's) 20 to 65 (1) 10 to 20 (4) 7 to 10 (3) 5 to 7 (3) 3 to 5 (10) 1 to 3 (20) 0 to 1 (29) Note: source data for the map can be found in Appendix E. 16

32 Figure 4: Division 72 Employment by County in 1999 Employment (000's) 20 to 65 (3) 10 to 20 (6) 7 to 10 (5) 5 to 7 (8) 3 to 5 (11) 1 to 3 (16) 0 to 1 (17) Note: source data for the map can be found in Appendix E. 17

33 Figure 5: County Location Quotients for Division 72 in 1995 Location Quotients 150 to 500 (7) 125 to 150 (4) 100 to 125 (6) 75 to 100 (6) 50 to 75 (14) 0 to 50 (31) Note: source data for the map can be found in Appendix F. 18

34 Figure 6: County Location Quotients for Division 72 in 1999 Location Quotients 150 to 500 (6) 125 to 150 (4) 100 to 125 (2) 75 to 100 (13) 50 to 75 (14) 0 to 50 (29) Note: source data for the map can be found in Appendix F. 19

35 Figure 7: Absolute Increase in Division 72 Employment by County, Absolute Difference (000's) 20 to 44.9 (1) 7 to 20 (3) 4 to 7 (8) 2 to 4 (14) 1 to 2 (11) -0.3 to 1 (30) Note: source data for the map can be found in Appendix G. 20

36 Figure 8: Percentage Increase in Division 72 Employment by County, Growth Rates (%) 150 to 340 (8) 100 to 150 (11) 75 to 100 (15) 50 to 75 (18) 25 to 50 (9) -21 to 25 (7) Note: source data for the map can be found in Appendix G. 21

37 5. A Detailed Look at Northern Ireland and its Comparators As noted previously, the latest employment data for Division 72 in Northern Ireland (NI) comes from the Quarterly Employment Survey, which can be compared with the ABI data for GB for As shown earlier, NI s computer services employment increased sharply from 1,380 in 1995 to 3,970 in 1999 (an increase of 188 per cent; CAGR 30.2 per cent). However, NI s computer services location quotient in 1999 (LQ 45) was still lower than all other UK regions except Wales (LQ 42), and prior to 1998 had been lower than all UK regions. Put another way, computer services accounted for only 1.03 per cent of private sector employment in NI in 1999 compared to the UK average of 2.27 per cent, and 4.09 per cent in the South East of England. Whilst NI still compares unfavourably on a regional level, it might be argued that it is more meaningful to compare NI with similar sized sub-regions of the UK. Equally, it might be argued that it is not realistic to compare NI with counties in the dominant Greater South East concentration. Hence Table 7 compares the computer services sector in NI with 12 other counties and sub-regions, most of which are either geographically peripheral or located in a traditional industrial region. Some points arising from this comparison include:! The counties of Avon, Nottinghamshire and Lothian are all slightly smaller than NI (in terms of total private sector employment) and encompass regional capitals of a similar stature to Belfast (i.e. Bristol, Nottingham and Edinburgh). Yet the computer services sectors in these counties are significantly larger than in NI (Table 7). The 1999 computer services locations quotients for these counties were 147 (Avon), 94 (Nottinghamshire) and 86 (Lothian).! Although the metropolitan counties of Strathclyde, Merseyside, Tyne & Wear and South Yorkshire (encompassing the cities of Glasgow, Liverpool, Newcastle and Sheffield) might be characterised as declining industrial areas, the computer services 10 However, note that the Quarterly Employment Survey data used here refer to September of each year whereas the Annual Business Inquiry data for GB refer to December. 22

38 sectors in these sub-regions were slightly larger than NI s in 1999 (Table 7). In 1999, Strathclyde had 7,300 employees (LQ49), Merseyside had over 6,000 (LQ 84), Tyne & Wear had nearly 4,500 (LQ 62) and South Yorkshire had 4,300 (LQ 56).! Another less successful British sub-region is Glamorgan - comprising the counties of West, Mid and South Glamorgan - which covers industrial South Wales. Glamorgan had a similar number of computer services employees to NI in 1991 (around 1,000). By 1999, Glamorgan had around 3,500 and whereas NI had nearly 4,000 (Table 7). Both sub-regions had a computer service LQ of 45 in 1999.! Another interesting comparison for NI is with the combined counties of Devon and Cornwall, an equally peripheral sub-region of the UK. The two regions are almost the same size (in terms of total private sector employment). In 1995, Devon and Cornwall had slightly more computer services employees than NI (1,900 to 1,400). However, NI s computer services sector has grown significantly faster than Devon and Cornwall s during Devon and Cornwall had around 3,000 employees and a LQ of 34 in To conclude, it is worth restating that NI s computer services employment increased at a much faster rate than the UK average during (up by 188 per cent or an annualised growth rate of 30.2 per cent) and faster than all of the other 12 sub-regions in Table 7. Further, there is anecdotal evidence of strong growth during 2000 and early Although this expansion was from a low starting point, and in some senses represents a process of catch-up, the growth is impressive. An important factor is the recent wave of inward investment in the software and computer services sector, which surpassed all other UK regions during (Crone, 2000). Here, praise must go to the Industrial Development Board (IDB), and other supporting agencies, for their success in attracting projects in the face of stiff competition from other regions, such as Scotland. 23

39 County/Sub-region Table 7: Comparison of Division 72 in Northern Ireland and Selected Non-core Counties Private sector employment in Employment in Div Change Location Quotient 1999 Change rank rank Number % Rank rank LQ Rank West Yorkshire 690, ,630 10, , Strathclyde region 662, ,534 7, , Lancashire 416, ,372 6, , Devon and Cornwall 397,820 # 1,872 3,087 # 1, # # -2 # Northern Ireland 387, ,380 3, , Cheshire 372, ,724 7, , Avon 357, ,564 11, , Glamorgan 351,428 # 1,939 3,558 # 1, # # 1 # South Yorkshire 339, ,266 4, , Merseyside 333, ,605 6, , Tyne and Wear 320, ,481 4, , Nottinghamshire 304, ,857 6, , Lothian region 279, ,603 5, , Cambridgeshire 240, ,831 8, , Notes: table summarises of data in Tables 3 and 4; counties are ranked by private sector employment in 1999; all of the selected counties, except Avon and Cambridgeshire, are located in peripheral or traditional industrial regions outside the south of England; the counties of Mid Glamorgan, South Glamorgan and West Glamorgan are aggregated for the purpose of this comparison, as are the counties of Devon and Cornwall, hence rankings are not available for these sub-regions (#). Source: Annual Business Inquiry (ABI), Office for National Statistics and NI Quarterly Employment Survey and Census of Employment, DETI Statistics Branch. 24

40 6. Software and Computer Services in the Republic of Ireland 11 Division 72 Employment in the Republic of Ireland The expansion of the Irish software industry during the 1990s has been widely publicised in the media and academia and has attracted the attention of policy-makers in competitor regions. For this reason, the Republic of Ireland (ROI) is a logical benchmark for the regions and sub-regions of the UK, particularly NI. It is possible to make a direct comparison of Division 72 employment in ROI and the UK because ROI s Central Statistics Office publishes data according to the European standard for industrial classification (NACE Revision 1) in the Annual Services Inquiry (refer Table 8) 12. Unfortunately, the most recent data published by the CSO refer to 1997, when Division 72 employment in ROI was estimated to be approximately 9,700. As an indication of the rate of growth in ROI s computer services sector in the mid- 1990s, note that the expansion from equates to an annualised growth rate of 17.4 per cent, and growth in was 25 per cent. Comparing ROI s Division 72 employment with NI and GB data from previous sections, during the period , reveals some interesting points (Figure 9):! First, the computer services sector in ROI grew at a faster rate than all the UK regions and sub-regions shown in Figure 9 during this period;! Thus whilst ROI s computer services sector was comparable in size to West Yorkshire s and Avon s in 1995, it was significantly larger than these by 1997;! ROI s computer services sector was significantly larger than those in less successful British regions such as Wales, North East England and South Yorkshire (and this holds when we allow for differences in region size); 11 The Irish software industry is currently being investigated as part of a separate NIERC research project Further details are available from the author or via the NIERC web-site ( 12 The Annual Service Inquiry is broadly comparable to the GB Annual Business Inquiry and was first undertaken in Prior to this date the only data on services in Ireland came from the one-off 1988 Census of Services. Until the reference year 1995, the Annual Services Inquiry only surveyed the Business Services sectors on a three year rotating basis but from 1996 onwards Business Services were covered annually. 25

41 ! So far as NI is concerned, bearing in mind that ROI has just over twice the population, it is interesting that ROI s computer services sector was 4.3 times larger than NI s in ! However, the computer services sector in ROI was still smaller than in Scotland, Greater Manchester and West Midlands (county) in 1997.! And Berkshire, the UK s leading county, had twice as many computer services employees (20,460) as ROI in Thus, we can say that ROI had a large computer services sector by the standards of the UK s less successful regions, and that its growth in computer services employment during was unsurpassed in the UK regions and sub-regions. Nevertheless, the size of ROI s computer services sector in 1997 was still quite modest in comparison with the leading UK counties and regions. National Software Directorate Statistics 14 Although the above comparison of Division 72 employment, as measured by official statistics, is the only like-with-like comparison available, there are two problems. First, since Annual Service Inquiry data beyond 1997 have not been published, the comparison is rather dated. Second, there are other figures in the public domain, published by the National Software Directorate, that give a much higher estimate for employment in the Irish software industry and a series of data covering (refer Table 8). According to the National Software Directorate, employment in the Irish software industry increased from just under 8,000 in 1991 to almost 25,000 in This sustained expansion equates to a compound annual growth rate of 15.6 per cent. Another interesting point revealed by the NSD statistics is that employment in the indigenous Irish component of the software industry has kept pace with employment in the foreign-owned sector throughout the 1990s (Table 8). 13 Indeed, the Republic s computer services employment in 1997 was 2.4 times larger than Northern Ireland s was in The National Software Directorate was established in 1991 to co-ordinate the work of various government bodies with an interest in developing the software industry. Initially a free-standing body, the NSD was brought under the umbrella of Enterprise Ireland in 1999 and renamed the National Informatics Directorate shortly afterwards. 26