Northern Devon ESB Employment & Skills Analysis. Produced by Marchmont Observatory

Transcription

1 Northern Devon ESB Employment & Skills Analysis Produced by Marchmont Observatory June

2 CONTENTS Contents... 2 Executive summary... 4 Economic context... 4 The workforce... 4 Employment... 5 Young people s skills... 6 Workforce skills... 6 Workforce development... 7 Future jobs growth... 7 Demographic change Introduction Policy Context Skills policy Demand-side funding The Heseltine Review HoSW Skills Strategy Employment policy Economic context Gross Value Added (GVA) Wages Vacancies Enterprise and business survival The Workforce Industrial structure Knowledge-Intensive Sectors Public sector employment Occupational structure Employment Employment rates Part-time working Part-time working by age Part-time working by gender Underemployment Temporary and self-employment Unemployment and Economic inactivity Northern Devon

3 6.1 Economic activity Unemployment Claimant Count Census-based unemployment Long-term unemployment Youth unemployment Young benefit claimants NEETs Young People s Skills Young people in jobs without training Qualifications attained by young people Achievement at GCSE Achievement at A level Qualification levels at age Higher Education Graduate retention Workforce Skills Adult qualifications Higher-level skills Lower-level qualifications Intermediate-level qualifications Skills shortages and skills gaps Skills Shortage Vacancies Skills gaps Workforce Development Employer perspectives Employee perspectives Projections Occupational change Industrial change Expansion demand Replacement demand Total requirement Demographic Change Northern Devon 3

4 EXECUTIVE SUMMARY This Employment and Skills Analysis Report describes the economic, employment and skills context of Northern Devon that will shape and drive the priorities of the Northern Devon Employment and Skills Board (ESB). Economic context In terms of GVA, the Northern Devon ESB area 1 experienced growth of 15% between 2002 and 2012, compared with a rise of 16% in both the UK and the former South West region. However, this disguises a more complex picture, with North Devon district experiencing 20% growth compared with just 6% in Torridge over this period. This is also reflected in the earnings of people living and working in North Devon and Torridge, with the average weekly wage for people working in Torridge 60% of the average ( 440) for England and 76% of the average for North Devon district ( 344). This disparity between North Devon and Torridge is also seen when looking at job vacancies, with more than twice as many claimants chasing each job in Torridge (5.2) as there are in North Devon (2.5). A lack of lending, lack of business confidence and lack of demand have also combined to seriously dampen the local entrepreneurial activity. Since 2008, Northern Devon s business demography has changed dramatically. In all, the number of active businesses in Northern Devon fell by 4% between 2004 and 2011 (from 6,480 to 6,220 businesses), compared with a growth of 8% in England as a whole. The workforce The industrial structure of Northern Devon reflects that of the UK as whole, with Retail, Health, Education and Construction the largest employment sectors. However, Northern Devon also has a higher than average proportion of employment in a number of less productive sectors which are also associated with lower pay rates. Retail & wholesale; Construction, Food & beverage services, and Accommodation account for a higher proportion of employment than nationally. At the same time, there is a notable absence of local employment in a range of highly productive services. In 2011, only 44.5% of Northern Devon s population was employed in Knowledge-Intensive sectors (KIS) compared with 49% across the Heart of the South West (HoSW) and 53% across England as a whole, representing a significant gap. Northern Devon has a lower level of employment among Professionals and associate professional occupations (30% of employment, compared with 39% across the Heart of the South West and 44% across England), reflecting its sectoral composition, whereas the proportion of employment in the Skilled trades is over twice the national average. 1 Official GVA data at District Level does not exist. The data discussed here is modelled by Oxford Economics and can be reviewed via Tab4 - GVA per FTE, of the accompanying Excel Workbook. Source: HoSW Economic Model, Oxford Economics. 4 Northern Devon

5 Northern Devon does contain clusters in a number of small but highly productive sectors, which could form the basis for strategies focused on smart specialisation. Notable concentrations of employment exist in: Pharmaceuticals; Electronics & electrical equipment; Agriculture, forestry & fishing; and the Arts. Future jobs growth is forecast to come primarily from Retail (+900 jobs), Residential & social care (+1,000 jobs), Business support services (+1,000 jobs), Health (+2,100 jobs), Food & beverage services (+2,600 jobs) and Construction, which is projected to add an impressive +4,100 jobs. Despite austerity measures, employment in both Health and social care is also forecast to grow relatively strongly in both the medium and longer term. Employment The Northern Devon ESB area has a relatively high employment rate with 74% of the working age population in employment, higher than the average for England as a whole (70.7%). Again, a significant disparity is evident with North Devon district having an employment rate of 80% compared with Torridge with an employment rate of around 66%. According to Census data, there has been a significant rise in the proportion of people working part-time in both Torridge and North Devon districts which rose from 29% in 2001 to 34% in The proportion of workers experiencing underemployment in Devon is high, at 11.9% in the year to September This is the equivalent of there being 39,000 underemployed workers within the county. Northern Devon has a higher than average proportion of residents in self-employment and in temporary employment. In 2012, 5% of residents were in temporary employment, and up to 23% of residents were self-employed, a higher rate than nationally and regionally. Economic activity is significantly higher in North Devon (80%) than it is in Torridge (73%). In February 2013, 2.7% of working age adults in Northern Devon were claiming Jobseeker s Allowance (JSA). This is the same rate as that for HoSW (2.7%) but significantly below the rate for England as a whole (3.8%). However, claimant unemployment has risen significantly post recession. A cause for concern is the fact that this gap is widening in terms of claimant unemployment between Torridge and North Devon. There is, predictably, a seasonal pattern to unemployment in Northern Devon. Long-term unemployment (12 months +) had risen from 9% of all claimants (Feb 2011) to 20% by February This hardening of unemployment is one that can have a lasting legacy, as long-term unemployment is normally slowest to fall during periods of economic recovery. Young people were more than two-and-a-half times more likely to be unemployed than people of prime working age and more than five times more likely to be unemployed than people aged 50 to 64. In March 2013, 6.7% of 18 to 24 year olds were claiming JSA. The youth claimant unemployment rate in Torridge was 8.2% SA, compared with 5.7% in North Devon. 5.8% of Northern Devon 5

6 young people in Devon aged 16 to 18 were NEET (Not in Education, Employment or Training), slightly below the national average (6.2%). Young people s skills Young people are remaining in education for longer and entering the workforce later, achieving greater numbers of qualifications at higher levels than has previously been the case. Participation rates for 16 and 17 year olds exceed the England average (88%) in Devon (90%), with participation increased by eight percentage points in Devon, between 2007 and 2011, entirely due to a rise in the number of young people staying on in full-time education. However, despite rising Apprenticeship numbers, the proportion of young people entering work-based learning is falling, from 7% of the cohort in Devon in 2007 to 6% in Data also suggests that the rise in Apprenticeships has largely been achieved through converting jobs without training into jobs with training. In March 2013, 10.7% of young people in Devon were in jobs without training, higher than the national figure of 4.9%. This may be a reflection of the relative availability of informal work locally, particularly within smaller companies. In Devon in 2012, 58.5% of young people achieved five GCSEs at grades C and above including English and Maths compared with 44.7% in In 2012, 84% of young people in Devon attained Level 2 2 by age 19 compared with 82% in 2011 and 68% in In the same year, 53% attained Level 3 by age 19, compared with 52% in 2011 and 43% in These trends are replicated nationally and in other parts of HoSW. It will be interesting to track this trend in future, as the total cohort of 16 year olds in Devon is projected to decline dramatically in the future, falling by 14.5% from 8,900 in 2012 to 7,600 by Thus, over 40% of young people in Devon still do not attain five GCSEs including English and Maths at Year 11 and 18% of 19 year olds emerge from the education and training system without a Level 2 qualification, which is increasingly seen by employers as a benchmark for employability. Finding ways of engaging this sizeable minority remains an important and considerable challenge. Workforce skills Northern Devon s economy is becoming more knowledge-intensive, with rapid employment growth among Managerial and Associate professional occupations. The value of qualifications to employers is evident in the strong links that exist between educational attainment and wages and employability. In 2010, the median hourly earnings of 22 to 64 year olds with degrees was 85% higher than the earnings of those whose highest qualification was a GCSE. In 2011, the Labour Force Survey unemployment rates for people in HoSW who were qualified to Level 4 and above (3.9%) was around a quarter of the rate for people with no qualifications (15.1%) and less than half (45%) the rate for people whose highest qualification was a Level 1. In terms of workforce skills, 31% of people in Northern Devon have qualifications at Level 4 and above, lagging behind the national average by 3.3 percentage points. Torridge lagged behind 2 Equivalent to five GCSEs at grades A* to C or higher 6 Northern Devon

7 the national average by -10 percentage points, a very considerable margin. At the other end of the spectrum, the proportion of people with lower levels of skills has been falling. The proportion of people whose highest qualification is either at Level 2 or at Level 3 has remained relatively static in Northern Devon over the last three years. In 2012, 77% had a Level 2 (slightly above the national average) while the proportion holding qualifications at Level 3 and above (52%) appears to be slightly below the national average (54%). Once again, the proportion of people with a qualification at Level 3 and above in Torridge was significantly below that for North Devon. The incidence of skills shortages (900 Skills Shortage Vacancies across Devon) is low, whereas 18% of employers in Devon reported skills gaps. Thus around 16,000 people in Devon, or 5% of all employees, are reported by their employer as being not fully proficient in their jobs. A wide range of skills are reported as being lacking, including both hard skills, technical and practical job-specific skills, and soft skills, such as customer-handling, team-working and planning and organisation skills. Workforce development In terms of workforce development: 43% of enterprises in Devon have no business plan; 71% have no budget for training; 41% do not carry out annual performance reviews; and 37% of enterprises do not undertake any form of training for staff (including informal training). If the adoption of such policies and practices is considered characteristic of good business practice, it is clear that a great many enterprises in Northern Devon, as well as elsewhere, still have some way to go. The proportion of the workforce receiving training is below the national average and has declined in line with national trends. Future jobs growth The expectation is that the economy will continue to become increasingly knowledge-intensive, requiring increasing numbers of people with higher-level skills, at Level 4 and above. However there will be a continuing demand for elementary and service sector jobs. Working Futures forecasts that, between 2010 and 2020, the total number of people employed in the HoSW LEP area will rise by 61,000 (or by 8%), from 763,000 to 824,000, entirely due to expansion in the three higher-level occupations. Employment within HoSW is projected to grow fastest in: Real estate (49%); Water & sewerage (+39%); Professional services (+37%); Arts & entertainment (+37%); Construction (+26%) and Accommodation & food (+22%). Employment is projected to fall in: Engineering (-19%); Food & Drink 3 (-17%); Public administration & defence (-10%); and the Rest of Manufacturing (-6%). Replacement demand, caused by people leaving a sector to retire or take up work in another sector, is considerably greater than expansion demand. Between 2010 and 2020, there will be a 3 Which includes Food and Drink processing Northern Devon 7

8 need to replace between 36% and 45% of all employees in all sectors in HoSW. Adding expansion and replacement together and looking at the total employment requirement for different sectors between 2010 and 2020, the sector that tops this scale is Real Estate (projected to need to recruit the equivalent of 93% of its existing workforce between 2010 and 2020). Water & sewerage; Professional services; Arts & entertainment; Accommodation & food and Construction are all projected to have a total net requirement equivalent to 65% of the current workforce or higher. The largest net requirements will be in: Wholesale & retail (56,000); Health & social work (44,000); Construction (36,000); Professional services (35,000); and Accommodation &food (34,000). Demographic change In Northern Devon in 2011, the population of 60 to 64 year olds (12,756) was 75% larger than the population of 25 to 29 year olds (7,284), while the average number of people aged between 40 and 64 was 46% higher than the average number of people aged between 15 and 39. This is accounted for by the large cohort of baby-boomers that is approaching retirement age. There is also an exodus of young people - probably those young people who are most educated and mobile from Northern Devon. This demographic profile also has consequences for education providers and schools who are, in effect, living through a period when their market is shrinking. 8 Northern Devon

9 1. INTRODUCTION This report has been produced at the request of the Heart of the South West Local Enterprise Partnership (HoSW LEP) Skills Strategy Group. Its purpose is to describe the economic, employment and skills conditions prevalent in the Northern Devon Employment and Skills Board (ESB) area: the context that will shape and drive the priorities of the Northern Devon ESB. The report does not make recommendations on possible priorities or interventions or explore how partners might go about improving the situation we describe. That is a separate task. However, we hope that this report will make that task easier by providing some of the evidence needed to make these difficult decisions. This report updates our previous Employment and Skills Analysis for the Heart of the South West, written in On this occasion, we have taken a more analytical approach and have provided the data that supports the analysis in an accompanying Excel workbook. This workbook (or data cube) can be found at It allows users to select their own data, to drill down into local areas and to benchmark against different geographies. For convenience, this document references the tabs in this workbook, leaving the workbook to reference original data sources. 4 The HoSW Employment & Skills Analysis 2011 is available at Northern Devon 9

10 2. POLICY CONTEXT 2.1 Skills policy In 2011, employers in England were estimated to have invested a total 42 billion 56 in developing the skills of their workforce. Of this, less than 2% was spent on fees to external training providers. Although this is a small proportion, it equates to roughly one quarter of the Skills Funding Agency s annual 4 billion budget. For the Coalition, this signals two things: the central role that employers must play in developing the skills that they and the UK as a whole need to remain competitive; and the scope that exists for growing employer-responsive training, compensating for the fact that government spending on skills is due to fall by 25% over the 2011/12 to 2014/15 Spending Review period. The fact that just 2% of Further Education (FE) income is also contributed by employers is further cited as evidence of a mismatch between the content of provision and the needs of employers 7. If this alignment could be improved, financial savings need not come at the cost of reduced training levels. The emphasis of policy, until the recent Heseltine Review, was therefore placed on reducing bureaucracy; removing unnecessary interference from intermediary agencies whether local, regional or national; removing unnecessary regulation; and, introducing new freedoms and flexibilities 8 ; in short, on cutting the supply side free to deliver programmes that employers and individuals either want or need Demand-side funding Successive Governments have argued that society, individuals and employers all benefit from investments in skills and learning and that they should therefore share responsibility for bearing the costs. The balance of where the benefits lie varies, depending on the type and level of the training, generating a central policy question: how much of that responsibility should sit with whom and for what kinds of programme? Today, this question is being asked in the shadow of the Coalition s austerity programme, which means that individuals and employers are being asked to take increasing responsibility for investing in training, particularly in areas where the individual and institutional returns are clearest. 5 This includes salary costs for time spent training. 6 Employer Skills Survey 2011, UKCES, No Stone Unturned in Pursuit of Growth The Heseltine Review, BIS, Investing in Skills for Sustainable Growth - Further Education New Horizon, Nov 2010, BIS, p Northern Devon

11 From 2013/14, people aged 25 and over will need to take out a loan to cover the cost of learning at Level 3 and above. As with loans for Higher Education (HE), these will be repaid once the learner is earning more than 21,000 a year. For Advanced and Higher Apprenticeships, loans to individuals will be capped at 50% of the Apprenticeship costs, reflecting an assumption that employers will contribute the rest, though this is for negotiation between individual employers and their employees. Fully-funded training is being focused on: learners with very low levels of skills; young people aged 19 up to 24 working towards full qualifications up to Level 3; literacy and numeracy skills; and adults on benefits who need training to Level 2 to help them find work 9. Adults re-training towards Level 2 qualifications in the classroom or at work (e.g. via Intermediate Apprenticeships) will be co-funded, with government sharing the cost with individual employees and/or their employers. This growing use of loans and co-funding 10 is not just a way of saving money. Putting purchasing power in the hands of employers and individuals is also consciously designed to encourage greater supply-side responsiveness. This is most evident in the Employer Ownership Pilot, which will shift 340m of Skills Funding Agency (SFA) funding over to the demand side by 2015/16. Applications will only be funded if they: are made by employers (with support from LEPs, ESBs and providers); lever in additional employer investment, and align directly to employer needs at the local or sectoral level The Heseltine Review The 2012 Heseltine Review represents a significant shift in the emphasis of English skills policy. The critique of the current system is familiar: Unfortunately, as a whole, the system is not delivering what the economy needs. The current system does not incentivise FE providers to run the courses that deliver the greatest economic benefit In most instances, skills funding flows to the courses that students demand and which colleges can fill. It is hardly surprising then, that there is often a mismatch between the skills being taught and the skills that employers are demanding or the jobs likely to be on offer. This either results in employers needing to retrain students, or not being able to fill vacancies 11. For Heseltine, Employer Ownership Pilots are steps in the right direction but nowhere near comprehensive or far reaching enough. Fixing a piecemeal system that lacks coherence must extend well beyond removing targets and bureaucracy or promoting freedom and flexibility 9 Adults on benefits who are aged 24 and over will need to take out a Learning Loan for training at Level 3 or above. 10 Co-funding is used to refer to programmes for which employers and individuals pay for part of the training costs. 11 Heseltine, M. No stone unturned in pursuit of growth, BIS, 2012, p. 168 Northern Devon 11

12 and will not be achieved without devolving a significant proportion of the central skills funding to local areas, and allowing business a far stronger influence in what is provided. 12 The key recommendations are to: devolve budgets for vocational learning for people aged 19 plus and for careers advice to local areas via a single funding pot ; and require all FE learning providers to consult and agree their 16 to 18 provision with LEPs to ensure this reflects local labour market requirements. Although the Government is still considering how far to go in devolving budgets, it has committed to giving LEPs a new strategic role in skills policy in line with the recommendations of the Heseltine Review 13. LEPs are now charged with: aggregating and articulating employer demand for training; developing business and skills plans that set out these needs; using these plans as a basis for o o negotiating with the supply side; unlocking government growth funds for local investment; and ensuring employer needs are met. Since responding to the Heseltine Review, the Government has charged LEPs with designing and delivering strategies on how to use c 5bn of EU funding for skills and economic development between 2014 and There is no suggestion of a return to a planned approach, with targets setting out volumes of provision to be delivered at different levels or for different sectors. The emphasis is remains firmly on being demand-led. What is new, however, is the requirement to evidence and articulate this demand and to accord it some measure of priority for investment within a strategic plan HoSW Skills Strategy HoSW LEP is in the process of developing its Skills Strategy. The draft strategy 15 opens by noting that the LEP covers a broad geography with diverse economies. It then goes on to devolve much responsibility for identifying skills priorities to the five ESBs in the HoSW LEP area. These ESBs now need to: liaise with employers; 12 No Stone Unturned in Pursuit of Growth, M. Heseltine, H.M Government, October Autumn Statement The budget is yet to be agreed. In the previous programming period, covering , England received 2.5bn of European Social Funding and 2.8bn of European Regional Development Funding. 15 At the time of writing, the available draft was the HoSW Skills Strategy Paper 1, January Northern Devon

13 ensure that good information exists on the match between demand and supply; and develop action plans for meeting skills needs, which reflect the needs of their area. ESB action plans will need to be consistent with the overall HoSW Skills Strategy, which is to be developed and maintained by a HoSW LEP Skills Group principally drawn from representatives of the five Employment and Skills Boards. The onus of understanding local economic conditions and the employment and skills needs that arise from them therefore lies squarely with ESBs. It is for this reason that this report is focused at the ESB level. 2.2 Employment policy The fact that LEPs are responsible for creating both jobs and growth presents them with a dilemma: where to strike the balance between the two? Areas with high levels of employment but low productivity could focus on supporting highly productive sectors of the economy, while areas with high unemployment may choose to place greater emphasis on job creation and employment-intensive growth. The point about localism is that it devolves authority to those best placed to strike this balance - HoSW s LEPs and ESBs. Having said that, unemployment remains at high levels across all areas and LEPs are increasingly being given responsibility for delivering strategies focused on assisting those who are unemployed and disadvantaged back into work 16. It is, therefore, important within this report to consider employment and, very briefly, employment policy. The twin pillars of the Government s employment policy - the Work Programme and Universal Credit - are concerned with supporting people into sustained employment that enables them to live independently of the State. A focus on preventing unemployed people from churning in and out of work, combined with a desire to reduce spending on in-work benefits, means that Jobcentre Plus and Work Programme providers are no longer just concerned with helping people into work. Work Programme providers are rewarded after their clients have remained in work for longer than three or six months, while Jobcentre Plus now supports claimants of inwork benefits by identifying training or other steps that might enable them to advance to better paid employment. The sustainability, quality and rewards associated with work are new features of employment policy and are examined in this report. 16 As part of their EU remit, LEPs now have a responsibility to oversee the targeting and effective delivery of the European Social Funds in their area, which has a focus on supporting people who face disadvantages to find and remain in work. Northern Devon 13

14 3. ECONOMIC CONTEXT This report is written in May 2013, following the release of GDP figures showing growth of 0.3% in the first quarter of Although this was better than expected and it means that the UK has avoided a triple-dip recession, national output remains 2.6% below its 2008 peak. The economy has recently been described by the Office for National Statistics (ONS) as being "broadly flat over the last 18 months" 17 and by the IPPR as "stuck in a rut" 18. Given this context, the Government s challenge to LEPs and ESBs, of generating growth and jobs, is considerable. But, so far, recessions have never lasted forever. Capital goods eventually wear out, generating a need for corporate investment, while individuals and banks eventually conclude that they have paid down their debts sufficiently to start spending and lending again. This may seem some way off, given the squeeze on demand caused by high inflation and near static wages. And when growth does return, it is unlikely to rise to the levels seen in the creditfuelled noughties. But LEPs and ESBs need to plan for growth now, for a time when labour markets tighten and skilled staff will be a lot harder to find. 3.1 Gross Value Added (GVA) GVA data for Northern Devon 19 suggests that the economy grew by15% between 2002 and The UK and the former South West region both saw GVA rise by16% over this same period. However, behind this headline statistic lies a more complex picture. Firstly, while North Devon district prospered, experiencing 20% growth, Torridge saw only 6% GVA growth over this whole 10-year period. Secondly, while the economy in North Devon district grew rapidly between 2002 and 2007, it has declined rapidly (by -11%) between 2007 and The more self-contained economy within Torridge also declined (by -6%) between 2007 and In both districts, the decline was higher than the national and regional averages (-3%). GVA is driven by both the number of people working in each area and the amount they each produce. Taking account of differences in employment growth reduces the disparity between Torridge and North Devon slightly, but not enough to change the overall picture. GVA per Full- Time Employee (FTE) 20 in Torridge rose 7% between 2002 and 2012, while it grew by 18% in North Devon and 12% across the UK. 17 Office for National Statistics IPPR Press Release, 25 th April 2013, 19 Official GVA data at District Level does not exist. The GVA data discussed here is drawn from the Local Economy Forecasting Model produced (LEFM) by Cambridge Econometrics. Please note that the LEFM does not produce data for GVA per FTE. This is sourced from the HoSW Economic Forecasting Model produced by Oxford Economics. 20 See Data Cube, Tab1 - GVA m, Source: HoSW Economic Forecasting Model, Oxford Economics and Tab2 - GVA m, change, Source: HoSW Economic Forecasting Model, Oxford Economics 14 Northern Devon

15 Yet, even this hides the key issue, which is that GVA per FTE in Torridge ( 32,306) is lower than it is in any other part of HoSW and falls well short of the levels found in North Devon ( 39,361) and across the LEP ( 41,396). In short, Torridge was lagging behind in 2002 and was lagging further behind in Wages Unfortunately, these GVA figures are reflected in the earnings of people living and working in North Devon and Torridge. In 2012, the average weekly wage for people working in Torridge was 264 per week. This was 60% of the average ( 440) for England and 76% of the average for North Devon district ( 344) 22. It is interesting to note that the differential shrinks when one compares the earnings of the resident populations, rather than working populations. The weekly earnings of people resident in Torridge ( 314) are 90% of those resident in North Devon ( 346), due to people commuting out of Torridge into North Devon and other locations to take up better-paid jobs. Making sure that Torridge is an attractive place in which not only to live, but also to work and do business, is clearly a central challenge for the area. 3.3 Vacancies Until November 2012, Jobcentre Plus published monthly data on the volumes of vacancies that were notified to them by employers. Although only around 30% of all vacancies were notified to Jobcentre Plus, the data is still worth reviewing as a broad indicator of the availability of work. Between 2005 and 2007, there were, on average, 826 live unfilled vacancies in the Northern Devon ESB area available via Jobcentre Plus. This had fallen to an average of 530 vacancies over the five years from 2008 and and 2010 were particularly bad years, with an average of 446 and 465 vacancies available per month respectively. Since then, there has been a modest recovery to 510 vacancies per month in 2011 and 600 per month in In 2012, 71% of these vacancies were located in North Devon district, an area that accounts for 57% of the working age population. 21 See Data Cube Tab4 - GVA per FTE, Source: HoSW Economic Model, Oxford Economics and Tab5 - GVA per FTE, change, Source: HoSW Economic Model, Oxford Economics 22 See Data Cube, Tab6 - Earnings, Source: HoSW Economic Model, Oxford Economics 23 See Data Cube Tab7 - Vacancies, live unfilled, Source: Jobcentre Plus Administrative Data Northern Devon 15

16 A seasonal pattern is also evident in the data. On average, 780 vacancies were available in the summer months (April to September) between 2005 and 2012, compared with 640 in the winter. This seasonal pattern is also evident in the unemployment data considered later in this report. Looking at the number of vacancies per person claiming Jobseeker s Allowance (JSA) 24 provides a useful rough measure of the level of competition for employment that exists for jobs in different local labour markets. In Spring 2008, before the recession when the labour market was tight, there were around 1.8 people claiming JSA in Northern Devon for each available vacancy. At the peak of the credit crunch, between December 2008 and March 2009, when recruitment effectively froze, this ratio rose dramatically, to over eight claimants per vacancy. It fell back relatively rapidly thereafter, settling at around four to five claimants per vacancy through 2010 and Unfortunately, the data series ends in November The final figures available show this ratio falling to 3.4 claimants per vacancy between June and November In other words, it suggests that while there appears to have been a slight improvement in the availability of work through the latter part of 2012, it has not returned to pre-recession levels. Those out of work are thus finding it hard to work. Once again, there is a huge disparity between North Devon and Torridge, with more than twice as many claimants chasing each job in Torridge (5.2) as there were in North Devon (2.5) 25. The relative lack of work in Torridge is once again highlighted, raising all manner of issues around the mobility of claimants and low-paid labour. 3.4 Enterprise and business survival Since 2008, reduced levels of consumer demand, lack of confidence and reduced bank lending have had a dramatic effect on Northern Devon s business demography. The scale of the decline in bank lending is worth considering. Despite the efforts of the Government, UK bank lending to businesses 26 fell by -16.2% in the year to December 2009, by a further -7.2% in the year to December 2010, by a further -4.4% in the year to December 2011 and by another -5.6% in the year to December The cumulative impact of these falls is that the total stock of bank lending to businesses is now 70% of what it was before the recession. As banks have withdrawn lines of credit to existing businesses and imposed stricter conditions on loans to start-ups, the number of business births has fallen while the number of deaths has risen, reducing the overall business stock. The Northern Devon ESB and HoSW LEP areas have both been hard hit by this dynamic. 24 See Data Cube, Tab8 - Claimants per Vacancy (timeseries), Source: nomis 25 See Data Cube, Tab9 - Claimants per Vacancy (local authority comparison), Source: nomis 26 Other than real estate 16 Northern Devon

17 In 2004, Northern Devon was home to 900 business births and 640 business deaths, a net gain of 260 active businesses. In 2011, the number of business births had fallen by 53%, to 480, while the number of business deaths had fallen just 19%, to In all, the number of active businesses in Northern Devon fell by 4% between 2004 and 2011 (from 6,480 to 6,220 businesses). HoSW saw a fall of just 0.5%, while England saw growth of 8%. Why exactly Northern Devon should have been hit so hard is not entirely clear. The proportion of businesses surviving for more than one year has gone down substantially: 96.9% of businesses born in 2004 survived more than one year compared with 89% of businesses born in But the local survival rate has remained consistently above the national average throughout this period 28. Statistically, the main cause has been a dramatic decline in the number of business births, which fell from 14% of the total business stock in 2004 to 8% in 2011 locally, compared with a decline from 13% to 11% nationally. The inference is that a lack of lending, lack of confidence and lack of demand have combined to dampen seriously the local entrepreneurial spirit. It is also the case that a high level of business creation and destruction is a feature of many of the most productive economies. It is, therefore, a concern to note that, as a proportion of the population, the number of business births in Northern Devon is extremely low. According to the Experian resilience rankings, Torridge and North Devon are the two worst performing areas in the country on this measure, with Torridge ranked 324 th out of 324 local authorities and North Devon just above them at 323 rd. 27 See Data Cube, Tab10 - Business Births & Deaths, Source: ONS 28 See Data Cube, Tab11 - Business Survival, Source: ONS Northern Devon 17

18 4. THE WORKFORCE 4.1 Industrial structure Although factors such as the scale or capital intensity of production are important, geographical variations in output are largely the result of differences in local economies industrial structure. Many of the largest sectors in Northern Devon are the same as those found across the UK. Retail, health, education and construction are among the largest sectors, measured in terms of employment, in both areas. However, Northern Devon also has a higher than average proportion of employment in a number of less productive sectors, such as: Retail & Wholesale (which account for 16.7% of employment in Northern Devon, compared with 13.5% across the UK); Construction (8.2% locally compared with 6.4% across the UK); Food & beverage services (6.1% compared with 5.2%); and Accommodation (4.6% compared with 1.4%) 29. These sectors contain large numbers of poorly-paid jobs. There is a notable absence of local employment in a range of highly productive services, such as Financial & insurance services (which accounts for 1% of employment locally, compared with 3.6% nationally) and IT services (0.6% compared with 2.8%). The large Business services sector is also underrepresented. Having said that, Northern Devon contains clusters in a number of small but highly productive sectors, which could form the basis for strategies focused on smart specialisation. Notable concentrations of employment exist in: Pharmaceuticals (which accounts for 0.7% of employment in Northern Devon, compared with 0.1% across the UK); Electronics and electrical equipment (1.5% of employment in Northern Devon compared with 0.7% nationally); Agriculture, forestry and fishing (3.0% compared with 1.3%); and The Arts (1.8% compared with 1.0%). Looking back over the period from 2002 to 2012, the sectors that added the greatest number of jobs in Northern Devon were Education (+800 jobs), Health (+800 jobs) and Food & beverage services (+700 jobs) and Wholesale (+700 jobs). Employment in the Pharmaceuticals and 29 Data in this section is sourced from the Cambridge Econometrics Local Economy Forecasting Model, developed for Devon County Council. 18 Northern Devon

19 Electronics sectors was more or less static. Agriculture, forestry & fishing lost around 1,500 jobs. The sectors that are forecast to add the most jobs between 2012 and 2025 are: Retail (+900 jobs), Residential & social care (+1,000 jobs), Business support services (+1,000 jobs), Health (+2,100 jobs), Food & beverage services (+2,600 jobs) and Construction, which is projected to add an impressive +4,100 jobs. The 76% expansion forecast for construction-related employment is surprising (nationally, 30% expansion is forecast) unless it includes assumptions about the success of local residents in securing employment at Hinckley Point. 4.2 Knowledge-Intensive Sectors Knowledge-Intensive Sectors (KIS) are often highlighted as being particularly important to an economy. They are typically highly productive, have high levels of innovation, demand a highlyskilled workforce and are commonly seen as having high growth potential. The definition of the KIS is given at the bottom of this page 30. In 2011, Northern Devon had 44.5% of its population employed in KIS compared with 49% across HoSW and 53% across England as a whole 31. This is a significant gap. The gap is due to low levels of employment in the: knowledge-intensive services, which includes Health and Education, and high-tech knowledge-intensive service sectors, such as Telecommunications, Computing and R&D. Knowledge-intensive services accounted for 38.5% of employment in Northern Devon, compared with 42.2% in HoSW and 45.7% across England; while High-tech knowledge-intensive service sectors accounted for 1.4% of employment locally, compared with 2.8% across HoSW and 4.4% nationally. It is interesting to note that the proportions of employment found in both High-tech manufacturing (0.6%) and in Medium-high tech manufacturing (4.0%) within Northern Devon was higher than that found in HoSW (0.4% and 3.7%, respectively) and England (0.4% and 2.5%, respectively). This data source again indicates the presence of a relatively high-tech cluster of local manufacturing, which could form the focus for strategic sector-based support. 30 The Knowledge-Intensive Sectors listed below. High-technology manufacturing Manufacture of pharmaceuticals and medical, precision and optical equipment. Manufacture of office machinery (including computers), televisions and communications equipment. Manufacture of aircraft and space craft. Medium high-technology manufacturing Manufacture of chemicals, machinery and equipment (including electrical machinery), motor vehicles and other transport equipment. High-tech knowledge-intensive service Telecommunications, computer activities and research and development. sectors Knowledge-intensive service sectors (excl high-tech knowledge-intensive services) Water and air transport, financial services, property and other business services, education, health and recreational services. 31 See Data Cube, Tab12 - % of Employment in Knowledge Intensive Sectors, Source: nomis Northern Devon 19

20 Looking back, the data suggests that employment in KIS fell by -0.8 percentage points in Northern Devon between 2008 and 2011, while it rose by 1.6 percentage points across HoSW and by 1.2 percentage across England. The fact that this decline was primarily due to a fall in employment in the two Manufacturing KIS is a concern, although care is required, due to the large confidence intervals that exist for this data. 4.3 Public sector employment Between 2002 and 2012, Education and Health each contributed more to jobs growth in Northern Devon than any other sector. Given the current austerity measures, one might anticipate such growth to decline. However, the forecasts suggest that employment in both Health and Social care will continue to grow relatively strongly in both the medium and longer term, driven by an ageing population and advances in health technologies. Employment in Education and in Public administration & defence is forecast to fall. In the current circumstances, Northern Devon ESB might be considered fortunate to have comparatively low levels of public sector and high levels of private sector employment 32. The latest data suggests that 82.7% of local employment 33 is in the private sector. Although this figure is subject to large confidence intervals (+/- 5.5%), the proportion of private sector employment in Northern Devon has remained consistently higher than the national average (77.2%) for many years. The proportion of employment in the private sector in Torridge appears to be particularly high, at around 85%. This should provide the local economy with a measure of resilience in the face of fiscal austerity and mean that Northern Devon is fairly well placed to deliver a private-sector led recovery, as and when confidence and demand return. 4.4 Occupational structure The industrial structure of the Northern Devon ESB area is such that the proportion of people who are employed in higher-level occupations 34, is significantly lower than average 35. Annual Population Survey (APS) data suggests that 30% of employment in Northern Devon is in higherlevel occupations, compared with 39% across the HoSW and 44% across England. There is a particularly low level of employment among Professional and Associate professional occupations, both of which are prevalent in areas of the public sector (such as Health and Education) as well as in Financial & business services. The proportion of employment in the Skilled trades is very high, over twice the national average, reflecting concentrations of employment in Agriculture, Construction and areas of 32 See Data Cube, Tab13 - Private Sector Employment, Source: Annual Population Survey, ONS 33 This data, from the Annual Population Survey, is subject to confidence intervals of c5.5%. 34 These are Managers & senior officials; Professional occupations; and Associate Professional and & technical occupations. 35 See Data Cube, Tab14 - % of Employment in Higher-level occupations, Source: Annual Population Survey, ONS 20 Northern Devon

21 Manufacturing. There is also a higher than average incidence of employment in Elementary occupations. Although recent APS data suggests that growth in knowledge-intensive employment within Northern Devon is not accelerating as quickly as it is in other parts of the country, other data sources, which go further back, show a somewhat different picture. The Local Economy Forecasting Model suggests that, over the 30 years between 1981 and 2011, the proportion of employment in higher-level occupations rose from 26% to 38% 36, with growth fastest among Managers & senior officials and Associate professional occupations. It also suggests that Northern Devon has seen strong growth in the proportion of total employment in the Personal service occupations, which are common in the Health & social care sector, while the proportion of employment is falling in Elementary occupations, Plant process & machine operatives; Skilled trades occupations and Administrative & secretarial occupations. Looking forward, the occupations that the Local Economy Forecasting Model projects will grow fastest are: Health professionals; Science & technology professionals; Customer service occupations and Business & public service professionals. Significant growth is also forecast among Business & public service associate professionals and in the Skilled construction trades. It is notable that three of the four fastest growing occupational groups are in the higher-skilled occupations. 36 Defined as including: Managers & senior officials; Professional occupations; and Associate professional occupations. Northern Devon 21

22 5. EMPLOYMENT 5.1 Employment rates Between October 2011 and September 2012, 76% of the working age population of the Northern Devon ESB area was in employment. This was in line with the regional average but significantly higher than the average (70.7%) for England as a whole 37. There is a huge amount of variation within the ESB. North Devon district is extremely successful, keeping 80% of its economically-active residents in work. This is one of the highest employment rates within HoSW and is quite exceptional in European terms. Torridge, on the other hand, has an employment rate of around 66%, which is the lowest in the HoSW LEP area 38. As the Government is keen to point out, the total number of people in work across the UK has risen above pre-recession levels and is at an historic high. However, the working age population has also grown, and grown more quickly than employment, pushing down the national employment rate. In the year to October 2012, 70.7% of 16 to 64 year olds in England were in work, compared with 72.6% in the year to October Across the HoSW LEP area, the rate also fell, from 75.6% to 73.7%. Interestingly, the employment rate in Northern Devon appears to have held up well over the recession. Although large confidence intervals apply to the data, it appears that around 74% of working age adults olds living within the ESB area have remained in employment over the last five years. Having said this, it is important to note that employment rates vary significantly for different groups in society. While HoSW has an overall employment rate of 74%, this falls: to 69% for people aged 50 to 64; to 68% for women; to 64% for ethnic minorities; and to 54% for people with disabilities. Unfortunately, ESB-level data on this topic is unreliable. 5.2 Part-time working The surprising resilience of the UK labour market over the course of the recession has attracted considerable attention. Across the UK, there were 50,000 more people working in 2012 than there were in Yet, in 2012, GDP was 2% lower than it was in Why? commentators have asked, do we have more people working, but producing less? 37 See Data Cube, Tab16 - Employment rate (local authority comparison), Source: APS 38 The large confidence intervals attached to this data make it difficult to state that it is the lowest with any real certainty Northern Devon