Greater Manchester Forecasting Model

4 th December 2013 Professor Neil Gibson Special Advisor: Oxford Economics

Agenda

The key facts Changes since last release The outlook Assessing the risks Policy considerations & summary Our details & what is available

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3

The key facts

Greater Manchester - A vital component of the UK economy 2013

2.7 Million People

Employment

1.3 Million Jobs

Gross Value Added

£49 billion GVA

4

Source: Oxford Economics

A service sector economy

Greater Manchester Population & employment breakdown - 2013 Looking after family home 3% Student 3% Unemployed 3% Sick 4% Other 3% Child population 20% Manufacturing 8% Construction 6% Employed 49% Wholesale & retail 16% Public services 26% Other 20% Business services 24% Elderly population 15% 5

Source: Annual population survey, Oxford Economics

Services generate over half the wealth

Sectoral breakdown of GM’s 2013 GVA

£49 Billion Construction Wholesale & retail Manufacturing Other Public services Business services

0 5000 10000 15000 20000 25000

£m 2010

30000 35000 40000 45000 50000 6

Source: Oxford Economics

Manchester accounts for over a quarter of jobs

% of total GM Employment 2013 7

Source: Oxford Economics

… and GVA

% of total GM GVA 2013

Wigan 8.6% Bolton 7.9% Salford 10.1% Bury 5.0% Rochdale 5.9% Oldham 5.8%

Manchester 28.7%

Tameside 5.6% Trafford 11.6% Stockport 10.7%

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Source: Oxford Economics

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Changes since last release

Forecast changes modest – new starting points

Population Greater Manchester 2900 2850 2800 2750 1 0.9

0.8

0.7

0.6

■ As the chart shows there is little change to the population forecast 2700 2650 2600 2550 Last Release 0.4

0.3

0.2

0.1

0 2500 ■ 2000 2005 2010 2015 The total employment level in 2013 is some 58,000 jobs higher than that estimated in the last release, this figure 2020 could be subject to a downward revision in the future.

■ ■ Current expectations are that BRES will lead to a downward revision of 13,000 jobs.

The jobs forecast is very similar to last year, albeit from a high base.

Employment Greater Manchester 1440 1420 1400 1380 1360 1340 1320 1300 1280 1260 1240 2000 2005 2010 2015 Last Release 0.3

0.2

0.1

0 2020 1 0.9

0.8

0.7

0.6

0.5

Source: ONS, Oxford Economics

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Changes since last release

GVA Greater Manchester 6% 4% 2% 0% -2% -4% -6% -8% Current Release Last Release ■ ■ Our GVA growth outlook for the area is marginally more positive than the previous release.

GVA has been rebased to 2010 prices.

■ The unemployment outlook is somewhat more positive this year, with around 15,000 fewer claimants expected in 2023.

■ The latest data shows 2013 to have been better than expected ■ Welfare effect more muted than provisioned for, coupled with higher job numbers and less population

Source: ONS, Claimant Count, Oxford Economics

11 Unemployment Greater Manchester 100 90 80 70 60 50 40 30 20 10 0 2000 2005 2010 2015 Last Release 0.3

0.2

0.1

0 2020 1 0.9

0.8

0.7

0.6

0.5

Changes since last release

Summary of differences in 2013 2013 Bolton Bury Oldham Rochdale Stockport Tameside Trafford Wigan Manchester Salford Greater Manchester Population (000s) 0.3

-0.2

-1.6

-1.4

-0.2

-0.5

-0.5

-1.6

1.1

0.3

-4.4

Employment (000s) GVA growth (pp change) Unemployment (000s) 0.8

4.2

3.1

7.3

9.7

0.9

11.4

4.8

15.4

0.4

57.9

-0.3

-1.4

0.7

-1.6

-1.2

-0.2

-2.1

-1.0

0.3

0.8

-0.5

-0.8

-0.4

-0.7

-1.2

-0.5

-0.8

-0.4

-0.8

-2.0

-0.5

-8.1

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Source: ONS, Claimant Count, Oxford Economics

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The outlook

What’s the story? – The Outlook 2013 – 2023 growth

135,000 More People

Employment

100,000 Net New Jobs

Gross Value Added

£17bn More annual GVA

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Source: Oxford Economics

The regional picture - Above 3% growth projected

Per Annum GVA Growth 2013- 2023

Lower than Greater Manchester

Higher than Greater Manchester

Scotland 2.63% Greater Manchester 3.02% UK 3.34%

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Northern Ireland 2.6% North West 2.88% Wales 2.49% South West 3.0% East Midlands 2.87% East 3.23% London 3.48% South East 3.23% Rochdale 2.68% Bolton 2.86% Oldham 2.70% Bury 2.91% Tameside 2.50% Salford 3.32% Wigan 2.70% Stockport 2.94% Manchester 3.36% Trafford 3.01%

Recovery for all, but city economies do still lead

2008-2013 pa % growth 2013-2013 pa % growth Greater Manchester Greater Manchester 16

Service strength leading the forecasts

UK more heavily concentrated Greater Manchester more heavily concentrated 17 -1.5

Agriculture Information & comms Arts & entertainment Accommodation & food Construction Public admin & defence Other service activities Mining & quarrying Manufacturing Water supply & waste management Real estate Financial & insurance Electricity, gas & steam Human health & social work Professional, scientific & technical Education Transportation & storage Wholesale & retail Admin & support

-1 -0.5

0 0.5

Jobs change 13-23 pp. differnce (GM % - UK %)

1

Source: Oxford Economics

1.5

-200 +7800 +6200 +9800 +13200 -9200 5000 0 +11700 +500 +6400 +2300 -900 +1400 +26700 -4700 +8300 +13700 +27000

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Key drivers: Sectoral

GVA growth 2013-2023 – Greater Manchester (£m 2010)

Wholesale & retail Professional, scientific & technical Financial & insurance Information & comms Admin & support Manufacturing Construction Human health & social work Transportation & storage Accommodation & food Education Arts & entertainment Electricity, gas & steam Other service activities Water supply & waste management Public admin & defence Agriculture Mining & Quarrying -500 0 Non Domestic Domestic

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Source: Oxford Economics

500 1000 £2010m 1500 2000 2500

Note: Excludes real estate as this includes ownership of dwellings and imputed rents

The Outlook – key Local forecasts

Bolton Bury Oldham Rochdale Stockport Tameside Trafford Wigan Manchester Salford Jobs (000s) 2013 - 2023 per annum change GVA (% per annum) Population (000s) 0.7

0.5

0.4

0.4

0.9

0.2

1.0

0.5

3.9

1.5

2.9% 2.9% 2.7% 2.7% 3.0% 2.5% 3.0% 2.6% 3.4% 3.4% 1.2

0.8

0.9

0.5

1.0

0.6

1.0

0.7

4.8

2.2

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Source: ONS, Claimant Count, Oxford Economics

Sectoral focus – key business services

ICT, professional services, administration, accommodation & food and arts employment (000s) 500 Forecast 450 400 350

78,000 Jobs Greater Manchester

300 250 200

40,000 Jobs

150 100

Manchester & Salford

50 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 ■ Crucial ‘backbone’ of jobs recovery ■ Growth has been strong consistently in cities ■ ICT has upside risk 20

Source: Oxford Economics

Key Drivers: ICT and professional services

60 50 40 ICT employment (000s) Forecast

7800 Jobs Greater Manchester

■ Classification can be an issue – but strong growth in parts of the country ■ Expected to grow steadily ■ ‘Big Data’ and computerisation of more activities (law, consulting etc. could see re classification into this sector) 30 20 10

3600 Jobs Manchester & Salford

0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 ■ The primary source of job growth ■ ‘Catch-all’ sector for wide range of services – suggest breaking down where you can in policy circles ■ Remember outsourcing from other sectors – key to understand this sector 21

Source: Oxford Economics

Professional services employment (000s) 160 Forecast 140 120 100

26,700 Jobs Greater Manchester

80 60

14,600 Jobs

40 20

Manchester & Salford

0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Key Drivers: Admin and hotels sector

Admin & support employment (000s) 180 160 Forecast ■ Fast growing sector and likely to rise even faster as greater use of recruitment workers and outsourcing of activities 140 120 100

26,900 Jobs Greater Manchester

■ Needs ‘broken down’ to fully understand the local labour market – do you know what your agency workers do?

80 60

13,800 Jobs

40 20

Manchester & Salford

Accommodation & food employment (000s) 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 140 Forecast ■ Key sector for both tourism and consumer spending ■ Expected to recover in line with wider economy, but could do even better?

120 100 80 60

16,100 Jobs Greater Manchester

40 20

8,100 Jobs Manchester & Salford

Source: Oxford Economics

0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 22

Key Drivers: Summary

ICT, professional services, administration, accommodation & food and arts employment (000s) Bolton Bury Oldham Rochdale Stockport Tameside Trafford Wigan Manchester Salford Greater Manchester ICT 0.44

0.53

0.32

0.29

1.24

0.21

0.81

0.34

2.40

1.19

7.76

2013 - 2023 Employment Change (000s) Professional Administrative Arts & services 1.96

services 1.70

entertainment 0.64

1.32

0.79

1.59

2.29

0.87

1.01

1.28

3.00

0.39

0.28

0.27

0.54

1.00

2.38

0.87

0.59

2.44

2.40

0.27

0.73

0.70

12.32

2.20

26.72

8.79

4.93

27.02

1.86

0.57

6.25

Suggests the area has a specialism in this sector Total 4.73

3.11

2.40

3.43

7.07

2.07

6.36

4.31

25.38

8.89

67.74

UK LQ <1.2

UK LQ >1.2

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Source: Oxford Economics

Key drivers: The contrast in industrial jobs and GVA

250 200 150 100 50 0 Employment – Thousands Forecast 8000 7500 7000 6500 6000 5500 5000 GVA £m 2010 Forecast

12,000 Manufacturing job losses are forecast over the next decade, with per annum GVA growth of 2.2% expected.

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Source: Oxford Economics

A little more on manufacturing…

What Greater Manchester makes…

Top Manufacturing Sectors - Greater Manchester Employees

Manufacture of bread Manufacture of other furniture Machining Other printing Manufacture of made-up textile articles Manufacture of rusks and biscuits Manufacture of instruments Manufacture of other plastic products Manufacture of metal structures Manufacture of builders ware of plastic Manufacture of other food products n.e.c.

Manufacture of prepared meals and dishes Manufacture of soap and detergents Manufacture of office and shop furniture Manufacture of paints & varnishes Manufacture of medical and dental instruments Other manufacturing n.e.c.

Manufacture of corrugated paper Manufacture of grain mill products Manufacture of general-purpose machinery n.e.c.

5100 3500 3500 3000 3000 2700 2600 2200 2100 2000 1900 1700 1600 1600 1500 1500 1400 1400 1300 1200

GB LQ

1.72

2.09

0.94

0.76

3.35

2.64

1.13

1.23

1.01

1.29

1.56

1.70

4.20

2.05

2.32

0.87

1.14

1.32

3.04

1.17

LQ > 1.2

Source: Business Register Employment Survey

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Manufacture of bread tops the list of manufacturing sectors within Greater Manchester, with over 5% of total manufacturing employment coming from this sector.

Local specialisms – broad sectors

Manufacturing Wholesale & retail Real estate Human health Wholesale & retail Education Manufacturing Transport & storage Construction Education Construction Manufacturing

Rochdale Bolton Bury Oldham

Manufacturing Construction

Human health Wigan Salford Tameside

Admin & support Finance & insurance Info & comms

Trafford Stockport

Electricity, gas & steam Admin & support Professional services Finance & insurance Professional services Transport & storage

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Note: Specialisms = Top 3 LQs with over 1000 employees

Manufacturing Wholesale & retail Construction Electricity, gas & steam Other service activities Admin & support

Local specialisms – more granular

Construction of utility products Manufacture of other food products Processing of fruit & vegetables Manufacture of bakery products Manufacture of weapons Manufacture of other textiles

Bolton Wigan

Television & broadcasting activities Manufacture of basic chemicals Other human resources Wireless telecommunications Residential care Weaving of textiles

Bury Salford Trafford Rochdale Oldham Tameside Stockport

Wireless telecommunications Manufacture of other textiles Weaving of textiles Manufacture of jewellery Manufacture of electronic components Repair of personal goods Preparation of textile fibres Manufacture of games Manufacture of lighting equipment Manufacture of grain mill products Manufacture of locomotives Manufacture of refined petroleum products Other accommodation R&D on social sciences Educational & support activities

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Note: Specialisms = Top 3 LQs with over 100 employees

Manufacture of gas Satellite telecommunications Manufacture of irradiation equipment

Who is coming?

Demographic changes 2013-2023 Bolton Bury Oldham Rochdale Stockport Tameside Trafford Wigan Manchester Salford Greater Manchester Net Migration -4.2

-1.6

-5.1

-8.3

-0.4

-5.2

-2.1

-4.9

9.0

6.5

-16.3

2013 - 2023 change (000s) Natural Increase Population (OE) 15.9

9.4

14.4

13.1

10.0

10.9

11.7

11.4

38.6

15.6

151.3

11.8

7.8

9.4

4.8

9.6

5.8

9.7

6.5

47.6

22.1

135.0

Population (ONS) 24.4

16.4

13.7

10.3

18.8

17.8

24.1

21.3

56.5

30.0

233.3

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Source: Oxford Economics

Changing demographics

Greater Manchester population forecasts 2000 1800 1600 1400 1200 1000 800 600 400 200 0 29

Source: ONS, Oxford Economics

Working age population Young population Elderly population

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Assessing the risks

Assessing the risks



Is the recovery secure?



Consumer risk?



Public sector risk?



Investment risk?



And the rest?

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Consumer risk

Consumer industries employment change, Greater Manchester, 1998 - 2023

08-13 98-08 Arts & Leisure Accommodation & food Wholesale & retail

-3 2 7 12 -3 2 7

Jobs change (000s)

12 -3 2

13-23

7 12 32

Source: Oxford Economics

Components of UK GDP growth

2 1 0

UK: Contributions to GDP growth

%pts Consumer spending Investment 4 Govt. consumption Inventories Net trade 3 -1 -2 1997 2007 2012 Source : Oxford Economics 2013 2014 2015 2016 2017 33

Inflationary pressures will be impacting

CPI Inflation, UK, 1998-2012 150 140 130 120 110 100 90 80 70 60 Housing and fuel Food & beverages CPI (overall index) 34

Source: ONS

26%

increase since 2007

30%

increase since 2007

Investment risk

 A ‘wall of investment’ has been projected to hit for a number of years, it has not come – why not?

 Many forecast models suggest firms will not sit on money – so large corporate profits must equal investment  This has not proved the case – lack of demand is the likely reason  Why ramp up production if you are unsure of domestic customer base and even international base  So investment more often follows, rather than leads, demand  However possible to react quickly to signs of recovery – due to large corporate cash piles and pent up housing demand  So could be a ‘first mover’ if not the trigger  But important to watch if this is ‘coming through’ 35

Public sector risk – a seas change in local labour markets

Public services employment change, Greater Manchester, 1998 - 2023

98-08 Health & Social Work Education Public admin & defence 08-13 13-23

-10 0 10 20 30 40 -10 0 10 20 30

Jobs change (000s)

40

But will austerity be here to stay?

-10 0 10 20 30 40 36

Source: Oxford Economics

Being positive

 The weight of risks is still on the downside, but not all is gloomy  The UK recovery has been broad based and gathering momentum  Firms (large) have cash to invest and confidence is returning  The momentum in recovery could be sufficient to mitigate against many of the risks, especially consumer ones  Rising inflation gives opportunities (product and service switching, new technologies etc.) and it will be the battle ground of the next election – which may see some changes to curb prices (directly affecting confidence and spend)  UK reputation is enhancing – tax position, ease of business, macro environment, confidence in political messaging (at least globally)  Some of the changes (controversial!) have been delivering some welcome changes  Private businesses have come out of the 5 years of pain stronger (those that have survived) – will the same happen to public services?

 There are success everywhere, in all places, all sectors – perhaps we listen too much to the airtime afforded to failure?

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Policy considerations & Summary

Policy considerations

 Devolution of powers – landscape is changing  Challenges are shifting (and growing) – global competition, demographics, skills, supply chains  Sectoral lines are blurring – what is manufacturing and what is services  Outsources an recruitment agencies making it harder to gauge data  Big data, better data – the correct evidence base is crucial (see BRES revisions, LFS problems, ILO vs. claimant count, housing data)  Scenarios – bigger range now than ever. What does success look like?

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Summary

 The 2013 base positions is

stronger

than expected (though some revision will come for sure)  The forecasts are only modestly changed at headline level – though more subtle changes within areas and sectors  Greater Manchester Forecast is relatively strong, dominated by privates services (at least in the labour market)  The risks are still on the downside (increasing need for scenario)  But maybe, just maybe, a rapid recovery is nearly upon us – capacity is certainly there  Plan for success – prepare for the alternative!

 Big challenge for you to gather the data you need to correctly structure policy 40

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Our details and what is available

GMFM 2013 – What is available

 Economy : ■ Employment; ■ Employees (note: excludes self employment); ■ GVA;  Demographics: ■ Total population; ■ Broad age groups (young, working age population and elderly); ■ Migration – domestic & international;  Residence based employment/employment rate;  Unemployment level / rate;  Employment by 25 minor occupation groups;  Qualification levels by occupation;  Replacement demand by occupation;  Household numbers;  Household income;  Carbon emissions, and  Demand for commercial floorspace  Note: economy results broken down by broad sector, 50 SIC2007 sectors as well as sectors defined by the New Economy

Oxford Economics Lagan House Sackville Street Lisburn County Down BT27 4AB UK Contact details: Kerry Houston Head of Regional Forecasting Oxford Economics Email: [email protected]

Tel: 02892 635402

Tel: Fax:

028 9263 5403 028 9263 5425 Anthony Light Associate Director Oxford Economics Email: [email protected]

Tel: 0207 803 1419