four pillars: derby economic growth strategy 2017-2022 · the draft strategy is divided into four...

Four Pillars: Derby Economic Growth Strategy 2017-2022

CONSULTATION DRAFT

24 January 2018

Derby City Council Four Pillars: Derby Economic Growth Strategy, 2017-2022 CONSULTATION DRAFT January 2018

Contents

Foreword 2

1 Derby’s economy: an overview 3

1.1 Derby’s economy – some headlines in 2017 3 1.2 Derby’s economic assets, infrastructure and opportunity

locations 3

2 Economic growth policy drivers 6

2.1 2017 economic growth policy drivers 6

3 Emerging themes for the future of Derby’s economy 12

3.1 Derby’s productive economy 12 3.2 Derby’s innovative economy 14 3.3 Derby’s collaborative economy 17 3.4 Derby’s whole-city economy 19 3.5 Thematic evidence base: at a glance and moving on 21

4 Derby’s Economic Growth Strategy 22

4.1 Vision 22 4.2 The four pillars of the strategy 22 4.3 The four cross-cutting themes of Derby’s economy 23

5 Delivering economic growth in Derby 27

5.1 Outcomes and targets 27 5.2 Actions framework 28

Annex 1 – key data and references 31


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Foreword “The announcement that Derby is the third fastest growing city-economy in the UK comes as little surprise. We've always known that we're a city with a strong economic base and we're proud of the many successful businesses that call Derby home. Nevertheless, we cannot afford to rest on our laurels. We want to capitalise on our inherent strengths, address our weaknesses and for the Council to take a more strategic role in shaping the future of our local economy. This consultation draft of Derby's economic strategy builds on the progress made over the last five years in addressing skills shortages and nurturing innovation. Compared to 2012, total employment in Derby has risen by 5.4 per cent, productivity has grown by 10 per cent and business density has increased by an impressive 18 per cent. What is more, we're on-track to exceed our target of creating 2000 jobs and apprenticeships for Derby people by 2019. We're a city on the up. The draft strategy is divided into four pillars, focusing on local, regional, national and international strands. It's being developed in consultation with key partners and seeks to feed into wider initiatives such as the D2N2 Strategic Economic Plan, the Midlands Engine and the Government's Industrial Strategy. We welcome your comments and suggestions on this draft so that we can confidently embark on the next five years of growth in the knowledge that this strategy is owned and supported by our residents and stakeholders.”

Councillor Ranjit Banwait, Leader, Derby City Council Councillor Martin Rawson, Deputy Leader & Cabinet Member for Regeneration & the Economy


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1 Derby’s economy: an overview Derby’s economy has evolved and grown since the previous Economic Strategy was published in 2011. While the intervening period is a short timeframe in the long-term economic history of the city, the economy has progressed and continues to perform well against many regional and national benchmarks. A ‘state of the city 2017’ assessment, below, highlights some key shifts in economic performance since 2011 and the evidence behind the city’s key economic challenges and opportunities for the next five years. Key data is summarised and referenced in Annex 1.

1.1 Derby’s economy – some headlines in 2017

Our Key Strengths

Derby is one of the most important drivers of the Midlands and national economies. The City is home to 126,750 jobs – it generates more jobs per head than the D2N2 area and the country as a whole

1.

There are more jobs in the Derby economy since 2011. Employment growth has been positive with almost 6,500 more jobs in the city – founded on the strong growth in manufacturing (+2,120), office-based administration (+1,640), hospital healthcare (+1,140) and higher education (+730)

2.

Derby is distinguished by its national reputation as a ‘producer’ city with a private sector jobs base driven by manufacturing and engineering. In a City with a proud industrial heritage, innovation amongst Derby’s key businesses has seen the manufacturing sector continue to grow, in contrast to trends elsewhere in the UK where the structural transition towards a service-based economy has often led to shrinking production industries.

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Derby’s is home to major international producer businesses – notably Rolls Royce and Bombardier; and Toyota which lies just outside the City. These global brands raise the national and international profile of Derby and support extensive supply chains.

This means that the City’s jobs base is more concentrated into a smaller number of larger businesses than at wider levels regionally and nationally

4. While the benefits of these major

employers are clear, there is room for further diversification, both in types of employment and business density to ensure the ongoing resilience and value of the city economy.

Workers and businesses in Derby are highly productive – adding value to the national economy. Output (GVA) per worker in Derby is considerably higher than the D2N2 average and is in line with the national average

5. In four of the five years between 2011 and 2015,

GVA growth in Derby exceeded the national trend. On average, manufacturing jobs in Derby generate almost 40% more economic value each year than those across the sector nationally

6. At £28,650, average earnings of Derby residents are £400 higher than the UK

and over £2,000 higher than the average across the East Midlands7.

Derby has achieved continued productivity gains in recent years. The average worker (2015) in Derby generates 10% more economic output than in 2011, with GVA per job increasing by over £5,000 in five years

8.

Since 2011 the city has more people working in science, technology and engineering professions in Derby. Growth in knowledge-intensive business services (KIBS) in Derby has been driven by employment in technical activities (+613) and engineering (+485)

9. Between

2011 and 2016 Derby generated over 900 professional ‘STEM’ roles, a growth of 9%10

.


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Our Key Challenges

Higher-value business services remain under-represented in Derby. Cities are increasingly the focus for such activities, which in turn are key to future productivity and attracting tomorrow’s wealth creators. Derby is not keeping up with wider trends. The share of jobs in knowledge intensive business services (KIBS) in the City is 12% compared to 14% nationally. Between 2011 and 2015 the total number of jobs in this sector grew much faster across D2N2 (+10%) and nationally (GB, +13%) than it did in Derby (+4%)

11.

To sustain and grow the strong productivity levels in the Derby economy, more needs to be done to support growth and diversification of the higher-value service sector to complement its recognised success in productive sectors.

There is a ‘missing middle’ of work in Derby for skilled workers. The profile of work in Derby has polarised since 2011 as the City saw the number of skilled jobs shrink by 5,900 (-18%). Compared to 2011, more Derby jobs are in higher-order managerial, professional and technical roles (+3,800; 7% growth); but more are also in lower-order unskilled service (+10%) and manual work (+20%).

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There is an ongoing mismatch between the skills of city residents and the needs of many city businesses. While 44% of Derby jobs are in higher-order occupations – managerial, professional and technical – this includes a proportion of workers living outside of the City

13. As might be expected of a tightly-bounded City with an attractive rural

hinterland, Derby draws some of its highly-skilled labour from outside its boundary, a missed opportunity for Derby’s own local labour pool and for retaining economic value and spending in the city.

Fewer people (16-64) in Derby have a higher-level qualification (NVQ4+) than the national average (Derby 33%; UK 38%). The skills deficit is particularly acute at the entry-level – a key issue is the level of basic employability in the labour market

14.

Derby has a clear gap between the value of employment in Derby and the economic wellbeing of its residents partly because of strong labour flows to and from the city – in particular to surrounding districts. The average (median) job in Derby pays £32,300 whilst the average resident earns £28,650 – a gap of £3,650 (11%)

15.

Encouragingly, this gap has closed significantly since 2010, when the difference between average job value (median) and average resident earnings was £5,900 (18%). Continued progress in creating more higher-value jobs will be required to ensure that the City’s residents have the opportunity to share in its future economic growth.

The benefits of Derby’s growth are not spreading across the whole-city. As with many large urban centres, Derby has a greater share of more deprived households than the national average - almost a fifth of local neighbourhoods (LSOAs) fall within the 10% most deprived nationally

16. Encouragingly, however, unemployment (JSA claimant count, % 16-

64) was line with or below the national average for the two and half years to mid-201717

.


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1.2 Derby’s economic assets, infrastructure and opportunity locations

The City of Derby benefits from a range of high-quality economic assets, infrastructure and locations for future growth, as shown in the plan below and referenced in key information tables.

Figure 1.3: Derby’s economic infrastructure and key growth locations

Derby’s key economic infrastructure

RAIL AIR

London passenger services 1h30

East Midlands Parkway 11 mins

Birmingham 40 mins

East Midlands Airport: 14 miles; 25 mins – UK’s main air freight hub

ROAD BROADBAND

M1 Junction 25: 8 miles; 12 mins

A52 to Nottingham: 15 miles; 30 mins

Top 5 UK Superfast Broadband

Derby key facts

Population: 256,2000 (63% of

working age18

)

Business stock: 8,990

businesses19

Annual GVA: £6,932 million20

Investment: £3.7bn invested

since 200521

Key industries: manufacturing,

health & retail

Average house price: £175,00022


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Derby’s economic growth locations – Core Strategy (2017) strategic employment sites

INFINITY PARK ENTERPRISE ZONE (8)

Infinity Park is a high-quality business park development with a focus on supporting high-tech innovation in the automotive, rail, aerospace and energy sectors. The 68-hectare site to the south of the City, is adjacent to the existing Rolls-Royce world aerospace headquarters at Sinfin. The site is also in close proximity to Toyota Manufacturing UK (2) and the UK headquarters of Bombardier Rail (3), with direct access to the A50 provided by a new £10m link road. It is expected to accommodate

new and existing business and benefits from links to existing manufacturing facilities within the City. Set at the heart of the park is the iHub a new 45,000 sq.ft. innovation centre completed in 2016 which will act as a catalyst for high-skilled job creation and further investment.

CITY CENTRE (11)

The renaissance of the City Centre is a City Council priority, with a focused plan for the Centre’s various core areas and a vision for a vibrant city centre established in the City Centre Masterplan (2016). The Core Strategy (2017) outlines the targets to develop 1,700 new homes and over 100,000sqft of new office space in the City Centre by 2028. The strategy includes the delivery of office space, high-quality retail, improved civic uses and residential development. This will also include developing some currently underutilised City Centre areas such as ‘Eastern Fringes' enabling them to support the overall City Centre economy.

DERWENT TRIANGLE, CHADDESDEN

A 28-hectare former mineral extraction site will deliver high-quality accommodation for a range of industrial and business uses within an existing business location near the City Centre, Derby Station and Pride Park. The proximity of Derwent Triangle to Pride Park and Derby Arena also opens up opportunities to create and enhance this emerging ‘leisure/visitor’ hub.

DERBY COMMERCIAL PARK, RAYNESWAY

The ambition is to develop the 65-hectare Derby Commercial Park on the eastern side of the City as a major regional hub for logistics and distribution development – taking advantage of links to the A50, M1 and East Midlands Airport. Outline planning permission is in place for a flagship storage and distribution park.

Derby’s economic assets

CITY CENTRE

The City Centre is one Derby’s key economic assets as the historic commercial, retail and leisure hub of the City. The Intu shopping centre is the main retail focus and home to flagship stores of Debenhams and Marks and Spencer, alongside national food chains such as Wagamama, Zizzi and Carluccio.

The City’s historic Cathedral Quarter is the location of much of Derby’s high-quality retail business and leisure offer – whist the St Peter’s Quarter has benefited from multi-million-pound investment from the City Council in enhanced public realm to create a much-improved shopping environment.

The City Centre is also home to Derby’s key cultural and leisure destinations such as the Quad Arts Centre opened in 2008 and the Derby Arena, opened in 2015 which is the Midlands’ velodrome and the premier large events venue in Derby. £8.6m of Local Growth Fund has been made available for the development of a new performance venue in the City Centre.

PLANES, TRAINS & AUTOMOBILES

Derby and the surrounding area is home to three of the UK’s key original equipment manufacturers, supporting thousands of jobs and extensive supply chains in the City:

Rolls Royce Civil Aerospace (1) - one the two largest manufacturers of jet engines for wide-body

civil aircraft in the world. The company employs around 14,000 people in Derby, with its global HQ located at Sinfin around 3 miles to the south of Derby City Centre. Investment by the City Council


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and D2N2 LEP to realign highways in the area will enable a £100m investment in the Rolls Royce campus including a new £90m test bed.

Bombardier Transportation (3) – Almost 3,500 people are directly employed in rail vehicle

manufacture in Derby – most of whom work for Bombardier which has produced a significant proportion of the country’s most-technologically advanced rail rolling stock for mainline and London Underground. In 2014, the company won the £1bn contract for the construction of the 65 trains for Crossrail due to open later in 2018.

Toyota Manufacturing UK – 2,500 workers are employed on the firm’s Burnaston site in South Derbyshire, 2 miles from the Derby city boundary. The production facility has been active for 25 years and produced 180,000 vehicles in 2016 – 10% of the UK auto industry’s total output. The plant currently assembles the Auris and Avensis models, largely for export to the EU. Since 2004, the Toyota group has invested £150m to expand production capacity and re-tool for new models, and a further £240m was announced in March 2017.

PRIDE PARK & RAILWAY TECHNICAL CENTRE BUSINESS PARK

Pride Park, a former railway yard and regeneration priority, was the sole B1a site in the previous local

plan. As a result it has been the focus of new office development in the city for 15 years. Today, Pride Park is home to Derby Arena, Derby Manufacturing UTC, Derby College’s Roundhouse campus (including the Engineering and Construction Academies), the Derby County stadium and an 80 hectare business park, as well as a commercial area and hotel accommodation. Call centres employ more than 1,600 people at Pride Park, where Firstsource Solutions and Webhelp UK provide customer service support to Sky and Unilever. The 2017 adopted Core Strategy allocates 28 hectares of employment land to extend Pride Park, the ‘Derwent Triangle’.

The RTC Business Park is on the site of the former research centre for British Rail, the Railway Technical Centre. Amongst the 30 organisations accommodated on the business park are:

Atkins, an engineering consultancy;

The University of Birmingham’s multi-disciplinary railway research centre;

RVEL, a rolling stock maintenance company; and,

the iD centre, the University of Derby’s incubation facility

DERBY COLLEGE & DERBY UNIVERSITY

Derby College has 5,000 full time learners aged 16-19 and 3,000 adult learners both full and part time. The college supported approximately 1,500 apprentices in 2016. The Roundhouse Campus at Pride Park is a vocational education institution offering courses in hospitality, care, IT, construction and engineering. The Engineering Academy has links with local employers in Aerospace (Rolls-Royce), Rail (Interfleet, Garrendale, DB Schenker, Bombardier) and Advanced Manufacturing (EPM Technology, Pentaxia, Guilford Europe).

The University of Derby, based 2 miles north-west of the city centre, has over 16,000 students, of which 14,000 are undergraduates. It is a top ten university for Fashion. Hospitality, Events, Journalism and Photography. The teacher training it provides has been rated as outstanding by Ofsted


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2 Economic growth policy drivers

2.1 2017 economic growth policy drivers

The 2011 Derby Economic Strategy was developed in the years following the 2008-9 recession and the subsequent economic downturn. Since then, changes in the macro-economic and political environment – notably the Eurozone crisis, the modest ongoing recovery of the UK economy and the UK’s referendum decision to leave the EU – have been accompanied by significant changes in national economic growth strategy and governance.

In short, the world in which the strategy for economic growth will be delivered in Derby in the years to 2022 is continually evolving and it is quite different from 2011.

This Economic Growth Strategy for Derby to 2022 needs to complement and add value to existing strategies at wider spatial levels and be sufficiently flexible to be adapted to changing circumstances.

The vision for Derby’s economy in 2022 will therefore clearly articulate its role in the regional, national and international economies.

2.1.1 Policy and strategy ambitions

Local Growth and Devolution

Since 2011, economic recovery and growth has been the focus and tone of national government economic development strategy – a distinct move away from the previous approach of directly addressing individual economic regeneration needs, such as housing renewal. Derby’s Economic Growth Strategy 2017-22 is the City’s plan to align with this direction of travel.

The National Plan for Growth (2011) – a joint Treasury and BIS policy – was followed by the Government-commissioned Heseltine Review into growth policy – No Stone Unturned (2012) –focusing on local responsibilities and actions to deliver growth, including the devolution of decision-making and spending power in skills, infrastructure, employment support, housing, regeneration and business support budgets. The National Planning Policy Framework (2012) has renewed focus on the use of spatial planning to support economic activity and the presumption in favour of sustainable development – recognised as critical issue for Derby through its adoption as the primary policy of the 2017 Derby Core Strategy (see Section 2.1.3 below).

Governance of sub-national economic development has taken a significant shift towards the local level – both through the establishment of Local Enterprise Partnerships across England and Combined Authorities in the largest City Regions. The D2N2 Local Enterprise Partnership for the Cities and Counties of Derby and Nottingham was established in 2010. The LEP is a private-sector-led partnership with responsibility for developing and delivering local growth strategy in partnership with local authorities.

The D2N2 Strategic Economic Plan (2014) provides the blueprint for the sub-region’s deals with national government. It is the key framework for prioritisation of action and investment of central government funding in economic growth projects across the area. The SEP gives national recognition to the importance of Derby’s economy, identifying key investments in the City expected to make a significant contribution to the sub-regional economy.

The role of Local Enterprise Partnerships in delivering local economic growth is likely to be reviewed in the coming years (see Industrial Strategy p125), and Derby City Council’s engagement in this process and the ongoing review of the Strategic Economic Plan (see below) will be important.


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Box 2.a D2N2 Stategic Economic Plan

Themes likely to emerge from the current SEP review may include:

Connectivity

Science & Innovation

Competitiveness

Skills

Image & Profile

Derby City Council’s collaboration with the D2N2 LEP in the last five years has been crucial to accessing funding – particularly from the Government’s Local Growth Fund - to invest in projects such as the One City, One River flood defence works; Infinity Park Enterprise Zone enabling infrastructure; and City Placemaking public realm improvements.

Box 2.b Derby’s future Local Growth Fund Projects: City Centre projetcs

Phase 1 of Derby Performance Venue – £8.6m

The redevelopment of the Silk Mill Museum – £3.6m

More phases of Castleward Urban Residential Development – £6.6m

Construction of larger office spaces to accommodate start-up businesses which have outgrown their current facilities – £2.9m

Enterprise Zones

Alongside establishing and funding LEPs and delivering the Local Growth Fund, the 2010 Coalition Government also announced a new generation of Enterprise Zones (EZs) in the 2011 Budget. EZs are designated areas of employment land where special fiscal policies apply – business rates relief or enhanced capital allowances – which are designed to encourage business growth. In the 2014 Chancellor’s Autumn Statement it was announced that Infinity Park Derby – a 68 hectare commercial and technology park – would be designated as an Enterprise Zone, in recognition of its unique position to deliver economic growth, situated adjacent to Rolls Royce’s Sinfin campus, the global HQ of its civil aerospace business.

Emerging Industrial Strategy: focus on raising productivity

As the UK economy has recovered to modest growth and the mechanisms of devolution have now been established and implemented in numerous places across the country, national economic policy has added a focus on improving national productivity. The green paper Building Our Industrial Strategy (HM Government, Jan 2017) sets the course and outlines the priorities for national economic strategy which will be in play over the next five years.

The Industrial Strategy looks beyond short-term economic growth – reflecting on the comparatively strong national economic growth and employment levels in recent years – towards the UK’s long-term productivity challenge. The per worker and per hour productivity of the UK economy has been behind the USA since the 1970s, and has fallen back behind international competitors such as Germany and France since the last recession

23. Government is also

particularly concerned with the widening productivity and wage gap between different parts of the country – both between London and the regions, and disparities within regions, for example between Derby and the rest of the East Midlands. Productivity levels (GVA per head) in the East Midlands rank in the middle of the UK’s twelve regions; but they remain around 20% below the national average and well below London and the South East

24.


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The ten ‘pillars’ of the Industrial Strategy (see Box 2.c) are evidence-based national economic ambitions founded on improving growth and productivity – and provide a pertinent checklist for the economic ambitions of Derby as a city: most notably in the focus on research and innovation, workforce skills, business growth, global trade, world-leading sectors and a ‘whole country’ approach to growth. Some of specific policy implications of the Industrial Strategy for Derby are explored further at Section 3.

Box 2.c Summary of the emerging UK Industrial Strategy

Building our Industrial Strategy: Green Paper (HM Government, January 2017)

‘Places with higher rates of investment in research and development, more highly skilled people, better infrastructure, more affordable energy and higher rates of capital investment grow faster and have higher levels of productivity’.

‘The objective of our modern industrial strategy is to improve living standards and economic growth by increasing productivity and driving growth across the whole country’

The Ten Pillars of the emerging Industrial Strategy:

1. Investing in science, research and innovation

2. Developing skills

3. Upgrading infrastructure

4. Supporting businesses to start and grow

5. Improving procurement

6. Encouraging trade and inward investment

7. Delivering affordable energy and clean growth

8. Cultivating world-leading sectors

9. Driving growth across the whole country

10. Creating the right institutions to bring to gather sectors and place

Midlands Engine

Derby sits at the heart of the country and is a core hub of the wider Midlands economy. The Midlands Engine is a government-backed coalition of nine Local Enterprise Partnerships, local authorities, businesses and universities across the wider Midlands region – established in late-2015 and focused on opportunities for collaborative working and strategy to boost productivity and growth in the heart of England.

The coalition has identified five core themes for the future of the Midlands economy:

1. Midlands Connect – developing a long-term transport investment strategy;


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2. Innovation – working together through the Midlands Engine Innovation Group to improve innovation in four market-driven areas: next generation transport; medical technology and pharmaceuticals; future food processing; and energy and low carbon.

3. Skills – improving and adapting the skills of the labour force to meet future business need and enhance productivity;

4. Finance for business – providing the best possible support for SME business growth; and

5. Promotion – collaborating to develop a regional brand to strengthen as single reputation across global markets.

The Government’s March 2017 Midlands Engine Strategy brings together a range of committed and future capital investments across the wider region under a series of similar themes.

The work of the Midlands Engine coalition thus far has provided the opportunity to highlight and promote the role and value of the City of Derby at a wider level – and align the City’s growth activities with the network of other towns and cities in the Midlands. For example, Derby is identified as one of the three Midlands Engine clusters of business and innovation activity – focused around its rail and aerospace industries – alongside Leicester’s space cluster and the automotive industry in Coventry.

Derby City Council is actively engaging in the Midlands Engine Coalition.

2.1.2 Derby’s role in a metropolitan economy

Derby’s economy does not operate in isolation from its immediate environment. The City of Nottingham is located just 15 miles from Derby City Centre, with over 40,000 people commuting between the two cities. Combined, the metropolitan area is one of the top 30 population centres in Europe

25.

Each city takes equal benefit from the strong transport connectivity offered by the proximity to the M1, and the A52 Brian Clough Way which links the two. The Nottingham tram system is accessible within just 6 miles of the boundary of the City of Derby – and this location, the village of Toton, will be the location of the proposed East Midlands Hub HS2 Station. The completion of the station, due in 2033, will bring rail journey times to London of just 51 minutes, compared to current times of 1 hour 30 minutes to Derby and 1 hour 45 minutes to Nottingham via the Midland Main Line.

The 2017 Derby Transport Strategy outlines the following vision for the economic infrastructure between the cities:

By 2040 Derby and Nottingham will be closer integrated with increased levels of commuting between both cities as a consequence of more seamless and integrated links and networks, focused upon the regional hubs in Derby, Nottingham, and at HS2 in Toton.

26.

More than ever, the two City Councils are working collaboratively on economic development strategy – particularly on how the cities work together to promote themselves, trade, and attract investment in a competitive global environment. The Derby & Nottingham Metropolitan Strategy 2030 establishes the shared commitment of the cities to work together across the four key themes outlined below:

1. Metro Enterprise: joint promotion of investment, business growth and diversification and increased productivity

2. Metro Talent: work across the two cities to provide the shared skilled labour force of the future

3. Connected Metro: joint promotion and investment in shared transport corridors and new technologies

4. Metro Living: delivering places for a modern urban lifestyle and vibrant city centres


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2.1.3 Brexit

The UK’s proposed exit from the European Union (‘Brexit’) is likely to have an effect on a wide array of economic issues including the trade of goods and services, labour supply, regulation, the strength of sterling and the visitor economy.

In 2017, it is not possible or productive to attempt to predict the outcome of the international dialogue which will determine the terms of the UK’s exit, future trading relationships with the EU and trade deals with non-EU countries.

Nonetheless, Derby City Council is already working alongside the D2N2 LEP and the Midlands Engine coalition to ensure that the City’s economic needs – particularly the global trading future of its largest production businesses – are properly represented in the national dialogue on the UK’s post-EU economic future. This requires the continual development of an outward-looking city approach and collaboration with regional partners to present a unified and stronger voice to the outside world.

A summit of key public and private sector representatives in Derby was convened in November 2016 and identified the emerging key themes for the City’s response to Brexit:

building international links;

closer regional collaboration;

improved education and aspirations;

focus on world-class quality; and

adopting a long term economic and commercial outlook.27

2.1.4 Derby’s spatial policy ambitions

Alongside the wider shifts in the economic growth environment since 2011, Derby City Council has been working to plan and articulate its spatial policy and investment ambitions through: a city centre masterplan and investment prospectus; and the Core Strategy of its Local Plan to 2028.

City Centre masterplan 2030

As outlined in section 1.3 Derby City Centre is one of the City’s key economic assets and one of its best opportunity locations for future growth. The Derby City Centre Masterplan 2030 was published by Derby City Council and the Vibrant City Partnership in 2016 with the ambition of creating a vibrant City Centre – celebrating the successes of delivering £3bn of investment in the past decade, whilst also recognising that ‘our city centre experience doesn’t universally reflect our high performing, high-technology economy’.

The vibrant city centre vision is to be:

A City of Choice – a leisure, cultural and retail destination;

A Business City – a successful central business district;

A Living City – a lifestyle and housing choice; and

A Connected City – a connected smart city.

The masterplan targets are to deliver 4,000 new jobs and 1,900 new homes in Derby City Centre by 2030.


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The role of the City Centre Masterplan in delivering economic growth to 2022 is critical – it is explored further in section 2.2.2 and in the vision for Derby’s economy at Part 3.

Core Strategy

The first part of Derby’s new Local Plan – the City’s spatial framework to 2028 – was adopted by the City Council as the Derby Core Strategy in January 2017. The Core Strategy spatial vision for the City in 2028 provides the touchstone for the City’s economic vison for the next five years.

Box 2.d Summary of the Derby Core Strategy (2017)

Derby’s Core Strategy 2017: economic growth reference points

By 2028, Derby will be an attractive, thriving, healthy, lively city of growth, opportunity and innovation for all:

UK’s number one high tech city

higher-value engineering and knowledge-based employment

regional centre for tourism

home to world-leading brands

11,000 new homes

a strong, accessible and vibrant City Centre of regional importance

new office development across the City Centre

schools, colleges, University and training providers working in unison

opportunities to access quality training, work experience and fulfilling career opportunities

an innovation and technology park at Infinity Park Derby

a major regional hub for logistics and distribution development at Derby Commercial Park

a range of new employment uses on the Derwent Triangle, developed as an extension to Pride Park


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3 Emerging themes for the future of Derby’s economy Four key themes emerge from the overview of Derby’s economy and the future drivers – presenting a way of understanding the challenges and opportunities for the City’s economy in the years to 2022. Reflecting on the evidence-base and where this strategy fits with other strategic drivers it is clear that successful, dynamic and modern city economies rely on (1) productivity (2) innovation (3) collaboration and (4) a whole-city approach to economic growth.

This section summarises the existing evidence base for each theme and establishes key indicators to guide the direction of travel of the City’s economy over the next five years.

3.1 Derby’s productive economy

3.1.1 Derby outperforming the rest of the Midlands

As the Part 1 economic overview has established, Derby is a productive city. In the broad picture there is no productivity gap in Derby. Economic output levels are ahead of the rest of the East Midlands – and productivity is improving at a faster rate than across the region or the rest of country as a whole. Between 2011 and 2015 the average annual GVA growth of the Derby economy was 4.0% compared to 3.2% across the East Midlands and 3.3% across the UK. Output (GVA) per worker in the City is 16% above the regional average

28.

According to analysis by Centre for Cities, Derby has the joint fastest rising tax base of all cities outside London (as reported in the 2015 Derby Local Economic Assessment) – indicating strong growth in higher-paid jobs and profitable businesses. The city economy now has a greater share of private sector jobs – 80% according to the latest data, compared to 76% in 2010 – making it more balanced and resilient to ongoing public spending reductions

29.

Nonetheless, Derby sits at the heart of a wider region where the productivity gap with the UK average is widening – by around 5% between 1997 and 2015

30 – and therefore productivity

remains the primary concern of wider economic strategy such as the Midlands Engine Strategy (2017). Given Derby’s relative high-performance, it therefore appears that the City has been carrying the burden of the decline in the relative productivity performance elsewhere in the Midlands.

3.1.2 Advanced manufacturing and engineering: Derby’s most productive sectors

Derby’s level of economic output and efficiency are driven by the strength of its advanced manufacturing and engineering businesses. The aerospace and rail sectors alone produce approximately a third of the city’s GVA (£6bn) and account for 14,700 jobs – 12% of total employment

31. The average worker in manufacturing in Derby generates more than twice

the value-added for the national economy compared to the average manufacturing worker in the East Midlands (GVA per job in manufacturing. Derby: £94,500; East Midlands, £61,000. ONS 2015)

32.

Rolls Royce is the strongest contributor to Derby’s productive economy. Across its nationwide sites the estimated annual contribution of the company to the UK economy is £7.26bn – roughly equivalent to the overall output of Derby as a City. Derby has 14,000 Rolls Royce workers, well over half of its national workforce, and the majority of the company’s operational and staff spending economic impacts are realised in the East Midlands.

33

With advanced manufacturing and engineering as Derby’s most productive sectors, and a considerable amount of Derby’s available employment land constrained by flooding and infrastructure requirements

34, the ongoing delivery of the innovation and technology park at

Infinity Park Derby is particularly critical to future productivity and growth.


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3.1.3 Derby’s productivity challenge

The productivity challenge in Derby is different from the national productivity challenge. There is no gap between the City’s average performance and the rest of the economy. However, the City’s relative strength is largely based on the activities of Rolls Royce and Bombardier, and the rest of its producer businesses. As shown in table 3.a, without the employment and output of manufacturing, the average GVA per worker across Derby falls by over £8,500 – from £54,700 to £46,100 – taking the per worker productivity average below the national average (GB £53,500)

35.

Beyond manufacturing, most sectors in Derby are less productive per worker than the national average, although several still outperform regional averages. As the economic overview (Part 1) established, Derby lags behind other places in the growth of its most productive service sector employment – jobs in the knowledge-intensive business services (KIBS). As shown in table 3.a, there is room for significant improvement in the value and productivity of ICT and financial and business services in Derby, whilst the retail, leisure and distribution sector is also less productive than average.

Table 3.a – GVA per worker in key selected private sectors – Derby, East Midlands and Great Britain

. Derby

East Midlands

Great Britain

Sector GVA Per Worker

GVA Per Worker

GVA Per Worker

vs. EM vs. GB

Manufacturing £ 94,500 £ 60,983 £ 68,037 +55% +39%

Financial and insurance activities

£ 80,100 £ 77,706 £ 116,904 +3% -32%

Information and communication

£ 71,300 £ 76,131 £ 89,972 -6% -21%

Business service activities £ 36,100 £ 28,764 £ 39,914 +25% -10%

Retail, transport, accommodation and food

£ 32,700 £ 35,587 £ 37,563 -8% -13%

All industries £ 54,700 £ 47,324 £ 54,702 +16% -

All industries without manufacturing

£ 46,109 £ 45,270 £ 53,535 +2% -14%

3.1.4 Smart productivity

Improving productivity does not mean making people work harder. It means helping them to work smarter – producing more value for each hour of their time and thereby increasing their earning power. This is how economies grow and how living standards improve (‘Building our Industrial Strategy: green paper’. HM Government, 2017)

As the economic overview in Part 1 identifies, there is a general labour skills deficit amongst Derby’s residents – both at the higher and entry-levels - when compared to the national skills profile. This appears to defy the trends of high-productivity economic activity in the City; and therefore suggests that Derby is a net importer of highly-skilled workers. This analysis is reinforced by research into the requirements of local businesses in the City.

Over a third of jobs in Derby require a degree or other higher-level qualification36

. A 2017 business survey found that two-thirds of employers in the city are finding it difficult to recruit appropriately skilled graduates

37. Employers are also reporting a lack of job-readiness skills, with

growing evidence that many graduates are in non-graduate-level jobs, thereby displacing residents with appropriate skills from these jobs

38.


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It is likely therefore that without improvement, the misalignment and deficit of skills in Derby’s workforce will continue to affect its most productive businesses. Between 2012 and 2016, 3,500 (74%) of the 4,700 job vacancies in the aerospace, rail and automotive sectors in Derby required higher level skills. Rail sector skills gaps are being exacerbated by an ageing workforce – 3,000 new Level 3 engineers and 7,000 new Level 4 technicians required to maintain skills levels

39.

A 2017 CBI report found that workforce skills and educational attainment are the key variable in the levels of productivity between place economies in the UK

40.

Given the strength of advanced manufacturing and engineering in the city, a key issue for maintaining the levels of productivity in Derby in the next five years will be trends in industrial digitalisation and the ongoing development of Industry 4.0 – the shift towards cyber-physical systems and the rapidly increasing importance of data control and transfer in production techniques. This is also a nationally important issue – recognised in the Industrial Strategy (Green Paper, 2017) and in the commission of the Industrial Digitalisation Review which is to lead to a ‘sector deal’ with national government for investment and support.

The interim report of the review (July 2017) highlights the particular skills deficit in this vital part of the future UK economy: ‘Businesses face a skills shortage, particularly digital engineering capability, hindered by a fragmented skills system and lack of systematic engagement with industry.’

41 Given the structure of its economy, these issues are particularly relevant to Derby and

have been corroborated in consultation with key Derby businesses.

3.1.5 Productive economy indicators

Indicator Measuring Derby East

Midlands GB

EM GB

Core indicator:

GVA per worker (2015)

Productivity of labour force

£54,700 £47,300 £54,700

GVA per worker outside manufacturing (2015)

Productivity of labour force outside Derby’s key industries

£46,109 £45,270 £53,535

Annual growth in KIBS jobs (2014-15)

Growth in the most productive service sectors

-1% -3% +3% - Annual growth in private sector jobs

Balance and resilience of economy

+2% +3% +3%

3.2 Derby’s innovative economy

3.2.1 Competitiveness

Founded on its world-class strengths in advanced manufacturing and engineering; viewed as a whole Derby’s economy is very competitive. In 2016 it ranked 12

th of 46 cities in its overall

competitiveness as measured by the Huggins Competitiveness Index – above cities such as Leeds, Newcastle, Sheffield, Birmingham, Nottingham and Leicester. Its rank is unchanged since 2013, indicating that it has kept pace with higher-ranking places such as Manchester, Brighton,


15

Bristol, Cambridge and Oxford. The index accounts for a range of indicators covering facets such as business, workforce skills, productivity, economic activity and earnings to measure the relative strength of cities and local authority areas – and provides a useful oversight of the relative health and progress of Derby’s economy.

42

3.2.2 Innovation and entrepreneurialism

Although Derby’s all-round competitiveness is strong, it has a relative weakness in the range and number of its businesses and it is more reliant on large employers than other cities. Competitiveness and innovation require a healthy and diverse range of businesses in any city economy.

Business density (businesses per 10,000 population) in Derby is lower than would be expected – the City would need to generate an additional 1,950 business to reach the average level across the East Midlands and 2,750 to reach the national average

43.

This would require a step-up in the historic rates of business start-ups and the entrepreneurial culture in the City. The 2011 Derby Economic Strategy identified the lower than average rate of business registrations as a significant weakness of Derby’s economy. However, national data on business start-ups (Table 3.b) shows that Derby continues to remain considerably behind the wider regional and national averages in terms of growing and replenishing its business stock.

This trend is corroborated by separate data based on new business bank accounts which shows a general decline in the rate of new business formation in the city since 2011 – although an encouraging upturn has been seen in 2017

45.

Although there are fewer new businesses than required, new businesses in Derby tend to be reasonably resilient in the earliest years of development and broadly in line with national averages.

Table 3.c: Business survival rates of companies created between 2011 and 2014

46

Survival Rate (%)

1 year 2 year 3 year 4 year

2011 Birth

UK 93.1 75.6 60.5 51.0

Derby 92.7 72.8 58.9 50.3

2012 Birth

UK 91.2 73.8 59.4 -

Derby 92.8 74.9 59.9 -

2013 Birth

UK 93.5 75.0 - -

Derby 93.8 75.4 - -

2014 Birth

UK 92.2 - - -

Derby 93.2 - - -

Table 3.b: Business Start Ups in Derby, East Midlands and UK (3 year average)44

2013-2015 average Derby

East Midlands

UK

Business Births per 10,000 Population 44.6 49.9 55.7


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3.2.3 Research and technology-based innovation: the Rolls Royce effect

Derby’s ambition is to establish itself as the UK’s leading high-tech city (Core Strategy). In parallel to skills development for industrial digitalisation, research and technology-driven innovation in Derby will be key to maintaining the competitiveness of its most productive businesses in the next five years. R&D activity across the East Midlands is driven strongly by business – more so than across the country where government and university research plays a stronger role. In 2015, £1.5bn was spent on R&D by the private sector in the region – 78% of total expenditure compared to 66% nationwide – of which £1.3bn was invested in manufacturing

47.

Unsurprisingly, Rolls Royce is the key driver of innovation, both in Derby and the wider region. The Midlands Engine Science and Innovation Audit (2017) identifies advanced manufacturing as the key sector – an ‘enabling competency’ – for innovation in the future Midlands economy. Rolls-Royce’s R&D spend (£800m) accounted for 4% of the UK commercial total in 2015 and the group is the largest UK European patent filer.

48

In order to justify and maintain its ‘UK Capital of Innovation’ status, the City will need to continue to diversify its R&D and innovation activity – building on the strength of Rolls Royce – and capturing opportunities for investment and collaboration in the next five years. National government has made investment in science, research and innovation the first ‘pillar’ of the Industrial Strategy (2017) and is committed to investing an additional £4.7bn in R&D by 2021 (Industrial Strategy p17).

This places increasing emphasis on the roles of universities as the drivers and guardians of local and regional economic growth – an opportunity for the City’s own university and for greater collaboration with other institutions around the region, working through the Midlands Engine Innovation Group.

3.2.4 Attracting and retaining an innovative and entrepreneurial population

Derby benefits from a ‘brain gain’ – according to 2017 research by Centre for Cities, as a result of the manufacturing sector which attracts many graduates to Derby, weighted heavily towards brighter graduates, who then stay longer than those in other sectors

49.

The city gains a greater number of new graduates from the rest of the country than it loses in local residents moving elsewhere to study (significantly to Nottingham, Birmingham, Sheffield and Leicester). 60% of those moving to the city with a 1

st or 2:1 from a Russell Group university come

to work in manufacturing. This strong concentration of talent in one industry suggests that specialist employment opportunities are the key attractor of well-qualified young people to Derby – annual graduate wages in manufacturing in Derby (£29,800) are almost 20% (£4,800) higher than they are around the country. However, graduate employment opportunities in KIBS and other private services in the City are not nearly as attractive, each being over £2,000 below the national average

50.

As highlighted in the Derby City Centre Masterplan (2017) more can be done to make Derby a vibrant living city with a sense of identity based on innovation and a greater presence of high tech firms and the university in the City Centre. To attract and retain an innovative and entrepreneurial population, Derby needs to continue to deliver the vision for its own City Centre as a place of choice for retail, culture, leisure and living – and a vibrant riverside location. This will also align with the Metro Strategy vision for Metro Living both Derby and Nottingham to provide ‘exciting and accessible opportunities for modern urban lifestyle and vibrant city centres.’

Innovation and entrepreneurialism also requires the right property market offers to support businesses in the earlier years of development. The 2015 Local Plan Core Strategy Economy Position Statement identifies a shortage of smaller and affordable units highlighted by businesses and the development industry, noting the economic importance of providing start-up space for new enterprises.


17

3.2.5 Innovative economy indicators


Midlands GB

EM GB

Primary indicator:

Business density (2016)

Strength and diversity of business base

351 428 459

Business start-ups per 10,000 population (3 year average)

Business growth and entrepreneurialism

45 50 56

Huggins competiveness index

Overall competitiveness of economy

100.7 N/A 100 (UK) N/A

3.3 Derby’s collaborative economy

3.3.1 Looking beyond Derby: labour, trade and investment

Derby’s economy is reliant on strong relationships beyond the City boundary. It is a net importer of labour, attracting around 11,800 more people in for employment each day than those who leave to work elsewhere. Derby has particularly strong connections to its surrounding districts – Amber Valley, South Derbyshire and Erewash – which have the biggest flows of labour (gross) to and from Derby

51. As outlined in the economic overview, the difference between the

value of work in Derby and the economic benefits enjoyed by residents suggests that the city’s employment opportunities attract high-skilled workers living outside Derby.

Alongside daily labour flows, Derby’s advanced manufacturing and engineering businesses attract talent from around the country and beyond – just one in ten graduates working in the ‘planes, trains and automobiles’ sectors completed their education in the City

52. Derby

University’s reach is more localised, with over half of graduates coming from the East Midlands region

53.

Table 3.d : Largest daily commuter flows (gross) to/from Derby (2011 Census)

Rank Local Authority In Out Net Total

1 Amber Valley 8,364 3,692 +4,672 12,056

2 South Derbyshire 7,897 3,517 +4,380 11,414

3 Erewash 6,348 3,194 +3,154 9,542

4 East Staffordshire 2,488 2,384 +104 4,872

5 Nottingham 1,648 2,671 -1,023 4,319

6 North West Leicestershire 1,040 2,616 -1,576 3,656

7 Derbyshire Dales 1,837 1,507 +330 3,344

8 Broxtowe 1,723 822 +901 2,545

9 Ashfield 767 658 +109 1,425

10 Charnwood 624 559 +65 1,183


18

Derby has strong trade relationships around the world – which will become particularly important to maintain and nurture following the UK’s departure from the EU. Export trade and global collaboration is a vital contributor to the City’s ongoing competitiveness. Per job, the value of the City’s exports is almost 50% higher than the national average and more than double the East Midlands average; making it a UK top 10 City for export value

54. The City has also been

ranked as top 10 European FDI city by the Financial Times.

The City Council is developing trading relationships with China and exploring opportunities in India. An economic co-operation agreement was signed in April 2010 with the Shaanxi Provincial Government that has created a relationship with this important province of around 36 million people. The relationship emerged through the presence of Rolls-Royce in both areas and due to the important similarities in the business profile of Shaanxi and Derby.

Table 3.e: Exports per job: Derby compared to other geographies (Centre for Cities analysis)

Exports Per Job (2014) Derby East Midlands GB Nottingham Leicester

Goods £20,800 £8,900 £8,200 £3,300 £7,500

Services £2,600 £2,500 £7,500 £2,500 £2,900

Total £23,400 £11,400 £15,700 £5,800 £10,400

Despite the excellent export performance of the Derby economy, there is a clear disparity between the value of goods traded and the value of services. Per job, the value of services sold internationally from Derby are only around a third of the UK average. This is in line with earlier analysis, identifying room for improvement in the volume and value of more service activity in Derby.

3.3.2 The Metro Economy and regional collaboration

As outlined at section 2.1.2, the economies of Derby and Nottingham are mutually linked and the City Councils are working collaboratively towards a shared vision for the twin cities by 2030. Derby’s economic links with Nottingham are particularly evident in the inter-relationships of people and labour markets. According to 2017 Centre for Cities analysis, Nottingham is the largest source of Derby’s university students, the most popular university destination for Derby residents, and the biggest single destination for Derby’s graduates. Nottingham is also the largest net recipient of internal migrants from Derby, at a rate of 460 a year between 2009 and 2015

55.

Derby also has a unique and complementary role within the metro economy and across the wider Midlands Engine. Nottingham is the larger of the two cities and therefore provides the metro economy with the majority of its employment – 63% of 346,000 jobs available in 2015

56. However,

Derby’s productive and innovative strengths bring great value to the metro economy.

3.3.3 Collaboration within the Derby economy

Derby is a city where the spirit of partnership runs deep and where all the key stakeholders work well together and are used to getting things done. The Derby Renaissance Board is the key economic partnership in the city with a senior membership drawn from the public, private and voluntary sectors. This board works collabratively with the Derbyshire Economic Partnership. The board approves bids to Government and oversees the delivery of all the main regeneration programmes in the city.


19

3.3.4 Collaborative economy indicators


Midlands GB

EM GB

Primary indicator:

Exports (£) per job (2014)

Strength and value of overseas trading relationships

£23,400 £11,400 £15,700

Service exports (£) per job (2014)

Strength and value of overseas trading relationships outside manufacturing

£2,600 £2,500 £7,500

Percentage share of Metro area GVA (2015)

Contribution to metro-economy

44%

(£6.93bn) N/A N/A

3.4 Derby’s whole-city economy

3.4.1 Stable and positive socio-economic picture for most of the city

As outlined in the Part 1 economic overview, the overall socio-economic wellbeing of Derby is positive and increasingly stable. The City’s economy was particularly hard hit by the 2008-9 recession and the subsequent economic downturn and contraction in public spending. In that period, the proportion of people claiming Jobseekers Allowance in Derby reached 5.0% in early 2010 and again in summer 2011 – before peaking at 5.6% in March 2012, by wider trend were more positive with regional and national unemployment (JSA, 16-64) already down to 4.0%. The claimant count in Derby was consistently higher than regional and national averages from 2008 until the end of 2014.

57

In the past two and a half years to mid-2017 however the claimant count has been in line with or below the national average. The proportion of young people between 18-24 claiming JSA in Derby is now also below the East Midlands and national averages

58. Average earnings of Derby

residents are £28,650 a year, £400 higher than the national (UK) average and over £2,000 higher than the East Midlands average

59.

3.4.2 Gap between value of Derby’s economy and economic benefits to residents

Despite the improving socio-economic wellbeing of the City, further progress could be made by continuing to close the gap between the value generated in Derby’s economy and the economic benefits to the whole city. The average (median) job in Derby pays £32,300 whilst the average resident earns £28,650 – a gap of £3,650 (11%)

60. This gap cannot be explained simply as a

result of the comparatively high proportion of better paid jobs in the City taken by in-commuters, although this is a factor. At the lower end of the scale, economic benefit to residents is also not commensurate with the value of the city’s economy. Three quarters of the way down the scale - at the 25

th percentile – the gap between resident and workplace earnings is still over £1,800 (8%).

As identified in the economic overview, the profile of employment in Derby is polarising towards the highest and lowest skilled occupations. This trend is reflected in the types of jobs the city’s residents do, but with a particular bias towards the lower end. A considerably greater share of Derby residents work in elementary, unskilled manual and customer service roles than the


20

regional and national averages. Almost a quarter of working residents in Derby (23%) have jobs in the lowest tier of skills and value, compared to 17% across the UK. At the very highest end, the proportion of Derby residents in management and directorial roles is only around 70% of the regional and national averages

61.

The value gap is particularly acute for Derby’s harder to reach economically deprived communities. Despite the relative good health of the city’s economy, Derby has a greater share of more deprived households than the national average - 45% of Derby’s local areas (LSOAs) are amongst the 30% most deprived in the country, with 19% in the 10% most deprived nationally. This is by no means unique for a large urban economy. However, Derby remains in the bottom fifth of local authorities in England’s Index of Multiple Deprivation – suggesting that economic opportunity is not universal in the city.

62

3.4.3 Skills and educational performance deficit

The overall skills profile of Derby residents lags behind wider trends. This an issue not only for the higher-level skills required to improve productivity and innovation (see section 3.1.4) – but also at the entry-level of the labour market. The deficit of work-readiness and training-readiness in Derby’s labour force are reported as particular issues by local employers – and are known national barriers to economic growth.

Improving skills and work readiness will be vital mechanisms for closing the value gap in Derby’s economy – enabling more local people to access employment, and then higher-value employment opportunities in the City.

Training opportunities do exist, but they are not necessarily be taken by local residents. 10% of all apprenticeships in the Midlands are offered in Derby, proportionately high. Only 20% of Rolls Royce apprenticeships are filled by people from Derby

63.

The CBI’s 2017 research into the regional productivity gap identifies the combination of educational attainment at 16 and workforce skills as the most influential factor in the differences between the performances of place economies in the UK. The particular focus is on schools:

Ensuring strong school performance and children getting the best results at GCSE (or equivalent) is the single most important driver of productivity differences across the UK.

CBI (2017). Unlocking regional growth understanding the drivers of productivity across the UK’s regions and nations

Derby’s performance in educational attainment and skills development is one of the key weaknesses of its economy. The city is in the bottom quintile for in work training and the bottom 2% for school outcomes

64.

Without improvement, the standard of educational performance in the city is likely to have a negative effect on whole-city economic opportunity and workforce productivity. In 2015 the proportion of students in Derby achieving 5 A*-C at GCSE (inc. Maths and English) was ten percentage points below the national average. Derby’s results were the fifth worst out of 60 cities in England and Wales – placing its performance below other more economically disadvantaged places such as Blackpool, Sunderland, Stoke and Doncaster.

65


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3.4.4 Whole-place economy indicators


Midlands GB

EM GB

Primary indicator

Job seekers’ allowance claimant rate (% population 16-64, July 2016-June 2017 average)

Cross-city economic wellbeing

1.1% 1.1% 1.2%

Resident- workplace earnings gap

Retention of economic value

£3,650 N/A

Proportion of students achieving 5 A*-C inc. Maths and English

Entry-level skills, educational attainment and aspiration

47.6% Not

available 57.7% (E&W)

3.5 Thematic evidence base: at a glance and moving on


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4 Derby’s Economic Growth Strategy

4.1 Vision

The vision for Derby’s economy in 2022 is:

4.2 The four pillars of the strategy

"An inclusive, modern city economy, creating innovative goods and services, producing competitively and collaborating regionally and globally to maximise local growth that works for all".


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4.3 The four cross-cutting themes of Derby’s economy

4.3.1 Productive Derby

Productive Derby – from evidence to vision

Productivity will continue to be an essential theme for the City of Derby in the next five years; as a feature of both the current strengths of its productive economy and its potential contribution to addressing the productivity gap between the UK and other advanced economies.

Manufacturing workers in Derby are twice as productive as the national average. However, beyond manufacturing and engineering, the evidence shows that significant progress is required in the next five years. Here value-added per worker is lower than elsewhere in the country; higher-value business services are significantly underrepresented; and critically, skills in all areas of the labour market consistently lag behind wider averages

Derby’s school-level educational attainment must be improved from a current position amongst the weakest performers of all UK city economies; whilst basic employability is a persistent challenge.

The future of Derby’s productive economy is therefore reliant as much on providing skills and more jobs in knowledge-intensive business services (KIBS) as it is upon sustaining the excellence of its existing producer activities.

Quality of place, particularly in the City Centre, and the ongoing supply of high-quality business space will be critical – both in meeting the growth need of employers and in creating a city environment conducive to attracting and retaining highly-talented and entrepreneurial people to drive productive city ambitions.

Productive Derby - Vision 2022

Reputation for the skills, infrastructure and leadership needed to create and apply high-value new designs, products and services

Appealing to urban entrepreneurs; supporting and retaining wealth creators

A supportive and proactive environment in which to incubate talent and business growth

Derby is the home of world-leading engineering and its workers generate more economic value than most other cities in the UK. The City’s productive economy in 2022 is one where this position is consolidated; with Derby’s modern workforce, infrastructure and outlook recognised as the productive engine of the metropolitan and regional economies.

The productive city is one which works efficiently – where people, products and information move freely, and business has room to grow.

In the productive economy of 2022, Derby is the first place the City’s producer’s look for the talent and skills they require in digital networks, data management and project delivery – to drive the factories of the future.

The productive economy also derives its strength and resilience from a diverse range of


24

4.3.2 Innovative economy

Innovative Derby – from evidence to vision

The overall competitiveness of Derby’s economy compares well relative to other city economies – driven by manufacturing productivity and good wage rates.

Derby has claim to be the UK’s leading high-tech city. Evidence shows this is strongly driven by advanced manufacturing, and by Rolls Royce in particular. This leaves room for continued sectoral diversification of R&D and innovation activity across the City in the next five years.

The persistent entrepreneurial deficit is one the City’s key ongoing economic challenges – Derby needs more businesses which requires a step up in the start-up and survival rates of new enterprises.

Significant numbers of well-qualified young people are attracted to Derby for its high-value specialist employment opportunities. Beyond this, improvements in the next five years to the value and quality of the City’s educational provision and the lifestyle offer are required to help attract and retain more highly-skilled entrepreneurs and wealth creators. A critical component is the ongoing enhancement of the City Centre as a high-quality meeting place for talented people, high-growth businesses, and civic, educational and research institutions.

Innovative Derby – Vision 2022

High-quality talent and assets to nurture and generate new ideas

Realising commercial potential

Reinforcing major companies, scaling up SMEs and driving up skills

Derby is the UK Capital of Innovation. It is a place where new ideas can be transformed into new products and businesses; and where innovation adds value to the City’s most productive companies.

In the thriving innovation economy ideas-generators are nurtured; and they engage in the city beyond the factory, office or the lab. In 2022, Derby will be a city of choice for graduates and urban entrepreneurs; building a range of interesting and exciting places to work and to live.

businesses in high-quality well-connected locations. By 2022, Derby’s economy will be more diverse – with more higher-value employment in knowledge-intensive business services; creating the jobs which sustain economic growth and attract young people to the City. The largest and most productive businesses in the City should buy more of their services from Derby-based businesses than ever before.


25

4.3.3 Collaborative economy

Collaborative Derby – from evidence to vision

Export data shows that Derby trades strongly as a city at national and international level with the value of goods exports per job two and a half times the national average. Derby can take advantage of trading opportunities through collaboration in the Midlands Engine and with national initiatives to promote foreign trade and investment. Development of a considerably stronger services offer over next five years will enable the City to start to trade in knowledge as well as products beyond the Metro area. Improving the range and value of services exports is therefore an important economic target.

Amongst the most important economic collaborations for Derby is with the City of Nottingham as part of a metropolitan city region: with evidence of very strong existing labour market and trade relationships. This developing partnership provides opportunities to collaborate on major infrastructure investment and promoting institutional collaboration especially between universities and research institutions – as well as presenting a stronger and more recognisable brand to investors and the wider world.

Collaborative Derby – Vision 2022

An outward-looking national and global trading partner

Part of a strong, thriving and contemporary metropolitan area

A unique contributor to the regional economy

Derby is not an island. It sits at the heart of the UK’s economy and is bound together through people and business with the other great producer cities of the Midlands. Derby and Nottingham have established a shared vision to realise a bold vision for the conurbation of relevance in the wider world.

In 2022, Derby will be positioned as a collaborative metropolitan economy; reinforcing and promoting its unique and complementary role in the Midlands economy.

The collaborative economy is outward-looking and open. Derby’s strength as a productive city brings the benefits of trade with the markets of the world – both established and developing – which will grow through the collaborative mindset. An international outlook will help to establish recognition and reputation – allowing Derby to draw on investment from global markets.

Collaboration is also a vital element of economic life in the city – with businesses working and trading together and civic, commercial and educational leaders sharing and promoting a common message about Derby’s economic future.

4.3.4 Whole-city economy

Whole-city Derby – from evidence to vision

Analysis shows that in the recent past Derby as a whole has enjoyed a relatively positive and stable socio-economic position, for example shown in higher than national average wages and relatively low unemployment. Part of the task for the next five years is to sustain and build upon this whole-city economic health.

However, the city also has structural socio-economic challenges which continue to threaten this position. The labour force in the city is relatively polarised between higher-value jobs at one end and unskilled and elementary occupations at the other. The City does not retain its own economic value as much as it should; and there is a persistent educational and skills deficit which acts as a drag on Derby’s economic growth potential.


26

Evidence also shows that the whole of the city is not yet fulfilling its economic potential – with access to opportunity and contributions to economic prosperity still very challenging in certain harder-to-reach communities.

Whole-city Derby – Vision 2022

Making opportunity for all people and businesses to share in economic growth

Strengthen economic and physical links across the city

Engaging young people through education and aspiration

In 2022, Derby’s economy is thriving with all businesses and residents contributing and sharing in this economic growth.

Young people are vital to the whole-city approach. All people brought up in Derby should have the opportunity to gain the skills and develop the aptitude required to take part in the city’s economic life.

The inherent potential within all our communities will be unlocked and realised.

The whole-city economy considers the needs of all parts of its business community – providing support and opportunity to those at the most challenging stages of business development, including through links and networks with its best performing companies.

The city vibrant centre will be the tangible embodiment of a whole-city economy; providing a window to the City’s high-tech companies, a welcoming environment for all, and transport networks which allow people to get to work efficiently and access to the city’s retail and leisure assets.


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5 Delivering economic growth in Derby

5.1 Outcomes and targets

The following diagram summarises the anticipated outcomes and measures of success (key performance indicators). The headline target is for the Derby economy to continue to create at least 1,200 net new jobs annually.


28

5.2 Actions framework

The suggested assets, programmes and institutions that Derby must have in place by 2022 to realise this vision for the city are set out below:


29


30


31

Annex 1 – key data and references

1. Derby’s economy: an overview Table 1.a : Performance indicators - Derby relative to D2N2 and national averages

Indicator Measuring Derby D2N2 GB

D2N2 GB

Jobs density per 100 working age residents (2015)

General health of employment base

87 76 83

Business density per 10,000 population (2016)

General strength of business base

351 397 459

Jobs in manufacturing (2015) Strength of key local sector

22,500

18%

126,700

14%

2,378,700

8%

Jobs in knowledge intensive business services (2015)

Strength of key high value-added sectors

15,550

12%

86,600

9%

4,051,000

14%

GVA per worker (2015) Productivity of labour force

£54,700 £47,000 £54,700

Production / services jobs split (2015)

Balance of economy 22% : 78% 21% : 79% 16% : 84%

Public / private jobs split (2015)

Resilience of the economy

20% : 80% 18% : 82% 19% : 81%

Jobs in higher-order occupations (2016)

Economic and skills profile of workforce

44% 40% 45%

Residents in higher-order occupations (2016)

Economic and skills profile of population

40% 41% 45%

Residents with higher-level qualifications (2016)

High-level skills and university graduate levels

33% 32% 38%

Residents without any formal qualifications (2016)

Work readiness, basic skills deficit

9.3% 8.1% 8.3%

Job seekers’ allowance claimant rate (% population 16-64, July 2016-June 2017 average)

Cross-city economic wellbeing

1.1% 1.1% 1.2%


32

Table 1.b: Derby‘s Economy: Key performance indicators 2011-15

Indicator Measuring 2011 2015 / 2016

Net change

% change

Total employment Overall size of economy 120,300 126,750 6,460

5.4%

Jobs density per 100 working age residents

General health of employment base

82 87 - +6%

Business density per 10,000 population

General strength of business base 300 354 +54 +18%

Jobs in manufacturing Strength of key local sector

20,360

17%

22,480

18% + 2,120

+10%

Jobs in knowledge intensive business services

Strength of key high value-added sectors

15,000

12%

15,550

12% +550

+4%

GVA per worker Productivity of labour force

£49,600 £54,700 + £5,100 +10%

Production / services jobs split

Balance of economy 22%: 78%

22% : 78%

- No change

Public / private jobs split Resilience of the economy

22%: 78%

20% : 80%

- +2% pts to private

sector

Jobs in higher-order occupations

Economic and skills profile of workforce

43% 44% - +1% pt

Residents in higher-order occupations

Economic and skills profile of population 39% 40% - + 1% pt

Residents with higher-level qualifications

High-level skills and university graduate levels

27% 33% - + 6% pts

Residents without any formal qualifications

Work readiness, basic skills deficit 13.9% 9.3% - - 4.6% pts

Job seekers’ allowance claimant rate (% population 16-64, July-June average 2010/11; 2016/7)

Cross-city economic wellbeing 4.9% 1.1% - - 3.8% pts


33

1 Jobs density 2015: Derby: 87 jobs per 100 working age residents; D2N2 76/100; GB 83/100

(BRES Employment, 2015; ONS Mid-Year Population Estimates, 2015).

2 Employment growth 2011-15: +6,458 net change in City of Derby (BRES Employment, 2011

and 2015) 3 Manufacturing growth 2011-15: +2,120 net change in City of Derby employment in

manufacturing (BRES Employment, 2011 and 2015)

4 Business density (2016): 343 businesses per 10,000 population compared to 397 in D2N2,

459 in Great Britain (UK Business Counts Local Units and Mid-Year Population estimates 2016)

5 GVA per person in employment (2015): Derby £54,690, D2N2 £47,040, Great Britain £54,702

(ONS Regional Gross Value Added, 2015; BRES Employment, 2015)

6 GVA per person in employment in manufacturing in Derby (2015): Derby £94,500; GB

£68,000 (ONS Regional Gross Value Added, 2015; BRES Employment, 2015)

7 Median annual wage of residents (2016): Derby: £28,654; East Midlands: £26,593; UK:

£28,213 (ONS Annual Survey of Household Earnings, 2016)

8 Growth of GVA per person in employment (2011-15): GENECON analysis of UK Business

Counts Local Units

9 Growth in technical activities and engineering consultancy (2011-2015): (BRES

employment 2011 and 2015 3 digit SIC analysis)

10 Growth in professional ‘STEM’ roles (2011-2016): Science, Research, Engineering and

Technology Professionals (SOC2010): 10,400 (2011); 11,300 (2015) (ONS Annual Population Survey, Workplace Occupations, 2011 and 2016)

11 Employment in Knowledge Intensive Business Services (2011-2015): Derby 2011: 15,000;

2015: 15,550 (GENECON analysis of BRES Employment, 2011 and 2015: using sector definition developed by Centre for Cities)

Knowledge Intensive Business Services are labour and human capital intense services that provide expert professional, technical and creative knowledge as inputs to the business processes of other organisations. The sector is associated with innovation and economic development and is widely viewed as leading the transition from industry-based to information-based economic systems. This report uses the Centre for Cities KIBS definition, which includes the following activities:

Information services

Software development and publishing, data processing and hosting, computer system design and management.

Financial services

Banking and lending, investment and fund management, insurance and pensions

Professional services

Legal services, accounting, auditing and tax activities, corporate head offices, management consultancy

Property services

Building project development, quantity surveying, real estate trading and management, architectural, planning and environmental consultancy

Marketing services

Public relations, advertising and market research

12 Polarisation of work on offer in Derby and decline of skilled workers: (ONS Annual

Population Survey, Workplace Occupations, 2011 and 2016)


34

13 More higher order jobs in the City than residents working in higher order jobs: (ONS

Annual Population Survey, analysis of Tier 1 Workplace and Residents Occupations, 2011 and 2016)

14 Basic qualifications: the proportion of Derby’s workforce with no formal qualifications (9.3%)

is higher than national and regional averages (GB 8.3%; EM 7.5%; D2N2 8.1%) (ONS Annual Population Survey 2016)

15 Median annual wage of residents (2016): Derby: £28,654; Median annual wage of

workplace jobs £28,650 (ONS Annual Survey of Household Earnings, 2016)

16 Deprived households and LSOAs: 18.5% of Derby LSOAs are in the 10% most deprived in

England (DCLG 2015 Index of Multiple Deprivation, Local Authority analysis)

17 Job seekers allowance trends: (ONS Claimant Count, proportion of 16-64)

18 ONS Mid -Year Population Estimates (2016)

19 UK Business Counts Local Units (2016)

20 ONS Regional GVA 2015

21 Marketing Derby investment prospectus 2016/17

22 Rightmove

23 HM Government (2017): Building our Industrial Strategy: Green Paper. p12

24 HM Government (2017): Building our Industrial Strategy: Green Paper. p14

25 Derby and Nottingham Metropolitan Strategy 2030. Action Plan. p1

26 Derby City Council (2017). Draft Transport Strategy. p33

27 University of Derby event: Making Brexit Work for Derby, November 21 2016

28 GVA growth in Derby outperforming national and regional averages: GENECON analysis

of ONS Regional Gross Value Added, 2015

29 Greater share of private sector jobs in Derby: GENECON analysis of BRES Public Private

Employment, 2011 and 2015

30 HM Government (2017) Midlands Engine Strategy

31 AECOM analysis of ONS Regional GVA as reported in Planes, Trains and Automobiles Part 2

(AECOM, 2017) p26.

32 GENECON analysis of ONS Regional Gross Value Added, 2015

33 Oxford Economics (2016), The Contribution of Rolls Royce to the UK Economy in 2015

34 Derby City Council (2017). Derby Core Strategy, p7.

35 GVA per person in employment by sector (2015): GENECON analysis of Regional Gross

Value Added, 2015; BRES Employment, 2015

36 Labour Insights data, as reported in DCC and NCC, Exploring skills needs and supply in the

Metro area (presentation, 2017)

37 Centre for Cities, 2017. The Great British Brain Drain: an analysis of migration to and from

Derby

38 Excalibur UK Ltd (2017) Research Report on Enterprise and Skills

39 AECOM, 2017. Planes, Trains and Automobiles Part 2

40 CBI (2017). Unlocking regional growth understanding the drivers of productivity across the UK’s

regions and nations


35

41 Industrial Digitalisation Review Interim Report (2017)

42 Cardiff Business School, Nottingham Business School (2016). UK Competitiveness Index 2016

The Huggins Competitiveness Index provides a benchmarking of the competitiveness of the UK’s localities, and it has been designed to be an integrated measure of competitiveness focusing on both the development and sustainability of businesses and the economic welfare of individuals

43 Lower than average business density: 2016 local business units per 10,000 population:

Derby, 351: East Midlands, 428; Great Britain, 459. (GEENCON analysis of ONS UK Business Counts 2016 and Mid-Year Population Estimates 2016).

44 GENECON analysis of UK Business Demography and Mid-Year Population Estimates (2013-

2015)

45 GENECON Analysis of Derby City Council data provided by Bank Search Information

Consultancy Ltd (2017).

46 ONS Business Demography (2015) Business Survival rates.

47 GENECON analysis of ONS Research and Development in UK Businesses (2015)

48 Oxford Economics (2016) The Contribution of Rolls Royce to the UK Economy in 2015.

49 Centre for Cities, 2017, The Great British Brain Drain: an analysis of migration to and from

Derby

50 Ibid

51 GENECON analysis of ONS 2011 Census, Origins and destinations data

52 AECOM, 2017. Planes, Trains and Automobiles Part 2


Derby

54 Centre For Cities data tool: 2015 data based on Regional Trade Statistics, Regionalised

Estimates of UK Service Exports, Labour Force Survey,


Derby

56 GENECON analysis of BRES Employment 2015

57 GENECON analysis of ONS Claimant Count data 2011-2017.

58 ONS Claimant Count, July 2017

59 Median annual wage of residents (2016): Derby: £28,654; East Midlands: £26,593; UK:

£28,213 (ONS Annual Survey of Household Earnings, 2016)

60 Median annual wage of residents (2016): Derby: £28,654; Median annual wage of workplace

jobs £28,650 (ONS Annual Survey of Household Earnings, 2016)

61 GENECON Analysis of ONS Annual Population Survey, Workplace and Resident

Occupations, 2011 and 2016

62 GENECON analysis of DCLG 2015 Index of Multiple Deprivation, Local Authority analysis

63 Excalibur UK Ltd (2017) Research Report on Enterprise and Skills

64 Derby City Council data from CBI (2016) Unlocking Regional Productivity, NUTS3 areas)

65 Department for Education (2015) data reported in Centre for Cities data tool.

four pillars: derby economic growth strategy 2017-2022 · the draft strategy is divided into four...

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