sheffield city region: supply chain needs & capabilities ... · ‘high-value manufacturing is...
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Sheffield City Region:
Supply Chain needs & capabilities – Data Pack
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Client: SCR Combined Authority23 April 2018Steer-ED ref: 234-984-01
Overview
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Supply Chain Data Pack – Overview
Purpose
This Data Pack forms part of a project researching the supply chain needs of the Sheffield City
Region’s (SCR) Original Equipment Manufacturers (OEMs) & indigenous businesses.
The project was commissioned by SCR Combined Authority in response to the findings in SCR’s
2017 Strategic Economic Plan, which identified that supply chains were underdeveloped.
Research for this project is focussed on the High Value Manufacturing (HVM) sector & considers
Inward Investment opportunities as well as existing supply chain activity.
Specifically, this Data Pack provides contextual data on the SCR's economic performance,
analyses of firm level data, & an assessment of the role of SCR in national & global value chains
(GVCs).
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Supply Chain Data Pack - Structure
This Data Pack provides five main themes of analysis, which combined provide an overview of
the economic context of SCR, an analysis of firm level data, & an approach to framing SCR’s
position in Global Value Chains & nationally. The main themes of analysis are:
• Context – This provides an overview of key economic indicators of performance in SCR
relating to supply chain activity, including GVA, employment, productivity, & business
demography
• Analysis of business data in SCR’s HVM supply chain – analysis of firm level data &
investment into the Sheffield City Region (SCR), using data from MINT, & a bespoke list of
firms generated from sources at SCR, Experian, & the University of Sheffield
• Analysis of HVM Investment data in SCR –investment pattern data provided by the SCR
Combined Authority, including spatial analysis of where investment is coming from
• Analysis of SCR’s Global Value Chain Footprint –observations & information on the SCR’s
position in Global Value Chains (GVCs) in the HVM sector
• Exploratory analysis of local & national HVM supply chain structures – a quantitative look
at the local & national level characteristics of HVM in SCR, using Input-Output data
• Concluding thoughts – Explaining emerging trends & issues
Each of these themes is interlinked with ‘Pause for Thought’ slides, which seek to identify key
messages & implications as the reader works through the pack
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Context
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Overview
This study is focussed on the HVM sector. In order to analyses this sector, a definition needed
to be agreed upon & then translated into Standard Industrial Classification (SIC) codes, whereby
national & local datasets could be categorised to highlight HVM businesses & data
For the purpose of analysing firm level data by sector, a definition for HVM was agreed with
SCR. The selected definition is displayed below
Definition of High-Value Manufacturing
Innovate UK defines HVM* as:
‘High-Value Manufacturing is the application of leading-edge technical knowledge &
expertise to the creation of products, production processes, & associated services
which have strong potential to bring sustainable growth & high economic value to
the UK. Activities may stretch from R&D at one end to recycling at the other’
This definition has been translated into a Standard Industrial Classification code definition,
displayed overleaf
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Definition of HVM by SIC code
Code Definition
20 Manufacture of chemicals & chemical products
21 Manufacture of basic pharmaceutical products & pharmaceutical preparations
25Manufacture of basic & fabricated metal products – [expanded scope due to increasing high value activity in this field]
26 Manufacture of computer, electronic & optical products
27 Manufacture of electrical equipment
28 Manufacture of machinery & equipment (n.e.c)
29 Manufacture of motor vehicles, trailers & semi-trailers
30.2 Manufacture of railway locomotives & rolling stock
30.3 Manufacture of air & spacecraft related machinery
30.4 Manufacture of military fighting vehicles
30.9 Manufacture of transport equipment (n.e.c)
33 Repair & installation of machinery & equipment
71.12 Engineering activities & related technical consultancy
72 Scientific Research & Development
Sourceshttps://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/362294/High_Value_Manufacturing_Strategy_2012-15.pdfhttp://www.neweconomymanchester.com/media/1212/advanced_manufacturing.docx
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The agreed definition of HVM was converted to the following SIC codes, using existing definitions & additional codes on discussion with SCR Executive
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Data Sources
Data Source
Business Counthttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/ukbusinessactivitysizeandlocation
Business Compositionhttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/ukbusinessactivitysizeandlocation
Business birth counthttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/businessdemographyreferencetable
Business death counthttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/businessdemographyreferencetable
Business death ratehttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/businessdemographyreferencetable
Business stock by sizehttps://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=142
Total GVAhttps://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry
Total Employmenthttps://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=189
Total Productivityhttps://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/datasets/subregionalproductivitylabourproductivitygvaperhourworkedandgvaperfilledjobindicesbyuknuts2andnuts3subregions
GVA by sector
https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry
Employment by Sector
https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=189
Productivity by sector Combined from above
Foreign owned businesshttps://www.ons.gov.uk/businessindustryandtrade/business/businessservices/datasets/annualbusinesssurveyforeignownedbusinessesbusinesscountturnoverandagvabreakdown
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National-level data
To understand the baseline economic conditions & trends in SCR in context with national &
other regional areas, relevant information from national level datasets was analysed. Of key
interest for understanding the strength of place for supply chains are GVA, employment,
productivity, & business demography.
The following slides provide a contextual analysis of economic conditions in SCR relevant to key
comparators.
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0
5,000
10,000
15,000
20,000
25,000
30,000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
All Industries HVM
Headline summary of SCR’s HVM economy
GV
A (£
m)
GVA growth in HVM has stagnated compared to overall GVA growth – now 11% of total (from 19% in 1999)
Ge
ne
ral t
ren
ds
19
98
/20
17
Total GVA is 2.2% of UK total & has remained fairly constant 1998-2017
Source: https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry
Total economy growth in SCR of 89%, compared to 104% for the UK
HVM (broad category) sector growth of 8% in SCR, compared with 26% growth in whole UK (20 years). 10 year comparison identifies a 16% rise in SCR & a 13% rise in the UK. The last 5 years, however, growth has slipped behind the UK, showing 11% growth compared to 14% in the UK*
*GVA data at this sub-regional level only available to broad level SIC codes (2-digit)
HV
M t
ren
ds
19
98
/20
17 GVA growth in HVM was hit harder by the
recession than the UK as a whole
GVA growth in HVM in SCR initially recovered faster than the UK from the recession but has fluctuated & lost pace recently
Analysis using ONS data is limited to broad sectors, meaning the overall HVM ‘picture’ is obscured by some non-HVM activities
10
60
70
80
90
100
110
120
130
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
UK Barnsley, Doncaster and Rotherham Sheffield SCR
HVM GVA growth (current price estimates)*
Sectoral GVA data groups Barnsley, Doncaster & Rotherham as one entity
Last 5 years – 11% growthLast 10 years – 16% growthLast 20 years – 8% growth
SCR GVA (£m - current price estimates)*
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0
500
1000
1500
2000
2500
3000
3500
4000
Sectoral GVA 2017 (£m)
Headline summary of SCR’s HVM economy
Top 10
HVM
Other
Two of the seven broad sectors comprising HVM* are in the top ten for GVA value in SCR (2017) (48 total).
The largest HVM sector in SCR encompasses some non-high value sub-sectors, so is over-represented
The large share of Human Health activities in SCR may provide opportunities for HVM – medical products & materials
GV
A (£
m)
Hig
h L
eve
l Se
cto
ral A
nal
ysis
Source: https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry
*GVA data at this sub-regional level only available to broad level SIC codes – 2-digit
Bro
ad H
VM
se
cto
r G
VA
Highest sub-sectoral GVA (broad sector) in SCR has been in R&D – both in overall growth & recent (past 5 year growth)
Architectural & engineering activities rose in GVA over the whole period, but this has declined in recent years
Manufacture of metal products & machinery/transport equipment -SCR’s traditional strength - has declined in SCR over the period
Sub-sectoral GVA change (indexed to 1998)
11
40
90
140
190
240
290
340
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Manufacture of petroleum, chemicals and other minerals Manufacture of basic and fabricated metal productsManufacture of electronic, optical and electrical products Manufacture of machinery and transport equipmentOther manufacturing, repair and installation Architectural and engineering activitiesResearch and development; advertising and market research
Other manufacturing/ repair/ installation has seen a rapid recent increase
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0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1 : Agriculture, forestry & fishing(A)
2 : Mining, quarrying & utilities(B,D and E)
3 : Manufacturing (C)
4 : Construction (F)
5 : Motor trades (Part G)
6 : Wholesale (Part G)
7 : Retail (Part G)
8 : Transport & storage (inc postal)(H)
9 : Accommodation & food services(I)
10 : Information & communication(J)
11 : Financial & insurance (K)
12 : Property (L)
13 : Professional, scientific &technical (M)
14 : Business administration &support services (N)
15 : Public administration &defence (O)
16 : Education (P)
17 : Health (Q)
18 : Arts, entertainment, recreation& other services (R,S,T and U)
SCR LQ England
90
95
100
105
110
115
120
125
2009 2010 2011 2012 2013 2014 2015 2016 2017
Highest Performing (incl London) Highest Performing (excl London)
Mid Performing Sheffield City Region
Lowest Performing
SCR’s employment situation
Employment
12
Growth in total employment in SCR has followed a similar profile to other LEPs/CAs, but recovery from the 2008 financial crisis has been slower, with lower relative growth.
SCR ranks 33 of 38 LEPs in terms of relative employment growth 2009-2017
Source: NOMIS, 2019
Employment in SCR is skewed towards Manufacturing & Motor trades compared to England as a whole
Location Quotient of Employment
Information & Communication (Digital) as a sector is under-represented as an employment source in SCR compared to England, along with the Professional, Scientific & Technical broad sector
Complementary sectors to HVM –Health & defence as well represented in SCR compared to England
Indexed employment growthLondon
Enterprise M3
Lancashire
Stoke on Trent
SCR
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SCR’s GVA situation
GVA
13
Growth in total GVA in SCR has followed a similar profile to the UK, but as with employment, was affected more greatly by the 2008 financial crisis & has not recovered as well
Source: ONS, 2019
GVA in SCR is skewed strongly towards Manufacture of basic & fabricated metal products & Other manufacturing, repair & installation, reflecting the strong heritage of SCR in these sectors
Location Quotient of GVA
Research & development as a GVA source in SCR is below the UK average, as is the manufacture of machinery & transport equipment, indicating that activities in this sector may be in low value goods this is highlighted by the lower productivity of professional & manufacturing sectors in SCR
Indexed GVA growth (current price estimates)
Of the core SCR Local Authorities, Doncaster has experienced the largest relative growth in GVA for the period, with Sheffield the lowest. However, growth in Doncaster has fluctuated more than in the other Local Authorities
0
0.5
1
1.5
2
2.5
3
Manufacture of petroleum,chemicals and other minerals
Manufacture of basic andfabricated metal products
Manufacture of electronic,optical and electrical products
Manufacture of machinery andtransport equipment
Other manufacturing, repairand installation
Research and development;advertising and market
research
SCR LQ UK
80
100
120
140
160
180
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Highest Performing (incl London) Highest Performing (excl London)
Mid Performing Sheffield City Region
Lowest Performing
London
Enterprise M3
LancashireStoke on Trent
SCR
|
SCR’s Productivity – overall
Productivity
14
Source: ONS, 2019, BRES, 2019
Productivity growth
Nominal productivity is below the median LEP productivity (33rd of 38), not far ahead of the worst performing LEP (Stoke-on-Trent & Staffordshire)
Absolute Productivity
However…The growth rate between 2009-2016 6th fastest of all 38 LEPs, & indeed ahead of London.A dip in productivity growth occurred in 2014-15, but data indicates that recovery from this has commenced
98
100
102
104
106
108
110
112
114
2009 2010 2011 2012 2013 2014 2015 2016 2017
Highest Performing (incl London) Highest Performing (excl London)
Mid Performing Sheffield City Region
Lowest Performing
35000
40000
45000
50000
55000
60000
65000
70000
75000
80000
85000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Highest Performing (incl London) Highest Performing (excl London)
Mid Performing Sheffield City Region
Lowest Performing
London
Enterprise M3
Lancashire
Stoke on TrentSCR
London
Enterprise M3Lancashire
Stoke on Trent
SCR
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SCR’s Productivity – by sector
Productivity
15
Source: BRES (jobs) & ONS (GVA), 2019
Change in Productivity by broad sector 2009-2016
Productivity by broad sector 2016
Productivity by broad sector group indicates that manufacturing has increased at the same rate as England & the Northern Powerhouse, with distribution & information broad sectors exceeding the growth rate in these comparator regions
GVA per Jobs by Industry SCR NP England
Production -3% -12% 9%
Manufacturing 34% 34% 35%
Construction 37% 42% 47%
Distribution 41% 19% 22%
Information 50% 15% 8%
Finance -34% -4% -9%
Real Estate 62% 27% 30%
Professional 11% -1% 9%
Public Services 10% 10% 8%
Other Services 21% 26% 28%
TOTAL 31% 26% 28%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
SCR England NP
Productivity in all sectors is below England levels & behind the Northern Powerhouse in most. However, manufacturing, construction, information & production all have productivities over £50,000, close to the national average Real Estate is the most productive sector, but this an outlier due to how GVA in this sector is recorded
15
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SCR’s Productivity – by Local Authority
Productivity
16
Source: BRES (jobs) & ONS (GVA), 2019
Productivity has increased in all of the core Local Authority areas but stagnated since 2008, in line with the UK as a whole.
Productivity growth has been strongest in Rotherham, & Sheffield suggesting the positive influence of international OEMs moving into these Local Authorities.
Doncaster is the worst performing Local Authority for productivity growth, although experienced a recent bounce alongside Rotherham
90
95
100
105
110
115
120
125
130
1997 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Indexed productivity by Local Authority
Sheffield City Region Barnsley Doncaster Rotherham Sheffield United Kingdom
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SCR’s Business profile
Businesses
17
Source: https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/businessbirthsdeathsandsurvivalrates
Indexed number of live enterprises
100
110
120
130
140
150
160
2012 2013 2014 2015 2016 2017
SCR Barnsley
Doncaster Rotherham
Sheffield UK
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
2012 2013 2014 2015 2016 2017
SCR Barnsley
Doncaster Rotherham
Sheffield UK
Business birth/death ratio
Constituent Local Authorities in SCR have similar birth/death ratio & indexed number of live enterprises to the UK, with the exception of Doncaster, which had a rapid growth of enterprises 2014-2016, although these new enterprises had a low survival rate
SCR has experienced proportionally more growth in enterprises than the wider UK since 2013, although this has recently seen a slow down
36.0
38.0
40.0
42.0
44.0
46.0
48.0
UK SCRBarnsley Doncaster Rotherham Sheffield
5-year business survival rate (2012-17)
SCR 5-year business survival rate is above the UK average. This is driven by Rotherham, Sheffield, & Barnsley, with Doncaster having a significantly lower survival rate since 2012
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SCR’s Business demography
Businesses
18
Source: https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/businessbirthsdeathsandsurvivalrates
Business composition in HVM – SCR vs UK
Within SCR, the demographics of the HVM sector differ to the total business profile, with a lower proportion of businesses in HVM being micro, with a larger proportion in all other business size groups
Compared to the UK, the HVM sector in SCR comprises of a lower proportion of micro businesses, but, again, has a higher proportion of businesses in the remaining business size classes
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Micro (0 to 9) Small (10 to 49) Medium-sized (50 to249)
Large (250+)
Series1 Series2SCR UK
Business composition in SCR – HVM vs total
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Micro (0 to 9) Small (10 to49)
Medium-sized(50 to 249)
Large (250+)
HVM TOTAL
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Micro (0 to 9) Small (10 to49)
Medium-sized(50 to 249)
Large (250+)
HVM TOTAL
SCR UK
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Pause for Thought
Messages
• The HVM sector in SCR (and all constituent core Local Authorities) has lagged behind the UK in
terms of GVA, employment, & productivity, ranking 33rd of the 38 LEPs in England for all three
measures. Productivity growth is more promising, ranking 6th of 38, but again, this is from a low
starting point.
• The business birth/death ratio in SCR is below the UK average, although this has followed the
same trend since 2012. Variation among the four core Local Authorities is small, with the
exception of Doncaster, which experienced a rapid growth in the number of enterprises 2012-17,
but with a low relative survival rate.
• Productivity by broad sector group indicates that Manufacturing (encompassing HVM) has
increased at the same rate as England & the Northern Powerhouse, with Distribution &
Information broad sectors exceeding the growth rate in these comparator regions.
Implications
• There is a need for greater integration of HVM OEMs into the City Region’s supply chains, which
would raise the level of higher GVA producing jobs.
• A stronger HVM supply chain would build critical mass, which would increase both the number of
enterprises, & their survival rates.
• There is an opportunity to build on these integrated sectors to drive productivity growth, as
Digital (Information) becomes increasingly aligned with HVM through the progression of Industry
4.0.19
Analysis of business data in SCR HVM supply chain
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Our Analysis
Objectives:
• Analyse current available data to identify firm-level trends of HVM in SCR & identify the
international presence in the City Region
• Identify Gaps in the data which will be filled by an online business survey
Method:
• Data for each firm (Supplied by SCR &, the University of Sheffield, & Made in Sheffield) was
collated into a single database & arranged into relevant headings to the specification
• Data gaps that will need to be filled by fieldwork were highlighted & inserted into the single
database as blank columns
• Of the available data, the number of firms by origin & the turnover of firms by origin was
analysed to:
– Understand the scale of HVM in SCR
– Gain understanding of the influence of global companies on the SCR economy to be
developed
• Assessment of large investments into the City Region in the past two years conducted to
highlight the largest contributing regions to SCR
• Subsector analysis at 2 digit & 3 digit SIC code level was undertaken to analyse the scale of
each sector in the SCR & inform identification of strengths, weaknesses, opportunities &
threats
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Headlines
• 93% of HVM firms in SCR are headquartered in the UK
• UK firms combined only account for the fourth highest turnover
• US firms have the highest combined total turnover
• Japan & China are second & third
• Turnover totals are dominated by a few very large firms – highlighting the importance of
attracting investment from these
• SCR has a smaller ratio of SMEs than the UK as a whole
• There is a lower percentage of SMEs in SCR’s HVM sector than as a whole:
SCR HVM SCR Total UK (Total)1
Number of SMEs 4,319 16,700 5,700,000
Total Firms 4,652 17,413 c. 5,750,000
Percentage of SMEs 93% 95% 99%
1. https://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf
22
Source: Steer ED analysis of the SCR MINT Database
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Number of HVM firms in SCR by origin
Number of firms
0
5
10
15
20
25
30
35
40
45
Nu
mb
er o
f fi
rms
UK: 4,300 (93%)
Relatively low ratio of foreign firms
23
Source: Steer ED analysis of the SCR MINT Database
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Total turnover of HVM firms in SCR by origin
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
Turn
ove
r (£
m)
Dominated by a small number of large firms
24
Source: Steer ED analysis of the SCR MINT Database
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Number of HVM firms by sub-sector – SCR’s Databases
• Firm level data shows the supply chain network of HVM businesses in SCR is dominated by three broad industry classes. Combined these three account for 78% of 2-digit SIC code defined HVM businesses in the SCR database. It must be noted that at 2-digit SIC code level, the top two sectors do include non-HVM activities as well
• 3 digit SIC code analysis identified that Architectural & engineering activities, Repair of machinery & equipment, & manufacture of special purpose machinery are the most prevalent
Nu
mb
er o
f fi
rms
78% of businesses
0
200
400
600
800
1000
1200
1400
1600
1800
Architecturaland engineering
activities;technical testing
and analysis
Manufacture offabricated
metal products,except
machinery andequipment
Repair andinstallation of
machinery andequipment
Manufacture ofmachinery and
equipmentn.e.c.
Manufacture ofelectrical
equipment
Manufacture ofcomputer,
electronic andoptical products
Manufacture ofother transport
equipment
Manufacture ofchemicals and
chemicalproducts
Manufacture ofmotor vehicles,
trailers andsemi-trailers
Manufacture ofbasic
pharmaceuticalproducts and
pharmaceuticalpreparations
25
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Total turnover of firms by sub-sector – SCR’s Databases
Total Turnover of Parent Companies (£m)
• The combined turnover of firms engaging in the manufacture of fabricated metal products is highest for parent companies, closelyfollowed by manufacture of machinery & equipment, & Architectural & engineering activities.
• The SCR based component of firms is skewed towards manufacture of fabricated metal products, showing a dependency on this sub-sector at a business level*.
* Company level turnover data on MINT & SCR generated databases has some data gaps
Immediate Company Turnover (£m)
Manufacture of fabricated metalproducts, except machinery andequipmentManufacture of chemicals andchemical products
Manufacture of motor vehicles,trailers and semi-trailers
Manufacture of machinery andequipment n.e.c.
Manufacture of computer, electronicand optical products
Manufacture of electrical equipment
Architectural and engineeringactivities; technical testing andanalysisRepair and installation of machineryand equipment
Manufacture of other transportequipment
Manufacture of basic pharmaceuticalproducts and pharmaceuticalpreparations
26
Source: Steer ED analysis of the SCR MINT Database
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Pause for Thought
Messages
• The percentage of SMEs as a total of HVM businesses in SCR is below the UK (7 percentage
points lower). This suggests a weaker local supply chain, where the large OEMs in the City
Region source a higher proportion of their intermediate products/parts from outside SCR.
• The vast majority of businesses in HVM in SCR are registered as UK companies (93%). However,
in terms of turnover, UK HQ’d businesses comprise only 11%. At this stage, it is not possible to
break down the percentage of firm turnover generated in SCR. The fact that US HQ’d
companies have a turnover equivalent to 44% of the total HVM business base, despite
numbering only 41 of c. 4,500 is indicative of the size of foreign-owned firms being significantly
higher.
Implications
• Attracting Large foreign owned businesses & integrating them into the local supply chain will
build critical mass & increase the growth opportunities for indigenous businesses & SCR as a
whole.
• Manufacture of fabricated metal products is the largest contributor to turnover of businesses
with locations in SCR. This is aligned with SCR’s industrial heritage in this area, & is a potential
growth area, with products from this sector feeding into Aerospace, Automotive, Defence, &
Construction industries – all growth areas under Industry 4.0. This is a differentiator for the
region and a strong starting point to build a forward looking profile/offer
27
Analysis of HVM Investment data in SCR
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Our Analysis
Steer-ED was provided with investment data from SCR for 2016/17 & 2017/18. this was coded
by country & Industry Classification to enable analysis of the HVM sector.
The following charts detail the number of investments, the total value of investments, & the
number of jobs created by investments by origin.
Headline HVM Sector Messages
• The majority of investments came from the US, followed by Germany & Netherlands.
• US, Netherlands & Germany were also the top investment origins by value, but with the
Netherlands being the largest, & Germany second.
• Investments from Germany created the most jobs, more than double the next biggest
contributor, the Netherlands.
• Expansion of activities was the most common form of investment
• Acquisitions contributed over 50% of total investment value
• The value of investment was heavily influenced by a small number of large
acquisitions/expansions, highlighting the importance to Supply chains of attracting large,
influential businesses to a region
• Some investments classified as HVM don’t fall into traditional HVM SIC code categories e.g.
food & drink
29
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Number of HVM investments by origin FY 16/17 - FY 17/18
0
5
10
15
20
25
Nu
mb
er o
f in
vest
men
ts
30
Source: Steer ED analysis of the SCR Investment data
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Value of HVM investments by origin FY 16/17 - FY 17/18
0
200
400
600
800
1000
1200
1400
1600
Val
ue
of
inve
stm
ents
(£
m)
31
Source: Steer ED analysis of the SCR Investment data
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Jobs created in HVM by investment by origin FY 16/17 - FY 17/18
0
1000
2000
3000
4000
5000
6000
Tota
l Jo
bs
crea
ted
by
ori
gin
of
inve
stm
ent
32
Source: Steer ED analysis of the SCR Investment data
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Pause for Thought
Messages
• The data available on investments into SCR is temporally limited. However, it does provide an
indicator as to the origin of recent large investments into the City Region. On all metrics, the
US, Germany, & Netherlands are the most important investment origins, with 87% of
investment value 2016-2018 coming from one of these sources.
• Investments are skewed highlytowards large value acquisitions, with 50% of all investments being of this nature. It will be important to expand on the number & value of investments that can be classified as New Investments, Creation of New Sites/Activities, & Expansions to maximise the supply chain benefits of investment.
Implications
• By Origin, the Netherlands, Germany, Japan, & the • US are have the largest value per investment, meaning• these countries would be good targets for • promotional activities. However, data over a longer• time period would make this analysis more robust.• Future global megatrends in industrial development • must also be considered to ensure longevity of any • investment strategy.
33
Acquisition48%
Expansion21%
New Investment18%
Creation of new site or activity
13%
Retention0%
Value of Investments
Analysis of SCR’s Global Value Chain Footprint
|
Overview
The following material seeks to:
• Provide a ‘top down’ context to help to understand & interpret the findings from the
‘bottom up’ SCR advanced manufacturing supply chain mapping work
• Create the potential to calibrate & adjust the ‘top down’ estimation method in the light of
findings ‘bottom up’ analysis, which could take the form of a business survey
35
|
Extracting value by comparing ‘top down’ & ‘bottom up’ estimates of SCR supply chain structure(s)
Top down
Bottom up
REALISTIC & GLOBALLY CONNECTED SUPPLY CHAIN
PICTURE
WEAKNESS: Starts by assuming that SCR’s overall GVC participation on an industry-by-industry basis mirrors that of the UK as a whole
STRENGTH: Does not assume anything about SCR’s overall GVC participation but focuses on firms & industries
STRENGTH: Provides a global ‘systemic’ perspective to SCR supply chain connectivity
WEAKNESS: Cannot capture SCR’s broader system GVC connectivity
LONG-TERM OPPORTUNITY TO:
• ADJUST TOP DOWN PROFILE OF SCR GVC PARTICIPATION USING BOTTOM UP DATA (THUS INCREASING ACCURACY OF THE ESTIMATES OF GVC PARTICIPATION)
• AUGMENT BOTTUP UP ESTIMATES WITH ESTIMATES OF BROADER GVC PARTICIPATION)
RESULT: MORE ACCURATE & USEFUL EVIDENCE FOR THE SCR IN THE FUTURE
In order to estimate the supply chain structure in SCR, two methods exist: the ‘top down’ & ‘bottom up’ approaches. Below we identify the strengths & weaknesses of the two approaches.
36
|
Why supply/value chains matter for SCR’s economy
Local economic impacts can be maximized by actively amplifying
multiplier effects rather than just assume they
will take place
Internationally connected supply
chains foster useful local knowledge
spillovers & attract FDI
37
|
Global Value Chain essentials
SCR’s economy
38
|
Different types of supply/value chain ‘actors’
SOURCE CONFLUENCE
ROUTER/PIVOT
FINA
L DEM
AN
D
INTERMEDIATE DEMAND
INTER
MED
IATE
DEM
AN
D
INTER
MED
IATE
DEM
AN
D
RES
OU
RC
E EX
TRA
CTI
ON
A sub-national region or major city can position itself in
different ways, e.g. Singapore prioritises a router/pivot role
in GVC participation – as could SCR
GVC participation ‘taps into’ GVC GVA flows using a distinctive technology/IP & functional geography ‘offer’
Convergence point of several GVCs driven by final demand
SCR Target
Resource extractor/raw material producer
e.g. USAe.g. Middle East
e.g. Singapore
39
|
Industrial Strategy & GVC ‘router/pivot’ hubs
• As an industrial region, SCR can learn from supply chain attraction & retention strategies
work-wide – what works well & what works less well
• 80% of global GDP is generated in cities, & GVCs loop through these cities – in other words the
GVC system is largely a network of city regions adding GVA in GVCs & benefitting from GVC-
driven technology flows & knowledge spillovers
• This prominence of City Regions in GVCs gives major & unique advantages to a ‘city state’
because central government can optimize national policy settings (tax & R&D subsidies etc.) to
build a city region GVC router/pivot hub -see next slide for more detail on Singapore
• For SCR, the supply chain attraction & retention potential can still be informed by places like
Singapore – but without the same scope to use national policy settings as a city region supply
chain attractor . . . though there may be alternative solutions
40
|
Taking a closer look at Singapore
• Explicit focus on fostering a world-class innovation ecosystem to attract inward investment &
supply chain ‘loop through’ to a city region
• Focus on HVM (plus biotech, fintech & cyber security)
• Explicit emphasis on fostering a vibrant start-up community as part of the innovation ecosystem
(in turn attracts Multinational Corporations (MNCs) … who benefit from & can buy-up start-ups as
& when necessary)
• Special & prestigious visa class to tempt talented entrepreneurs to relocate to Singapore to
start their companies
• Major advantage of setting income & corporate tax rates to facilitate supply chain attraction –
combined with ability to use generous R&D subsidies to effectively wipe out corporation tax
• e.g. Dyson’s new electric car activities in Singapore are rumoured to be receiving R&D subsidies
that will bring net corporation tax to zero
• Clever combination of loose & strict regulatory regimes to maximise supply chain attraction,
loose for industry, strictest in the world at present for banking (which attracts banking in Asia
due to lower risk exposure) & IP protection (China counter-balance…)
• Exploits the functional geography of GVCs – physical location in the GVC system matters (land, sea
air)
41
|
Lessons for SCR from Singapore
• An innovation ecosystem focus is very useful because these synergies matter to OEMs (e.g. a
vibrant start-up sector is attractive to MNCs)
• Proximity & co-location matters – geographical closeness fosters trust & reciprocity (valuable
‘social capital) …. but this intangible asset is most valuable when the innovation ecosystem is
diverse…and includes cutting-edge professional services
• Talent attraction is of major importance, create an environment attractive for start-ups & actively
encourage global talent to re-locate to the SCR (the Peak District is a major natural asset in this
respect)
• Useful for ‘asks’ of Whitehall to mimic the optimized use of central government policy settings
available to a city state (hence the importance of devolved powers to LIS delivery)
• Exploiting the functional geography of GVCs – as supply chains loop through the network of cities
land, sea & air connectivity plays a major role in attractiveness & feasibility of supply chain
configuration – what is without effects what is done within
➢ SCR has an opportunity to strengthen supply chains by giving greater consideration to major
systems integrator OEM interest in the combination of goods & services supply chains &
innovation networks (national & global)
42
|
Addressing the HVM Digital & Professional Services interface
43
• As Industry 4.0 highlights, HVM is now heavily reliant on digital technologies & the professional
services that support digital capability
• ‘Servicisation’ of HVM has a strong digital dimension (e.g. failure mode prediction & alerts to
drive preventive maintenance interventions)
• Use of digital virtual factory ‘twins’ to reduce the time, cost & disruption risks when
balancing production processes & introducing new machines/capacity
• Use of advanced simulation models to reduce the time, cost & risk in the R&D,
demonstration & new product introduction processes (lower spending on experimental
development in particular)
• Blockchain/distributed ledger technologies in HVM supply chain logistics management &
quality assurance
• In short, digital capability is the major productivity driver in HVM
• The HVM-Digital nexus is best addressed in data by integrating available data (R&D services &
digital inputs to HVM via Input-Output data) & via the main consultations
|
Estimation objectives & methods
• Objective: provide SCR with ‘best in class’ supply chain mapping that places detailed local data
firmly into the global context
• Method:
• Use a combination of OECD Trade in Value Added (TiVA) & the World Input Output Database
(WIOD) to generate UK-level profiles of Global Value Chain (GVC) participation on an industry-
by-industry basis
• Use ONS GVA by industry data at the NUTS 3 level (hence able to create an SCR profile) to
estimate key characteristics of SCR GVC participation based on the distinctive mix of industries in
the SCR
• Stage 1 estimates assume that SCR-level industry participation in GVCs mirrors national (UK level
characteristics)
• Stage 2 estimates (a potential future step), drawing upon local supply chain survey results,
provide an opportunity to update the Stage 1 via calibration using survey results
• Benefit to SCR: we are not aware of any other City Region able to access this integrated local-
international GVC participation evidence-base
44
|
NUTS 3 regions used for these analyses
For the following analysis, Nomenclature of Territorial Units for Statistics (NUTS)NUTS 3 regions were used to determine the GVA per sector for SCR.The NUTS 3 regions selected to represent SCR are displayed in the map opposite. It must be noted that although these regions cover the majority of the SCR, differences in the boundaries of the Combined Authority & NUTS 3 regions means this is not an exact representation of the whole SCR.
45
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Steer ED’s data integration approach to GVC mapping
ONS has recently introduced new NUTS 3 level GVA data at a 3 digit SIC industry detail, enabling estimates of GVC participation for the SCR
OECD Trade in Value Added database
(traces full direct & indirect economic inter-dependencies
between countries)
World Input Output Database (WIOD)
(able to trace specific economic inter-dependency
pathways between countries)
Suite of ONS industry data(used to estimate regional
profiles & mesh with OECD & WIOD data)
Steer-ED Bespoke industry classification &
concordance (allows OECD, TiVA, WIOD &
ONS data to be meshed)
Steer-ED Regional
Estimates (allow global
connectivity footprints & traces for UK
regions)
‘First of a Kind’ evidence to
inform regional & national
Industrial Strategy
46
The method employed by Steer-ED to mapping GVCs is outlined in the process flow below
|
GVC Analysis Outputs
The following analysis shows the outputs of Steer-ED’s GVC analysis, highlighting key messages for SCR, including:• ‘Unmeasured spaces’, not covered at country level by TiVA data are becoming increasingly
important drivers of HVM GVCs• HVM in SCR is highly dependent on imports from China & Germany, but contributes less to exports
to these destinations• The US is the largest final demand destination for SCR HVM products/services, which matches the
origin profile of the number of & size of OEMs in SCR• SCR’s HVM sector is comparatively more dependent on Asian markets & the Middle East than the
UK as a whole• Increasingly, SCR is becoming more dependent on ‘far away’ destinations, with a decrease in the
importance of trade with European countries noted• Compared to other sectors, HVM in SCR is heavily dependent on the US (+1.5%) & less dependent
on the EU. It also relies on emerging ‘unmeasured spaces’, primarily in Africa & the Middle East (+13% compared to other sectors in SCR)
47
|
Coverage of the OECD Database
China’s Belt & Road Initiative (BRI) is starting to reach the unmeasured economies as regards Global Value Chains
….this is no co-incidence
The UK’s Advanced Manufacturing supply chains are increasingly tied into what is happening in these unmeasured spaces….
48
The ‘unmeasured spaces’ of the global economy are starting to matter…
|
Context: SCR HVM Global Value Chain dependencies
As yet ‘unmeasured’ emerging economies: worth finding out what’s
going on here
A high dependence on imports & as a final export destination
SCR HVM has a high dependence on imports but less so as a final
export destinationSCR is dependent on some other significant EU economies
Source: Steer ED analysis of the OECD Trade in Value Added database
49
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Experimental estimates of the SCR’s overall ‘downstream’ Global Value Chain dependencies (all industries)
Source: Steer ED analysis of the OECD Trade in Value Added database
These estimates trace the Gross Value Added (GVA) that accumulates in GVCs as they loop through national economies en route to Final Demand/end-use
50
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SCR dependencies in relation to the UK
The SCR is more dependent than the UK as a whole on China, India, HK, & Saudi Arabia……& less dependent on Germany, Netherlands, Spain & the USA according
to this top-down data. Note: these top down data have been ‘flowed through’ GVCs, unlike the direct links captured in the bottom up data. The difference between direct & indirect ‘flow-through’ profiles is greatest when there are
exports to ‘portal/pivot’ countries that feed-in to more complex GVCs.
Source: Steer ED analysis of the OECD Trade in Value Added database
51
|
Change over time in SCR’s GVC footprint
Change in the country composition of SCR GVC footprint 2011 to 2017
52
The countries at the end of GVCs in which SCR participates are getting further away over time… with large increases in China & the USA
|
Focusing-in on changes within Europe
Change in the country composition of SCR GVC footprint 2011 to 2017 within Europe
53
Difference in SCR’s GVC footprint 2011-2015
|
Experimental estimates of the SCR’s overall ‘downstream’ Global Value Chain dependencies – HVM
Source: Steer ED analysis of the OECD Trade in Value Added database
Unmeasured emerging countries at no. 2 is a surprise
US at no. 1 is not a surprise
SCR’s HVM downstream GVC footprint
54
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SCR’s HVM GVC footprint compared to SCR as a whole
The HVM GVC footprint is stronger relatively in the USA, but weaker in Germany & Spain. However, the biggest difference can’t be shown on a map. HVM is 13% more reliant on unmapped other emerging economies (grey)
Difference between SCR HVM & overall SCR GVC footprint, 2015
55
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SCR’s participation in GVCs
UK 2.6%
Source: Steer ED analysis of the OECD Trade in Value Added database & OECD Main Science & Technology Indicators
56
There are opportunities to leverage the remaining 97.4% of global R&D performed on the rest of the world - especially if combined with international academic collaborations
|
SCR GVC profile (2014 world input output structure with 2016 UK GVA data)
57
INPUT & GVA STRUCTURE OUTPUT STRUCTURE
DOWNSTREAM GLOBAL VALUE CHAINS
STRAIGHT TO UK FINAL DEMAND
STRAIGHT TO OVERSEAS FINAL DEMAND
DOWNSTREAM UK VALUE CHAINS
TOTAL OUTPUT = INPUTS + GVA = SUM OF WHERE OUTPUTS GO TO
GVA ADDED TO INPUTS
UK VALUE CHAIN INPUTS
UP
STR
EAM
G
LOB
AL
VA
LUE
CH
AIN
INP
UTS
Source: Steer ED analysis of the World Input Output database & ONS Regional GVA data
Estimates still
bein
g refined
|
SCR GVC profile in 2016 (cont.)
58
GVA depends on domestic &
overseas inputs
GVA depends on output destinations – especially
exports
INPUT & GVA STRUCTURE OUTPUT STRUCTURE
SCR is low for GVC participation & exports direct to overseas final demand
Source: Steer ED analysis of the World Input Output database & ONS Regional GVA data
|
Industry GVC profiles at the UK level differ – as is expected
59Source: Steer ED analysis of the World Input Output database
|
Pause for Thought
60
Messages
• Mapping GVC footprints is useful for articulating the opportunities & the challenges for supply
chain upgrading. It gives understanding of:
• The key difference between export growth linked to GVC participation, & exports going
straight to final demand
• Where the dependence on imports for GVA (hence employment) lies – ‘what you import
determines what you can export’ – especially when high-tech imports enable GVA to take
place
• The analyses provide a basis for framing supply chain upgrade & investment attraction
priorities on the attractiveness versus the feasibility of different industrial development
options
Implications
• SCR’s Advanced Manufacturing capability relies on GVC participation, consequently
opportunities & competitive threats will manifest themselves via the GVC dimension
• OEMs will consider SCR’s GVC participation when assessing investment opportunities – the
‘external’ context shapes the ‘internal’ investment case (hence the importance of SCR’s Global
Innovation Corridor’ (GIC)
|
Pause for Thought (cont.)
61
Implications (cont.)
• Unless SCR’s GVC participation differs from that of the UK as a whole, then an increasing
share of downstream GVC ‘action’ is in currently unmeasured emerging economies (and
HVM in particular):
• Boosting export opportunities here is potentially important to local GVA & jobs – BUT is
not ’low hanging fruit’ – the implications for investment attraction need to be thought
through
• Given export & FDI boosting attention directed at China, the Belt & Road Initiative’s focus
on what are currently unmeasured emerging economies (prominent in final demand for
high value manufacturing) deserves further investigation & strategic thinking
Exploratory analysis of local & national HVM supply chain structures
|
Mapping local HVM supply chain structures by combining Input-Output & ONS Regional GVA data at the NUTS 3 level
• There is a value in producing local & national global Input-Output analysis used to trace
SCR’s HVM participation in Global Value Chains
• A recent ONS release of regional industry GVA data by broad industry allows a
geographical granularity not previously possible (these data only went down to the NUTS
2 level)
• In essence, the method employed to analyse this localises HVM supply chain
characteristics based on measured UK-level inter-industry supply chain flows – making
the defendable assumption that these supply chain flows also apply at a local level, e.g.
the steel structures fabrication industry’s requirement for steel supplies
• Data on the UK Input-Output structure from the World Input-Output Database (WIOD)
has been used to allow this localised profile to be linked to the full global GVC tracing
work
63
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Industry classification used for HVM
• The ONS NUTS 3 level GVA data uses a
more aggregate industry classification
than at NUTS 2 & above
• The NUTS 3 level GVA data does allow
HVM profiles to be developed – albeit
losing some granularity specifically:
• chemicals & pharma are combined
• automotive, other transport (which
includes aerospace) & other
machinery are all combined
HVM industry breakdown at the NUTS 3 level
• Manufacture of petroleum, chemicals, pharmaceuticals & other minerals
• Manufacture of basic & fabricated metal products
• Manufacture of electronic, optical & electrical products
• Manufacture of machinery & transport equipment
• Other manufacturing, repair & installation
• Architectural & engineering activities
• Research & development; advertising & market research
• Other professional, scientific & technical activities
64
|
Review of domestic/intra regional market - Progressing localised industry structure & supply chain analysis
Highlights the importance of including the manufacture of basic & fabricated metal products in HVM definition –SCR's activities in these areas are distinctively HVM (e.g. Dreadnaught submarine nuclear reactor structures) - high precision & "must not fail" systems...
Source: Steed ED analysis of ONS NUTS 3 GVA data
65
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Internal SCR GVA structure (2016)
• HVM GVA pretty evenly spread across the four jurisdictions – but with different emphases
• There is a prominence of basic & fabricated metal products – historically SCR’s strongest
industry
Source: Steed ED analysis of ONS NUTS 3 GVA data
66
Analysis of industry and Local Authority level GVA is presented below, highlighting the major HVM
sectors in SCR
|
SCR’s HVM profile compared to the UK
• SCR has a particularly prominent emphasis on basic & fabricated metal products – an expected
traditional strength, but of great importance to the future & research & innovation dependent for
competitiveness in high-end markets (e.g. Nuclear Systems)
Source: Steed ED analysis of ONS NUTS 3 GVA data
SCR & UK HVM profiles compared
67
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Building a profile of supply chain structures at the NUTS 3 level
• National-level Input-Output data provide a first approximation for NUTS 3 level inter-industry
flows …..but this approximation can be refined
• The recent availability of industry GVA data at NUTS 3 level provides a basis for calibrating &
adjusting national-level inter-industry flows using regionalised industry GVA data
• In principle, this provides a basis for creating profiles of inter-industry flows at the NUTS 3 level
by forcing the UK-level Input-Output coefficients that reflect inter-industry flows to align with
the data on industry GVA at the NUTS 3 level
• Without this calibration & alignment, UK-level Input-Output data create estimates of industry
GVA at the NUTS 3 level that do not match – closing this gap by adjusting the local version of the
Input-Output coefficients creates a more accurate profile of a regional supply chain system
• In the case of the SCR, a technical assessment of this calibration process indicates that the HVM
supply chain system is more inter-dependent than at the UK level
• in Input-Output terms, diagonal ‘within industry’ supply chain flows are less prominent in
SCR compared to the UK as a whole
• in other words, HVM supply chains are more interdependent than at a national level -
simply because UK level data averages out these regionally specific aspect
• Although this is a highly exploratory ‘short cut’ approach to estimating industry supply chain
systems at a regional level (avoiding the need to construct full regional Input-Output tables), it
can inform local industry thinking – & is therefore a cost-effective solution
68
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SCR’s estimated HVM supply chain structure in Input-Output terms (full picture)
• Rows indicate where the supply chain inputs come from for each user industry (columns)
• The Importance of basic & fabricated metal products is reinforced (noting the great breadth of
petroleum, chemicals, pharmaceuticals & other minerals sector forced data data availability at the
NUTS 3 level)
• 60% of SCR’s HVM GVA inputs are from within each industry (on the diagonal), with 40% coming
from inter-industry flows
Source: Steed ED analysis of Input Output & ONS NUTS 3 GVA data
69
The Input-Output tables for SCR’s HVM industry are presented below (GVA £m)
|
SCR’s estimated HVM supply chain structure in Input-Output terms (full picture) – percentage view
• The pivotal role of basic & fabricated metal products is highlighted (27.5% of SCR’s HVM GVA is
dependent on these inputs)
• Services in HVM are not very prominent currently, but are likely to increase in importance in the future
as advanced simulation & R&D-driven competitiveness becomes more important (advanced
simulation reduces the likelihood of failure, & the cost of development & demonstration in innovation)
Source: Steed ED analysis of Input Output & ONS NUTS 3 GVA data
70
Input-Output percentage values are presented in the table below
|
Estimated SCR HVM supply chain structure in Input-Output terms (simplified picture – values above 2.5% of SCR’s total HVM GVA, only)
• Highlighting only the key industries in GVA production for SCR highlights the system inter-dependencies.
HVM supply chains are not simple linear chains, particularly highlighted in Manufacture of machinery
and transport equipment
• This reinforces the point that major ‘systems integrators’ (Apex companies) like Boeing & BAE Systems
view SCR (and Sheffield specifically) as possessing technological excellence in basic & fabricated metal
products, a key part of SCR’s HVM offer
Source: Steer ED analysis of Input Output & ONS NUTS 3 GVA data
71
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Estimated SCR HVM supply chain structure in Input-Output terms (simplified picture – values above 2.5% of SCR’s HVM GVA only) – percentage version
Source: Steed ED analysis of Input Output & ONS NUTS 3 GVA data
72
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Identifying other regions in England & Wales which share a similar mix of GVA to SCR’s HVM profile
Source: Steed ED analysis of ONS NUTS 3 GVA data
• This map identifies the other NUTS 3
regions in England & Wales with similar
mixes of HVM GVA to Sheffield (thus
picking up regions with a similar emphasis
on metals & metal fabrication in the HVM
footprint)
• The HVM Index is the correlation
coefficient between HVM GVA proportions
in each NUTS 3 region compared to
Sheffield
• This approach can be further developed
to provide a geographical indication of
more complex HVM supply chain
connectivity using HVM inter-industry
patterns
Suggests a HVM supply chain ‘corridor running NE to SW across England & Wales …. Plus some ‘satellite’ regions
73
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. . . & zooming-in on SCR?
Source: Steed ED analysis of ONS NUTS 3 GVA data
Sheffield
Barnsley, Doncaster & Rotherham
North Nottingham
shireEast
Derbyshire
• Opens up an opportunity to use this type
of supply chain system analysis to
examine within-SCR complementarities &
their future implications
• Useful for progressing the SCR offer, &
highlights the degree of difference
between the Local Authorities in SCR
compared to Sheffield
74
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International supply chain connections to SCR
• SCR GVA production in HVM is most reliant on imports from Germany
• The ‘unmeasured’ emerging economies (Rest of the World) feature at no. 2
• Due to the reliance on imports, Brexit-driven trade-disruption is of course a potential threat
• Further work can look to trace direct ‘downstream’ international supply chain dependencies (in a
similar manner to the indirect/”flow-through” profiles created using the OECD Trade in Value
Added database
Estimated HVM imports To SCR from direct country sources can be estimated based on the connections between UK Input-Output data and World Input-Output data
Source: Steed ED analysis of Input Output & ONS NUTS 3 GVA data
75
|
Taking a broader view of the HVM supply chain system structure (via input coefficients)
• HVM industries excluding services (in the box) tend to have ‘dispersed’ knock-on effects
because the internal impact of inputs (same industry input & output, indicated in the
diagonal coefficients) are relatively low, i.e., an increase in output is associated with an
uplift in inputs from a wider range of industries (white in this table)
• This supports the point that SCR should focus on supply chain systems – HVM is a
complex & inter-dependent economic structure, not a set of linear ‘chains’
76
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HVM multipliers (national-level data)
• The metals production
element of HVM has
strong multiplier
effects (a capital-
intensive industry)
• These multipliers are
useful, but should not
be taken as a given.
Tactics to amplify
multipliers at the SCR
level via strengthened
supply chain system
synergies should be
considered
Source: Steer ED analysis of ONS Input-Output data
77
|
Pause for thought
Messages
• This analytical work suggests that it is preferable to adopt a ‘core-halo’ approach to the
SCR HVM supply chain system consisting of:
• A ‘core’ of industries producing tangible products (but with very important services
integral to this offer)
• A ‘halo’ of supporting service industries (e.g. R&D services) that assist HVM but are not
central to HVM, as they have far broader scope contributions to the economy
• Given industry sector definition problems at the NUTS 3 level including ‘Manufacture of
petroleum, chemicals, pharmaceuticals & other minerals’ is rather general & therefore
distorts the data
Implications
• Preferable to move forward with a core group comprising (for NUTS 3 level analysis):
• Manufacture of basic & fabricated metal products
• Manufacture of electronic, optical & electrical products
• Manufacture of machinery & transport equipment
• Other manufacturing, repair & installation
• The advantage of using this sort of localised Input-Output approach is that adopting a
narrow core HVM definition still allows the broader inter-industry impacts to be handled
78
|
Pause for thought
Implications cont.
• This GVC & local/national supply chain research suggests that estimates of HVM supply chain
systems can be used to inform industrial strategy objectives & implementation by:
• Specifying current & potential future local economic multiplier effects in greater granularity
than is commonly achieved
• Emphasising the key point that HVM supply chains are a system with important inter-industry
dependencies
• Consequently underlining that it is these HVM system inter-dependencies that will help to
attract OEM & investor attention
• Highlighting that any HVM supply chain enhancement strategy should consider both the local
& national HVM supply chain system & its global connectivity – upstream (imports) &
downstream (exports)
79
Observations & Implications
|
Observations & Implications
This Concluding Section draws together the emerging observations & implications of the
analyses regarding supply chain development in SCR.
The Big Picture
SCR has a productivity problem. It ranks 33 of 38 LEPs in England for productivity, & although
productivity is increasing at a relatively fast rate, this is from a low base. Integrating High-Value
OEMs into SCR’s supply chain will lift this, by creating more opportunities for businesses to
engage in higher value activities in manufacturing. The positive growth in Manufacturing &
Communications broad sectors in SCR is reason for some optimism that this is achievable.
SCR’s Sector Profile
Manufacture of fabricated metal products is the largest contributor to turnover of businesses
with locations in SCR. This is aligned with SCR’s industrial heritage in this area, & is a potential
growth area, with products from this sector feeding into Aerospace, Automotive, Defence, &
Construction industries – all growth areas under Industry 4.0. There are further opportunities
to move, using core skills & technology, from pure metal products to composite materials
81
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Observations & implications (cont.)
Business Demography
The largest & highest grossing businesses in SCR are from overseas. These large OEMs have
strong influences on supply chains, dictating where products and materials are sourced from.
Integrating existing OEMs & attracting new high-value, large-scale OEMs into SCR’s supply chain
(& vice versa) is crucial to raising productivity in the City Region
Investment
Investment into SCR 2016-18 was dominated heavily by a small number of large investments.
Promotional activities for SCR’s offer to large OEMs can be targeted at regions which historically
produce firms who make transformational investments. Data for the time period in question
suggests the US, Netherlands, Germany, and Japan as key markets
The type of investment attracted to SCR is also important, with 48% of investments 2016-18
being acquisitions. New Investments, Expansions, & the creation of new sites/activities are
more inclusive forms of investment, which will have more positive supply chain multiplier
effects long term.
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Observations & implications (cont.)
A Distinctive Offer
GVC/national/local supply chain analyses indicate that SCR’s supply chain offer pivots on
building a more distinctive combination of metals (and advanced materials) & supporting
industrial & HEI R&D & education/training inputs. As Scoping Consultations (including those for
the GIC) have stressed, the strong industrial heritage in metals is not merely an ‘old-tech’
industrial legacy, it is increasingly a pathway for future regional economic prosperity,
Specifically:
• Numerous industries will require advanced metals (including low-weight steel) & metals-
non metals composites.
• Technological excellence in metals & composites is a key Industry 4.0 dimension –
especially regarding the use of advanced simulation modelling to reduce dramatically the
likelihood & consequences of material failures
GVC Participation
SCR’s Advanced Manufacturing capability relies on GVC participation, which at present is low,
with a low percentage of outputs being exported to intermediate or final demand (13%). OEMs
will consider SCR’s GVC participation when assessing investment opportunities, which stresses
the importance of SCR building an international profile. In effect, improving GVC participation
through OEM investment will help to shape the ‘internal’ investment structure of SCR’s supply
chains, making the economy more attractive, & in investment terms ‘sticky’
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Observations & implications (cont.)
The ‘Core-Halo’ Approach
This analytical work suggests that it is preferable to adopt a ‘core-halo’ approach to the SCR
HVM supply chain system, building:
• A ‘core’ of industries producing tangible products (but with very important services
integral to this offer)
• A ‘halo’ of supporting service industries (e.g. R&D services) that assist HVM but are
not central to HVM, as they have far broader scope contributions to the economy
For SCR, a core group of sectors for the supply chain comprises:
• Manufacture of basic & fabricated metal products
• Manufacture of electronic, optical & electrical products
• Manufacture of machinery & transport equipment
• Other manufacturing, repair & installation
Adopting this approach will ensure that SCR’s key industrial strengths are leveraged, but that
the SCR offer is not constrained to these industries, enabling the City Region’s industrial offer to
adapt to Industry 4.0, through adoption of Digital and Advanced Materials (e.g. composites)
innovations.
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Observations & implications (cont.)
The ‘High Multiplier Manufacturing’ (HMM) perspective
From an SCR economic development perspective, it will be useful to enhance the existing focus
on HVM by drawing-out and exploiting the ways in which local HVM supply chain systems (as
inter-dependencies between HVM, and other, industries) create strong local economic
multiplier effects. Rather than take the multiplier effects as an assumed given, based on
national norms, this strategy would aim to foster amplified multiplier effects that exceed
national norms. All too often, actual multiplier effects do not meet assumed levels for a variety
of reasons, hence this strategy would be both pragmatic and compelling. This can be thought of
as a High Multiplier Manufacturing dimension to the current HVM focus.
Local & Global
It is important to consider local capabilities and connections in the supply chain alongside the
global destination of goods/services. Having an understanding of both means that important
GVC participation and investment attraction can, in part, be leveraged by encouraging growth
in supply chains relevant to global trends (e.g. SCR’s traditional strengths in the production of
fabricated metal products can be leveraged in an Industry 4.0 context, through transformation
to composite development and providing products for high-end technologies, as is already
occurring in parts of SCR.
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