surrey local economic assessment executive summary dec 2010 final

Surrey Local Economic Assessment Executive Summary

of 11 December 2010

Surrey’s Local Economic Assessment

Executive Summary

December 2010 Commissioned by: Surrey County Council County Hall Penrhyn Road Kingston-upon-Thames KT1 2DN Contact: Damian Testa t: 020 8541 7068 e: [email protected]

Produced by: Surrey Economic Partnership Ltd Surrey Technology Centre Surrey Research Park Guildford GU2 7YG Contact: Mark Pearson t: 01483 685230 e: [email protected]

Final December 2010


of 11 December 2010

1. What is a Local Economic Assessment? Surrey County Council has a statutory duty, from 1 April 2010, to carry out a Local Economic Assessment (LEA). In essence, the LEA is a narrative on the broad range of factors - economic, social and environmental - that impact on sustainable growth, and identifies challenges and opportunities for the Surrey economy going forward. In doing this, the LEA provides a sound understanding of the economic conditions in Surrey, and how they affect its residents, businesses and communities. With a changing economic and political climate this is important, so that when decisions need to be made there is data readily available to inform and support them. The assessment is supported by a wide range of data, but is not simply a data gathering exercise. The LEA aims to tell a shared ‘story of place’ through the synthesis of data and evidence across a range of themes. To add important additional value to this retrospective assessment, a complementary piece of work has been undertaken (reported alongside the LEA), which provides economic forecasting of where the Surrey economy might be in 2030, based on a number of different scenarios. The LEA will support Surrey County Council in playing a more significant role in promoting economic development; underpin its priority to maintain economic success; and help ensure that the county council is better able to respond to future economic challenges. The assessment provides an opportunity for the county council both to better understand and to inform the strategic direction for economic development in Surrey, and to start to set out the business case for investment in the local economy. The LEA is also a valuable tool for Surrey businesses, public agencies and district and borough authorities; it can support business/ corporate planning and help guide capital investment programmes. Surrey County Council sees the undertaking of this assessment as best practice, because the LEA will update its knowledge base and help develop a compelling case for government, and other public and private sector investment, in Surrey. 2. About the Local Economic Assessment Surrey Economic Partnership Ltd was commissioned to produce the Surrey Local Economic Assessment (LEA) in collaboration with Surrey County Council. Special mention must go to Mark Pearson and Lauren Read at Surrey Economic Partnership and to Damian Testa, Deborah Fox and Lee McQuade at Surrey County Council. The main report covers six broad strategic themes: Economic Performance Labour Market People & Communities

Business & Enterprise Transport & Infrastructure Sustainable Economic Growth

These are supported by detailed chapters and a comprehensive technical appendix. A broad range of local, regional, national and international data underpins the LEA. This has been compiled in comprehensive technical appendices to the main report.


of 11 December 2010

The key information is reflected in the main report accompanied by a supporting narrative. The Surrey ‘story’ has been tested and validated through consultation with partners from the 12 local authorities (county, district and borough), as well as the wider economic development stakeholder community and Surrey businesses. In this way, Surrey’s LEA has drawn in a wealth of qualitative information to add strength, depth and life to the statistical analysis. The LEA data collection process has also highlighted the wealth of existing economic data sources; however, the most comprehensive data set informing the LEA is the 2001 census data, which does not always provide information at the right spatial scale. There is a shortage of county-level data collected direct from Surrey’s businesses. Much existing economic policy work relies on looking back over past trends, and, in light of the recent global downturn and national recession, this is not helpful, given the time lag in the provision of contemporary data. For this reason, the Surrey LEA is complemented by economic forecasting work. Since most of the analysis in this report is based on data and evidence available from national sources (which enables comparisons to be made), the data could be viewed as slightly out of date. It does not reflect fully the current downturn in the global economy; although analysis of unemployment is current and available on a monthly basis at county level. Whilst the global downturn has had an impact on the county, it is too early to be precise about its full effect and for how long the impact will be felt. 3. What ‘story of Surrey’ does the Local Economic Assessment tell? Overall, Surrey demonstrates strong performance on a number of measures (relative to comparator areas). It has high levels of: jobs in knowledge-based sectors; business start-up rates; and residents with high level qualifications – all of which are important drivers of productivity. As a result, resident and workplace earnings, as well as total Gross Value Added (GVA), are generally higher in Surrey than in the rest of the South East. However, there are some significant challenges to economic performance going forward. These include: the declining proportion of residents that are of working age; the declining levels of economically active people in the population; slower rates of GVA growth; an over-reliance on the banking, finance and public sectors for employment; a reliance on London for employment; provision of faster and more reliable broadband speeds; retaining the county’s high quality natural environment in the face of pressures for growth; transitioning to a low carbon economy; and the pressures of globalisation, with the world economy expected to double by 2030. The following table presents the key findings of the LEA, the main evidence on which these findings are based, and the associated strategic implications. These do not jump to a solution, as the purpose of the LEA is to provide a narrative on the data, nor to set strategic direction; this will be progressed through other mechanisms. Many of these key findings are inter-related and the relationships between them are complex and interdependent. For example, improving skills levels may not result in more local employment, as this is also influenced by factors such as housing affordability and salary levels compared to adjacent areas or other parts of the country. Policy approaches to address the key challenges will require significant multi-agency responses.


of 11 December 2010

4. Key Findings Key Finding Headline Evidence Strategic Implication

Economic Performance Comparator economies are catching and overtaking Surrey’s economic performance

The World Knowledge Competitiveness Index (2008) shows that the South East of England (Surrey being a significant contributor to the region) was ranked 74th out of 145 global regions; down from 40th in 2004.

That Surrey will not be able to compete as well on the world business stage. This may reduce levels of new investment and result in disinvestment by existing Surrey businesses. Recognition of the importance of sectors.

Business & Enterprise Importance of supporting innovation and entrepreneurship

Six of the 11 districts and boroughs in Surrey are in the top 25 areas for numbers of knowledge-based businesses. In 2007, Surrey had 58 business registrations per10,000 adult population compared to a South East figure of 40.

Direct business support is currently changing with public funded support services (i.e. Business Link/ Innovation and Growth Teams) altering. The future success of businesses and, specifically, knowledge-based businesses is critical to Surrey’s overall prosperity. The importance of employment and skills support at a community level.

Labour Market Growing importance of the relationship with London

Census data shows that 23% of Surrey’s residents work within the Greater London area – about 9% in Inner London, and 14% in Outer London.

Surrey’s on-going ability to support the London workforce with skilled workers, its influence and dependency on the capital for commerce, and the necessity for joint working on infrastructure provision. Surrey is under growing pressure from London out migration.

Large reliance on employment in the public and financial services sectors

ABI (employee data) shows 30% of employment in Surrey is in the ’banking, finance and insurance’ sector and 24% in ‘public administration, education & health’.

These sectors are both expected to contract. The knock-on effect of public sector funding cuts for private sector businesses that supply goods and services to local authorities and public agencies. Over time, the direct impact on the productivity of the county from decreasing levels of economic activity.

Significant growth in unemployment (from a low

Job Seekers Allowance in Surrey – 12,263 claimants in August 2010 (1.7% of the resident working age

Risk of further deterioration in the quality of life of deprived communities and of those on the borderline slipping into


of 11 December 2010

base), especially among young people

population), compared to South East (2.4%) and Great Britain (3.6%), from less than 4,000 in 2008 (0.7%). Number of JSA claimants aged 20-24 rose to a peak of 2,660 in Aug 2009 (2,210 in Aug 2010).

deprivation. Fewer people able to contribute to and share in Surrey’s economic success.

The need for an appropriately skilled workforce

APS shows 39.3% of the working age population are qualified to degree level (NVQ 4), 7.8% have no qualifications. NVQ Level 2 or above - 73.4% of working age population in Surrey; South East 69%; GB 65.4%.

The need for lower skilled workers as well as higher skilled staff for wealth generation. A re-emphasis of the need for an enhanced employer voice around the skills agenda. Need to up-skill resident population: improve the employability skills of existing and potential workforce to reduce the number of inbound workers, and ensure higher skilled workforce can meet the needs of knowledge-based businesses.

Transport & Infrastructure Increasing pressure on economic infrastructure

The Surrey Infrastructure Capacity Project quantified the cost of the non-delivery of infrastructure in the period to 2026 as a total loss of almost £3.3bn in GVA (a 13% loss to Surrey’s economy).

Surrey becomes a less attractive location for business and the economy contracts and access to services is reduced – a potential quality of life reduction for all. To reduce the likelihood of this there is a need for more and better quality economic infrastructure and government investment to provide this.

Significance of broadband and superfast broadband

In Surrey, 15% of households and 12% of businesses are receiving 1.5 Mb/s or less in connection speed. For example, nearly 40% of premises in the Surrey Hills AONB, (home to 150,000 people) receive an internet connection of less than 2 Mb/s. 30% of Surrey businesses are knowledge based, compared to 24% in London.

Several areas in Surrey have limited or no connectivity (‘not spots’) and are unable to benefit from the significant economic, educational and social benefits of broadband/ super fast broadband. This needs to be addressed. The need for more investment in super fast broadband to enable more innovative, efficient and effective delivery of local authority services, including tele-health and virtual classrooms. Given the increasingly knowledge-based economy of Surrey, it is important to have the right ICT infrastructure to drive growth and innovation, e.g. to exploit emerging markets, develop new business ideas, and to support home working.


of 11 December 2010

Pressures on road transport affect the physical delivery of goods and services

Average daily vehicle flows along Surrey’s motorways in 2007 were 80% more than the national motorway average (139,300 vehicles per day in Surrey compared to 77,400 vehicles per day nationally), and 46% more than the South East average of 95,000 vehicles per day. Traffic flows on A roads in Surrey are 66% greater than the national average (21,800 vehicles per day in Surrey compared to 13,176 vehicles per day nationally).

As road usage increases and pressures on transport infrastructure grows, so do the problems for Surrey in terms of congestion and the efficient movement of and access to goods and services. The need for investment in the physical road network to avoid gridlock will intensify.

Provision of appropriate commercial sites and premises

The 11 district and borough employment land reviews recognise a need for more small unit space in most districts, and particularly freehold premises, to meet needs in locations that are accessible to labour, materials and markets.

The need for appropriate commercial sites and premises for a range of businesses - this may require intervention by local authorities. For example, with common policies to support and encourage the redevelopment and upgrading of existing employment premises to meet the needs of modern, high quality occupiers.

People and Communities Population pressures

Surrey is the most densely populated county in the South East with 661 people per km2. Surrey’s total population grew by 4.1% between 2000 and 2008 with the highest rate of growth in the 65+ age category. Net internal migration is the biggest driver of population increase in Surrey. A 20% increase in the birth rate in Surrey between 2002 and 2008, will require a further 8,000 primary school places. The population of Surrey is projected to grow by 19.5% or by around 215,000 people, between 2008 and 2033, with over half of this increase accounted for by people of pensionable age (i.e. 65+).

Surrey’s changing demography, specifically the growing 0-15 and 65+ age categories, will influence the need for and shape of services, such as those for education, adult social and mental health care, and the infrastructure required to support services. The need for more primary school places comes at the same time as the Department for Education is preparing to cut its capital budget by 60% by 2015. This is likely to place further financial pressure on the local education authority if it is to meet the increased demand for places.


of 11 December 2010

Commuting patterns and levels of Surrey’s workforce

In 2001, the total Surrey resident population (aged 16-74) in employment was 533,000; of these 342,000 (64%) worked in Surrey and 191,000 worked outside the county, predominantly in London. In addition, there were 145,000 inward commuters.

There is the need to reduce inbound workers, for example by increasing the employability of the existing and potential Surrey workforce, to fill local jobs; and also reduce the reliance on jobs outside the county. The need to encourage new local businesses and more flexible working/ working from home.

Contraction of the working age population

APS shows Surrey’s working age population grew by only 4% between 2000 and 2008, the lowest rate of all its LEA comparators (except Buckinghamshire).

An effective shortfall in working age population means it is increasingly difficult to recruit locally. This may increase the reliance on importing skills to meet employer needs, which could also result in a need for more housing.

Sustainable Economic Growth

Limits of sustainability Surrey Structure Plan 2002 identified 73% of total area of Surrey is protected green belt land. Surrey is the most wooded county in Great Britain with 22% woodland coverage (37,564 hectares) compared to a national average of 12%. The percentage of household waste recycled and composted in Surrey is well above the 2007/ 08 LAA baseline of 35%. The 2009/ 10 trend rate was 46.1%. This is above the South East and national averages, 35.57% and 34.34% respectively.

Surrey’s natural environment is both an asset and a constraint to future economic growth, suggesting a greater need for productivity/ spaceless growth over labour growth. The sustainable use of Surrey’s natural resources, such as wood fuel, must be considered. The need to reduce further the reliance on landfill and improve household and commercial waste recycling rates. The need to provide the appropriate volume and type of housing to support a successful economy.

Transition to a become a low carbon economy

In Surrey, there has been a 4.3% reduction in CO2 emissions from 7.0 tonnes of CO2 per capita in 2005 to 6.7 tonnes per capita in 2008. This is on a par with the South East regional reduction of 4.3%, but lower than the national (England) reduction of 5.6%.

If Surrey is to be a world-class sustainable economy, greater effort has to be made to reduce CO2 emissions further, whether through transport, residential and commercial buildings, or the development of new carbon products and services. For example, supporting commercial opportunities to develop and export building technologies and renewables, as part of the growing global Low Carbon and Environmental Goods and Services (LCEGS) market sector, which was worth £107bn in the UK in 2007/8 and £3 trillion globally.


of 11 December 2010

5. Context With a resident population of 1.1million, Surrey is the third most populated and the most densely populated county in the South East. Economically diverse, its communities range from outer London suburbia to some of the most attractive rural villages in England. Surrey’s geography, location, environment, history and cultural assets have all played an important role in shaping its economy. Against this backdrop, Surrey has developed its position as a strong, knowledge-driven, wealth-creating, ‘powerhouse’ economy. However, Surrey’s economic performance remains dependent on the performance of regional, national and international economies, and much of its wealth is earned outside its boundaries, particularly in London. Surrey, as with many local economies in the 21st Century, is increasingly affected by external events and competition on a global scale - whether of a social, environmental or economic nature. Furthermore, Surrey exhibits many of the downsides of success – congestion, high house prices, pressures on infrastructure, and growing socio-economic disparities. Despite Surrey’s past economic successes, in relative terms it is slipping in the competitiveness stakes. The World Knowledge Competitiveness Index (2008), shows that the South East of England was ranked 74th out of 145 global regions (down from 40th rank in 2004) – London is now 102nd down from 46th in 2004. The region has also slipped within the European Competitiveness Index (2006/ 07) being ranked 16th among 118 European regions (down from 12th in 2004). If the relative rank of the South East economy is falling then it follows that Surrey’s is also falling, although within the UK Competitiveness index (ranking 12 regions), for the first time the South East has displaced London into second. For individual Surrey districts, six are within the top 25 most competitive areas in the UK (although there were eight in the top 25 in 1997). Surrey’s GVA was worth £26.5bn in 2007; its economy being almost equivalent, in GVA terms, to that of Birmingham and Liverpool (England’s second and third largest cities by population) combined, and comfortably larger than that of Liverpool and Leeds (England’s third and fourth largest cities) combined. GVA per capita in 2007 was £24,103 (the third highest of its LEA comparators). While Surrey’s total GVA grew by 32% between 2000 and 2007, this was a slower rate than its LEA comparators, and GVA per capita did not grow at all during the same period. Surrey is home to an estimated 61,600 workplaces, of which around 53,000 are VAT or PAYE registered enterprises. The vast majority of Surrey’s businesses (88%) are micro businesses employing less that 10 people and 81% employing fewer than five staff. There are around 300 businesses in the county employing 200+ employees. The number of new business VAT registrations for Surrey in 2007 was 58 per 10,000 of the adult population; higher than the level for the South East (40 per 10,000) and the UK (42 per 10,000). Surrey has a higher business survival rate than its comparators; after five years, the survival rate of businesses in Surrey is 50.2% (second only to Berkshire). Surrey enjoys a well qualified workforce: 39% of the resident working age population are qualified to NVQ4 (degree level) and above, and 73% are qualified to NVQ Level 2 and above; well above the South East and Great Britain rates. Conversely, only


of 11 December 2010

7.8% of the working age population have no qualifications (lower than the South East and Great Britain as a whole). Surrey has a very similar population age profile to that of the South East as a whole: 18% of its population is aged 0-14 years; 64.2% are of working age (16-64); and 16.5% are of pension age or older (65+). The population of Surrey is projected to grow by 19.5%, or by around 215,000 people, between 2008 and 2033 (with over half of this increase accounted for by people aged 65+). 6. Functional Economic Areas and Comparator Economies It is important to provide an understanding of Surrey’s performance relative to other economic sub-regions in the greater South East, which share commonalities, be it economic profile, aspirations, challenges, opportunities or functional economic geographies. Surrey also has a complex set of ‘closer’ functional linkages with both UK and international sub-regions, depending on which aspect of the economy is being looked at. Surrey has a strong, well-connected, knowledge-driven and wealth-creating economy. It supports a diverse business base of local, national and global companies. Surrey has the potential to drive a world-class regional economy. However, economic activity cannot be neatly defined in terms of local authority boundaries. What happens outside Surrey has a significant impact on Surrey’s economy, such as turbulence in financial and currency markets and the general health of the UK and global economy. For the purpose of the LEA, three Functional Economic Areas (FEA) have been selected (Surrey, the Gatwick Diamond and the Blackwater Valley and Western Corridor) which have been the focus of economic development policy activity and research in recent years. The LEA has not focussed on either rural Surrey or the London Fringe as an FEA; this is predominantly because of the complex nature of these relationships, which could be the focus of separate assessments. However, the importance of rural issues and London and its inter-linkages with Surrey are referred to throughout the main report. In terms of comparator economies, Berkshire, Buckinghamshire, Cambridgeshire and Oxfordshire have been explored; Berkshire and Buckinghamshire being part of an existing local government group of statistical partners that are benchmarked against each other; Cambridgeshire and Oxfordshire reflecting Surrey County Council’s perception that there is some phenomenon attracting people and businesses away from Surrey to these locations that needs to be understood better. The LEA shows that whilst Surrey has the largest economy of our comparator areas, it grew more slowly than all comparator areas and the UK between 2000 and 2007, and latest data show that GVA per head in 2007 was lower than both Berkshire and Oxfordshire. On enterprise, Surrey outperforms all comparator areas apart from Buckinghamshire where business start-up rates and business stock (per 1,000 population) are considerably higher. However, growth in Surrey’s business stock has lagged behind all comparator areas and the UK since 2000, which suggests Surrey needs to take action in this area to maintain its advantage in the enterprise driver of productivity.


of 11 December 2010

7. Economic Forecasting Importantly, Surrey’s LEA is not purely a retrospective look at the economy. As part of the process, SQW and Cambridge Econometrics have undertaken economic forecasting work, which provides forward looking data on which to consider the key policy drivers for economic success in Surrey. It is important to note that economic forecasting is not a perfect science; it does not predict what will happen, only what might occur under particular conditions and policy approaches. The forecasting considered the baseline position as well as three scenarios: greater global competitiveness, less global competitiveness and the impact of the anticipated public sector funding cuts on the Surrey economy over a 20 year timeframe to 2030. It considered these relative to the four comparator areas. The forecasting shows that, overall, Surrey has hitherto demonstrated strong performance in a number of areas relative to comparator areas. For example, Surrey has a high proportion of jobs in knowledge-intensive businesses, business start-up rates and residents with Level 4+ qualifications – all of which are important drivers of productivity – and, as a result, resident and workplace earnings are generally higher in Surrey. The forecasting work also indicates that there is relatively little difference in Surrey’s performance under the baseline projection (i.e. in which Surrey remains on its present course, unchanged) and under the less favourable projection of the Surrey economy becoming less globally competitive. SQW sees this as a ‘wake up’ call for Surrey, particularly given that it has better intrinsic assets than some of its comparators – such as its residents’ skills profile and its knowledge base. The modelling also predicts that, over the 20 year period, Surrey will under perform in relation to Berkshire (the strongest of the comparators), in terms of GVA and productivity, and that Surrey’s productivity will lag notably by 2030. However, there are other weaknesses that might challenge economic performance going forward, particularly around the lower proportion of residents that are of working age and, in turn, the proportion of these that are economically active. Surrey has also seen slower growth in business stock, work-based pay rates and the overall GVA level since 2000, which provides an opportunity for comparator areas that are growing faster to close the gap (and thereby reduce Surrey’s comparative advantage). The economic forecasting is reported in a separate stand-alone report to the LEA. 8. What next for the Local Economic Assessment? The Surrey LEA is not meant to be either an economic strategy or a new policy; rather the evidence base to support future economic strategic thinking and planning. It is therefore a tool that will enable private and public sector partners to plan the direction of travel for successful economic development in the future. The LEA has already been used to inform the development of the ‘Surrey Connects’ Local Enterprise Partnership Expression of Interest; submitted to government in


of 11 December 2010

September 2010. Demonstrating the value of having a comprehensive economic data set in one location. The Surrey Local Economic Assessment will also provide the foundation for the development of a ‘New Business Plan for Surrey’, being taken forward through Surrey Economic Partnership. This initiative has arisen from the need to look at Surrey’s global position, and where the county wants to be in the future. The LEA helps set the context for this work through providing a good understanding of where Surrey sits today. The LEA will also support funding bids, such as the recently announced Regional Growth Fund, which requires proposals to be underpinned by published robust evidence and data sets. Critically, Surrey’s past success cannot be used as a guide to its future performance. Nevertheless, Surrey continues to benefit from its unique strategic location, first class transport and communications links (including two international airports), three universities, highly qualified residents, and a high quality natural environment. It is still an attractive environment for international businesses and has a strong culture of enterprise and innovation. The challenge for Surrey going forward is not to be complacent, i.e. to rely on past success, but to build on its inherent strengths to ensure a competitive future. December 2010

surrey local economic assessment executive summary dec 2010 final

Documents