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Rh100811psc Local Economic Assessment Hk 05 240811 EE/11/7 Place Scrutiny Committee 5 September 2011 Local Economic Assessment - The Economy of Devon Report of the Head of Economy and Enterprise 1. Summary This report, and the accompanying presentation, summarises the current state of the Devon Economy and the overall approach to interventions and investment being made by the County Council to support the Devon Economy. 2. Introduction The economy of Devon has its own, almost unique, profile. Devon is one of the largest economic areas in the South West covering a land area of 6,564 square kilometres and generates over £11billon Gross Value Added (GVA). It is home to almost 400,000 economically active people, 32,000 VAT registered businesses and almost 70,000 self employed people. Many of Devon’s businesses are small - around a third has a turnover below the VAT registration threshold. The business profile also reflects the character of Devon’s landscape and geography - compared with the national average there are 3 times as many people employed in agriculture and twice as many working in tourism. Such employment tends to be less well remunerated – overall, average earnings in Devon are £2,600 per year less than the national average. If earning levels in Devon could be increased to reach the national average that would add £1 billion a year to the local economy. Also, the impact of lower earnings is compounded by a high proportion of part time workers and a high dependency on public sector employment. By contrast, Devon has a noticeably higher proportion of economically active people – those in work, self employed or actively seeking work. The number of employees (those working for someone else) is in line with the regional average (just over 66%) but is ahead of the national rate (which is just 64%). Similarly Devon has a high proportion of self employed people compared to the national average (almost 12% for Devon compared to 9% for Great Britain). This could indicate a level of entrepreneurship and enterprise. Although the high level of self employment could be seen as a strength, it could also be compensating for a lack of formal employment opportunities or a reflection of the industrial structure (greater reliance on agriculture and construction where self employment is normal). This could be a sign of weakness – with a shortage of formal job opportunities forcing people to become self employed. There is a lack of churn in the business sector - only 6% of firms leave the VAT register each year – compared to 7% nationally. And only 7% are added to the register (compared to 10% nationally). On one hand this implies stability, but stability can be a weakness indicating lack of competition and innovation. Unemployment is - and has been for some time - lower than the national average. Again this is strength. Also, when Devon people do become unemployed, they tend to find another job relatively quickly – over 86% of people who become unemployed find another job within 6 months (compared to less then 80% nationally) and only 3% are unemployed for more than 12 months (compared to almost 8% nationally). As would be expected from a relatively strong employment performance (compared with some other parts of England) the level of benefit claimant is also lower than the national average – just 11% of people in Devon claim some form of benefit compared to almost 15% nationally (based on average figures for last year – the number claiming Job Seekers Allowance is at a recent historic high but is still well below the national average). The average wage levels in Devon are below the regional national averages (gross weekly pay in Devon is just £400 compared to £445 for the South West and £489 for Great Britain). The nature of the Devon economy means that its productivity is relatively low – GVA per employee is substantially lower than the national or regional averages. Devon has slightly higher unemployment among women (27% compared to around 26% and 25% for regional and nationally) – important in a low wage economy where many families rely on dual incomes. The impact of the global economic downturn has certainly been felt in Devon and unemployment rates doubled during the first 9 months of the recession. Whilst unemployment rates have remained at twice the pre-recession levels they are still significantly lower than national averages. The recession has emphasised some of the inherent weaknesses in our economic structure. The low productivity, low wage businesses that characterise Devon's economy continue to face a number of challenges as they emerge from the recession. These challenges may well be exacerbated as public sector spending cuts filter into the economy. Employment markets are dynamic, there will always be changes which result in some people losing their jobs and then finding new ones. During the last year over 24,000 people lost their jobs in Devon and claimed Job Seekers Allowance. However at the same time over 20,000 stopped claiming Job Seekers Allowance and found work. Whilst this does mean there has been a net increase in the total number of unemployed it is not all a downward movement. 3. Role of the Economy and Enterprise Service Against this unique and diverse background the Economy Service has two core objectives: o to provide a strategic overview of the economy and o to strengthen the Devon economy through stimulating private sector business growth The Government's aspiration to promote private sector growth and rebalance employment away from the public sector will continue to require localised support within a landscape which is constantly changing in relation to institutions and financial regimes. In addition to a two tier local authority structure there is the plethora of agencies, organisations and partnerships within Devon, with different remits, linked agendas and funding arrangements. This can often make a concerted and joint effort hard to achieve. It is also worth noting that the organisational landscape is quite complex. As we move away from regional and national economic development structures (abolition of the RDAs and Government Offices, centralisation of the Business Link service and European programmes etc), there is an increasing emphasis being placed on upper tier authorities to show strategic leadership, but the expectation is that they will do so by very much working alongside and with the private sector. The key focus for the Economy and Enterprise Service going forward will be to deliver through 4 themes which together will promote private sector job creation and lead to increased productivity and wage levels: o Developing Workforce skills o With an emphasis on skills for those in work to improve productivity and wage levels. o EU Policy and engagement o Influencing and lobbying on EU policies and funding programmes. o Advising and facilitating the development of projects and programmes which will draw down EU funding. o Enterprise development o Securing external funding to support the deployment of high speed broadband across the County. o Promoting innovation and strengthening the profile of Devon as a business destination o Working with the private sector to deliver a range of flexible work space offerings. This ranges from large scale strategic interventions such as Exeter Science Park and SkyPark to smaller units in the more sparsely populated rural areas of Devon where commercial viability might otherwise be challenging. o Strategic developments & partnerships o Work with the private sector to develop the Local Enterprise Partnership (LEP), including transition away from support to the Devon Economic Partnership and the development of an LEP Forum and appropriate delivery mechanisms. o Commissioning major infrastructure projects that support economic growth (such as South Devon Link Road, Science Park, SkyPark) and management of the industrial estate portfolio. o Maintenance of robust economic evidence base for promoting a greater understanding of the challenges and opportunities facing the economy. o Exploiting the Renewable Energy potential of the County Council estate. In recognition of the financial pressures experienced by the County Council, some other areas of activity by the authority have had to be scaled back:- o Support to the tourism industry has been reduced by almost half, and financial support to the sector is likely to cease at the end of 2011/12, but with some in kind support being maintained for another year. o Small scale projects aimed at supporting communities can no longer be supported by the Economy and Enterprise Service. Economy and Enterprise capital funding aimed at community regeneration, such as public realm enhancements, has been scaled back. However there are some other potential funding sources for such work, including Community Infrastructure Levy, and town and district councils. 4. Examples of Projects to Strengthen the Economy Superfast broadband is essential to the aspirations of our businesses and communities. Current broadband services across our area are poor in terms of speed, reliability and bandwidth, and the market will not deliver the level of service needed. We have already engaged with nearly six thousand residents and businesses across Devon and Somerset and almost 90% of businesses surveyed say improved broadband is vital to their future and both business and residents felt that current broadband held them back. To tackle this critical barrier to economic growth the Economy and Enterprise Service had identified ICT as a key priority. Our approach has been twofold:- • using the limited resource available directly to DCC we have lobbied and bid for additional funding and • we have used our activity budgets to support skills ‘demand stimulation’ activity to ensure when superfast broadband is delivered our business are equipped to use it to maximum impact. Government has recognised the size and scale of the challenge of delivering improved digital connectivity across Devon and Somerset and awarded funding to deliver our Local Broadband Plan in May 2011, which was submitted jointly with Somerset.
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