ROTHERHAM BOROUGH COUNCIL – REPORT TO MEMBERS

1. Meeting: Cabinet

2. Date: 18 July 2007

3. Title: The Joint Economy of Rotherham and (Impact will be Boroughwide) 4. Directorate: Environment and Development Services & Chief Executive’s

5. Summary To inform Cabinet of a recent study into the joint economy of Sheffield and Rotherham, carried out by CURS consultants. The study highlights the key issues regarding the Rotherham and Sheffield economy and identifies the implications and opportunities for the future economic development of Rotherham and Sheffield

6. Recommendations

That Cabinet receives the findings of the joint economic study and adopts the following measures for the future economic development of the Rotherham economy, in relationship with Sheffield, especially in regards to developing strategic documents:

• That appropriate local mechanisms are put in place between Rotherham and Sheffield to co-ordinate relevant economic policy and development through conurbation wide consultation.

• That the study is used to inform the Regional Spatial Strategy, Housing Strategy, Economic Masterplan and Local Development Framework. Full account must be taken of the interactions of the two economies and the growth picture it represents. Point 7.20 should be considered in regards to the Regional Spatial Strategy.

• Focus future policy on developing indigenous innovation led growth, to underpin the investment led growth which is currently driving the Rotherham economy and which should continue to be supported – therefore delivering a ‘dual track’ approach.

• Continue to work with partners to deliver interventions that re- engage the economically inactive into work and/or training.

• Develop policies and interventions to raise the skill level of Rotherham residents, with a particular focus on the provision of NVQ Level 3 and higher.

• That the following sectors are targeted by the borough for inward investment and business starts;  Advanced Manufacturing and Metals (high value engineering/manufacturing)  Creative and Digital Industries  Business and Professional Services  Energy and Environmental Businesses

• The strength of the evidenced joint economy of the Sheffield/Rotherham conurbation should be built upon and promoted as the ‘economic powerhouse’ of South Yorkshire, with a growing regional and national importance to be capitalised upon.

• Sheffield and Rotherham should promote the joint economy together and a communications action plan produced (to both internal and external ‘markets’).

7. Proposals and Details

Rotherham MBC and Sheffield City Council jointly commissioned a report to provide a detailed picture of the two areas in terms of the structure and performance of the local economy, the extent of economic linkage and interdependencies and possible patterns of future economic growth. The contract was won by CURS, from the University of Birmingham. A presentation setting out the key findings and challenges, a version of which will be presented to Cabinet, is attached as Appendix 1. A full copy of the report is also available to Members.

The Key findings of the Study were:-

7.1 There are strong geographical and economic links between the two areas. For example, there are supply chains within the metal-based manufacturing sector – Sheffield firms purchase component and intermediate metal goods such as forgings and castings from Rotherham, which they then finish into products such as cutlery and medical equipment. In the labour market, Rotherham supplies lower skilled workers to Sheffield, while Sheffield supplies higher skilled workers to Rotherham, but all workers view the two areas as one single employment opportunity. As a whole this characterises the two economies as one distinct economic mass within the broader South Yorkshire sub-region.

7.2 The joint economy has experienced dramatic and transformational growth in employment, business stock and output in the period 2000- 2005, and this has been substantially in excess of national and regional rates. Much of the growth is due to specifically local growth processes, rather than an effect of overall national growth or national growth in sectors where Rotherham/Sheffield has a strong presence (i.e. Advanced Manufacturing). For example, between 2000 – 2005 Sheffield and Rotherham gained an additional 35,500 jobs, but had their growth been in line with the national trend, it would have only produced around 14,500 jobs. Rotherham and Sheffield’s economic growth is therefore bucking the national trend.

7.3 To an extent this growth is attributable to an ‘investment-led’ growth i.e. new businesses investing in the area, which has been successful in securing a small number of large employers in the banking and business services, transport and distribution sectors. There has also been significant expansion in public sector employment.

7.4 It appears that an alternative “innovation-led” growth model may be emerging in the area i.e. established and new local businesses generating new ideas and products, with the economy experiencing growth above the national rate in areas including worker productivity, R&D expenditure, innovation outcomes and higher level skills in the labour force.

7.5 There is evidence that Rotherham’s economy has actually outperformed Sheffield’s in some areas. For example, more businesses in

the Advanced Manufacturing sector are choosing to locate/cluster in Rotherham than Sheffield, Rotherham has experienced more rapid employment growth than Sheffield 2000 – 2005 (22.2% to 13.8% respectively), and the growth in banking and business services has been most rapid in Rotherham. Rotherham has also experienced a greater increase in output than Sheffield. While it is true that Rotherham may be starting from a lower base than Sheffield in some of these areas, the improvements have still been impressive and the impact and strength of RiDO has made a major contribution in bringing these about.

7.6 Continued growth is expected over the next 10 years, although the rate of growth may reduce over time, with insufficient numbers of workers and potential workers to sustain the recent rate of employment growth. There are question marks over certain current growth areas too, such as the public sector (due to spending reviews) and banking and business services (due to developing countries increasingly entering this market, and the sector being dominated by a few large employers, especially in Rotherham). As such, suitable arrangements to promote and sustain growth should be made within the relevant planning frameworks and policy documents.

7.7 The workers that Rotherham exports to Sheffield are lower skilled than those received from Sheffield. In addition, Rotherham/Sheffield is leaking higher skilled (knowledge workers) to places such as Leeds/Manchester.

The report has been used to identify the strengths, weaknesses, threats and opportunities to both the Rotherham economy and the joint economy. These will drive future economic policy and interventions to deliver the long term sustainable economic development of the Borough.

Strengths/Opportunities

7.8 Sheffield is home to two high class universities. Rotherham needs to ensure it benefits from this, in promoting innovation, attracting and growing high-value businesses, up-skilling the local workforce and retaining graduates within the local economy.

7.9 The number of higher level skill workers (NVQ3 and 4) is rising above the national average and there is the need to use this to attract more high value firms to invest and locate in Rotherham

7.10 Sheffield has very little vacant land remaining for major developments, providing an opportunity for Rotherham, with potentially almost 300 hectares of land available subject to varying degrees of reclamation and servicing, to exploit. This strength is assisting and retaining businesses for the entire conurbation, which would otherwise have relocated. An example of this is Johnston Press, which moved from its location to a brand new high-tech facility in Dinnington. It is therefore essential to increase

and preserve the amount of land available for business, as well as the Investment Team that support this work.

7.11 The workforce of both Boroughs look at Rotherham/Sheffield as one economic area with no consideration of “crossing boundaries” when seeking work.

7.12 Manufacturing sectors that have survived the contraction of the 1980s/90s are strong and with a high focus on R&D and innovation.

7.13 Rotherham and Sheffield have highly complementary business sectors, more so than the other areas within the region and sub-region, such as in the case of the metal-based manufacturing sector described in 7.1. The study also highlights further potential complementarities by Rotherham being somewhere that many people who choose to work in Sheffield may wish to live, so long as suitable executive and affordable aspirational housing can be provided. By providing the right kinds of housing and an improved town centre, this could have obvious benefits for Rotherham’s local economy.

7.14 There is evidence that Rotherham provides supporting services to Sheffield. This takes the form of providing basic material inputs in the manufacturing sector, to providing support services (telecommunications, computer services, etc) in other sectors. This is a potential growth area with Rotherham providing “backroom services” to Sheffield, as Glasgow does for Edinburgh.

7.15 Consideration should be given to attracting people from other parts of the country (i.e. the “overheating” South East), including the relocation of some Civil Service back office functions, as set out in the recent Lyons Review. To achieve this Rotherham would need to provide these potential migrants with executive and affordable aspirational housing (Planning and Transportation is currently carrying out a housing market assessment to determine future housing needs and inform the LDF), high skill vacancies and a high quality of life. Better ‘quality of life’ marketing for the joint economy’s conurbation would also be required.

Weaknesses/Threats

7.16 The Rotherham economy is dependent on a small number of large employers (basic manufacturer Corus, call centres, etc). Also, a large percentage of employment is within the public sector, meaning any tightening of central government budgets, such as through this year’s Comprehensive Spending Review (CSR), could have a significant negative impact on the local economy.

7.17 As of 2005 approximately 5,500 Rotherham jobs are located within Call Centres. In future, these could come under pressure from the lower wage economies of India and Eastern Europe.

7.18 While the joint economy is very successful in securing investment led growth, there are concerns over the long-term sustainability of this model. For example, inward investment has recently come through an Indian firm buying the Rotherham soft furnishings and textiles company ‘Rosebys’, but this has resulted in over 100 of the firm’s office based jobs being reinstated in India.

7.20 Current competitiveness is rooted in lower wage labour, plentiful land and efficient transport networks. Land is a finite supply, with a potential shortage of about 144 hectares based on current employment predictions and an analysis of available land, while growth projections identify a potential labour shortfall in the next 5-10 years and connectivity to certain parts of the Borough, particularly deprived areas, is poor. There is evidence, therefore, that employment land should be protected and invested in if capacity needs are to be met, which is opposite to the Regional Spatial Strategy’s argument of decreasing the amount employment land.

7.21 Future growth, particularly of higher skill/higher value jobs, could be constrained by a lack of suitably skilled applicants from within the Borough’s population. The overall employment rate in Sheffield/Rotherham has remained fairly stable over the last few years, despite rapid job creation, suggesting that some of the benefits of local job creation are spread outside of the local population.

7.22 In addition to the previous point, the study indicates that even if the entire working population of the joint economy moved into employment, and the current rate of growth continued, there would still be a shortage of skilled people. Therefore, there is a need for more executive housing to attract skilled workers into the joint economy.

7.23 Equally, if the joint economy is to grow, there needs to be a suitable transport network and this may require some level of investment. The report states that a growth in the joint economy will see an increase in commuting across the conurbation, with the potential for a spatial mismatch between workforce mobility, housing and transportation arrangements. If a growing joint economy is to be supported and sustained, transport flows need to be easy, or growth will come under threat. Consultation with the Forward Planning Team has raised the point that the Regional Spatial Strategy needs to be considering allocating employment land in sustainable locations, not motorway corridors, to ensure accessibility and effective transport flows. For example, the Lower Don Valley may be best suited to be served by high capacity public transport.

7.24 Sheffield/Rotherham displays a relative lack of entrepreneurialism. Although business start-ups numbers and total business stock has increased, levels are still considerably below those of other major Northern cities such as Leeds and Manchester. There needs to be a balance between innovation and investment to ensure robust economic growth. It is therefore important that the work of the business support and incubation strategy, with its focus on local innovation and business start-ups, is continued.

7.25 Rotherham’s most significant contribution to Sheffield’s labour market is lower skilled workers, while Sheffield provides higher skilled workers to Rotherham.

7.26 There is a lack of awareness, at both regional and national levels, regarding the strength and growth of the Rotherham/Sheffield economy and its regional and national contribution.

Key instigators and supporters of the Study include John Healy MP and Richard Caborn MP. Therefore a recent meeting was held with these two MPs, along with officials and members from RMBC and SCC and regional partners including, Yorkshire Forward, Government Office and the Regional Assembly. This meeting highlighted the following areas for joint policy making and interventions for Sheffield and Rotherham:-

• Twin track growth policy – Innovation and Investment • Labour market • Employment and housing land allocations • Entrepreneurship • Connectivity • Communication/image

In many cases joint working is already taking place, such as inward investment and through the recently established Work and Skills Consortium, although these both operate at a sub-regional level.

8. Finance Cost of the report was £17,875 split between Rotherham MBC and Sheffield CC.

The next round of European funding covering the period 2007-13 focuses on delivering the Lisbon Agenda of jobs and growth, including supporting innovation. Any activity funded through by ERDF or ESF must take account of the issues raised by the Report and this paper.

9. Risks and Uncertainties Any predictions on the future economic performance of Rotherham are subject to wider range issues over which the Council and Borough have no control. This could include a downturn in the World or National economies. However, there are also some further specific potential risks:

 The future sustainability of some of the Borough’s manufacturing, due to vulnerability to global markets and the potential cost-savings of moving overseas, especially as environmental legislation within the UK becomes stronger.

 Call centre operations being vulnerable to overseas markets

 The outcome of the Comprehensive Spending Review and potential cuts in the public sector.

 Land use allocations (e.g. housing and employment)

 Future growth is by no means guaranteed, despite recent trends

 It is highly likely that Objective 1 funding has had an impact on the high levels of growth and investment seen in recent years. The impact of much reduced funding in the future remains to be seen.

Working to increase indigenous business growth, in the context of a joint economy and still supporting investment led growth would help mitigate the impact that would be felt should any of these risks become a reality.

Following consultation with the Council’s Forward Planning Team, they have noted that this study’s employment projections suggest that the Regional Spatial Strategy (RSS) and the Examination in Public Panel Report are still underestimating the growth potential and related amount of employment land required for Sheffield and Rotherham. The RSS also needs to recognise the potential of Sheffield/Rotherham as a comparable growth centre to Leeds and should give more emphasis to the Sheffield City Region.

10. Policy and Performance Agenda Implications

Joint economic working with Sheffield will contribute to a number of Key Partnership priorities under the Achieving and Learning Themes of the Community Strategy:-  Develop competitive growth sectors, building on the existing strengths and assets in Rotherham and the sub-region to create jobs and diversify the economy  Create the right conditions for inward investment and the development of world class businesses that will drive the economy by developing the skills of local people and providing high quality facilities and services and quality environment for growth.  Address the skills shortage, which is a growing concern for the business community, particularly in higher level skills.

11. Background Papers and Consultation

The Joint Economy of Sheffield and Rotherham Study and presentation slides, Centre for Urban & Regional Studies, University of Birmingham (April 2007).

The following have been consulted in the development of this report; Miles Crompton, Research Co-ordinator, Policy and Partnership Paul Woodcock; Business Development Manager, RiDO (currently seconded to Chief Executive’s Office) Karl Battersby; Director of Planning and Transportation Andrew Duncan; Strategic Policy Team Leader, Forward Planning Neil Rainsforth; Research and Spatial Development Officer, Forward Planning.

The paper has been endorsed by CMT and the meeting of South Yorkshire MPs in June 2007, received

Contact Name : Simeon Leach Economic Strategy Manager X3828 [email protected]

Paul Woodcock Acting Policy & Research Manager X2737 [email protected]