The Economic Impact of Military Presence in North Yorkshire February 2010 The Economic Impact of Military Presence in North Yorkshire The Economic Impact of Military Presence in North Yorkshire Foreword by Brigadier David Maddan, Commander 15 (NE) Brigade Those of us who work for and with the armed forces in North Yorkshire know that the Defence presence is important to our economy and that of the Yorkshire and Humber region. This study shows exactly how important that presence is, and looks ahead to the impact of future changes to Defence in the region. It is a joint effort between the MOD and a number of local partners, who have all contributed financially and by way of oversight to the research. I hope you will find this study useful. There are contact details in it if you wish to pursue anything you read. Imphal Barracks York January 2010 The Economic Impact of Military Presence in North Yorkshire Contents Executive Summary............................................................................................. i 1: Introduction.......................................................................................................... 1 2: Approach and methodology................................................................................. 3 3: Setting the scene ................................................................................................ 7 4: Direct economic impact ...................................................................................... 14 5: Indirect economic impacts .................................................................................. 22 6: Wider impacts ..................................................................................................... 32 7: Military leavers and the local labour market......................................................... 38 8: Assessment of net impacts ................................................................................ 49 9: Future growth prospects ..................................................................................... 52 10: Conclusions and recommendations..................................................................... 55 Annex A: Military Overview................................................................................................. A-1 Annex B: Definitions............................................................................................................ B-1 Annex C: Consultees........................................................................................................... C-1 Annex D: Capital projects ................................................................................................... D-1 Annex E: Employee Spend Survey .................................................................................... E-1 Annex F: Military Leavers Survey ....................................................................................... F-1 Annex G: Detailed labour market analysis........................................................................... G-1 The Economic Impact of Military Presence in North Yorkshire Executive Summary 1. In April 2009, Yorkshire Forward, in partnership with the Ministry of Defence (MOD) and Defence Estates, North Yorkshire County Council, Richmondshire District Council and the Tees Valley Joint Strategy Unit commissioned SQW Consulting to undertake research into the economic impact of current and future military activity in North Yorkshire. The study explored: • the scale, nature, geography and impact of military activity in North Yorkshire • the indirect impacts of military activity, including the integration and impact on local communities and their regeneration, and housing markets in particular • the impact of military presence on local labour markets, particularly looking at the integration of military leavers • the potential economic impacts of expansion at Catterick over the next 20 years. 2. SQW also considered the implications for policy and economic development, and provided recommendations to improve integration and economic impact. 3. Research focused on the Catterick Garrison Figure 1: Catterick Garrison Administrative Area within North Yorks. within North Yorkshire Administrative Area (CGAA), the area with the largest concentration of MOD activity in the York and North Yorkshire sub-region and where the highest level of growth is expected in the future. A `bottom up’ approach was adopted, assessing impact through evidence collated from available statistics on the local economy, internal MOD data, in-depth consultations with key stakeholders and surveys with MOD staff. Headline findings In 2009, the MOD employed 17,149 (FTE) staff in North Yorkshire. 4. Of this employment: • 88% are military staff and 12% civilians • 75% are in the Army, 25% in the RAF • 47% are based at Catterick Garrison, 72% within the wider CGAA boundary. 5. A high proportion (71%) of military jobs in North Yorkshire are in junior ranks, and almost half (49%) of the civilian staff are employed in administration. The average salary of MOD staff working in North Yorkshire (weighted to reflect employees by rank) is £25,314. The high representation of lower-level MOD occupations is a major determinant of lifestyle - in particular, housing choice - and also of spending power. 6. MOD jobs represent around 6% of all jobs in the sub-region. As shown below, most MOD jobs in North Yorkshire are based in Richmondshire, which is home to Catterick Garrison. MOD employment represents around 44% of all jobs in this District. i The Economic Impact of Military Presence in North Yorkshire Figure 2: MOD jobs by district Source: ABI and internal MOD data. Produced by SQW Consulting 2009. © Ordnance Survey. Crown Copyright. License Number 100019086. Digital Map Data © Collins Bartholomew Ltd. CLG. Postcode information © Royal Mail Group Plc (2007). The estimated net annual economic impact of military activity on the Yorkshire and Humber region was just under £600m per annum 7. The gross impact of MOD salaries in North Yorkshire equates to £434m p.a. When this is converted to Gross Value Added (GVA), and low levels of displacement and substitution, higher levels of leakage 1, and multiplier effects are taken into account, the net annual economic impact of this military activity on the Yorkshire and Humber region is estimated at between £541m and £594m per annum. MOD employee spend and job creation have considerable impacts on North Yorkshire, and these impacts also spread into Tees Valley in the North East 8. Approximately 95% of military staff in North Yorkshire lives in MOD accommodation. Of those who do not live in MOD accommodation (a small proportion of military staff and most civilian staff), SQW found through a small-scale survey 2 that 42% were living in Yorkshire and Humber, and 56% in the North East. Those renting were more likely to live in Yorkshire, home-owners were more likely to purchase in the North East. Approximately two-thirds of MOD earnings were spent within the Yorkshire and Humber region (and in North Yorkshire in particular). However, a large share of employee spend on household goods, entertainment and recreation flows into the Tees Valley / North East, even for those who live within North Yorkshire. Two thirds of procurement business was retained in the region from those CGAA procurement contracts for which information was available. Large scale contracts will continue to be procured nationally, but the MOD is actively promoting sustainable procurement policies, which are beginning to open up more opportunities for local suppliers 9. The study included MOD procurement at CGAA of at least £61m p.a., of which 64% was retained by businesses in the region (creating an estimated c.600 indirect jobs p.a.) either through multi -activity contracts (where large management contractors appear to be attracted to the region specifically due to MOD opportunities) or sub-contracts in services such as accommodation repairs and refurbishment, maintenance, tailoring, and window cleaning. 10. Attempts to increase the local impact of procurement spend need to be realistic - many contracts are still controlled on a national basis and the drive to improve cost-efficiencies and economies of scale can result in procurement contracts being too large-scale for local businesses to handle. 1 This is based on primary evidence of spend and supply chain leakage from the MOD in North Yorkshire. Please refer to the main report for a full explanation of the gross to net assessment. 2 Please note, due to small sample sizes, this survey was not statistically significant. ii The Economic Impact of Military Presence in North Yorkshire But there are some opportunities for local businesses, especially in activities such as painting and finishing,maintenance, and waste management which are currently undertaken by firms outside the region. Possible actions include: • Raising awareness: the MOD and its major contractors are pursuing sustainable procurement policies; some results are becoming evident, for example in local supplyof meat, but more could be still be done to raise awareness and offer new opportunities • Local businesses seem unaware of these possibilities and how to access them; there is potentially a role for Yorkshire Forward, the MOD and the local authorities to address this `information failure’ 3, by promoting `success stories’ in the region and contact channels to check and investigate potential • There may be a role for public sector co-ordination in encouraging