Enterprise M3 Economy, Labour Market and Skills Dashboard EM3 SAP and EM3 Board Meetings – March 2021 HEADLINES • High business density in Enterprise M3 but sluggish business growth - business activity above the average in late December but business financial performance and the economy affected severely last year. • Strong performing labour market in Enterprise M3 takes the hit but the impact on the labour market relatively subdued - largely thanks to government policy (job support schemes). • Labour intensive consumer services and construction in Enterprise M3 affected the most – decrease in demand for upper intermediate skills accompanied by the increase in demand for lower intermediate skills and higher skills (professional occupations). • The greatest impact to date has been on self-employed and non-permanent work and young people. • 3rd lockdown led to a sharp fall in output but businesses have become better at adapting to lockdowns – the impact on GVA in Q1 2021 much smaller than in Q2 2020; released pent-up demand and government spending to drive economic growth this year. • Jobs demand heavily subdued at the start of 2021 - the strongest skills demand in nursing and care and several professional occupations and the weakest in hospitality, retail and elementary occupations. BUSINESS & ECONOMY BUSINESS ACTIVITY IN ENTERPRISE M3 ABOVE THE AVERAGE IN LATE DECEMBER Trading Status Survey evidence suggests that about 3 in every 4 (% of single site businesses currently trading) business in Enterprise M3 were trading in mid-to- 90 % 14 - 29 December 2020 late December 2020. 85 80 Enterprise M3 had a higher proportion of 75 South East businesses trading than the South East or the 70 UK. 65 UK 60 The economy seems to have become better at 55 adjusting to periods of lockdown 50 West Surrey North Hampshire Central Hampshire • some 74% of UK businesses were trading in early March 2021 Source: ONS BICS Survey (2021) West Surrey (Surrey Heath, Woking, Guildford, Waverley, Spelthorne, Runnymede Elmbridge); North Hampshire (Basingstoke & Deane, Hart, Rushmoor); Central Hampshire (Test Valley, Winchester, East Hampshire, New Forest*). UNPRECEDENTED IMPACT ON FINANCIAL PERFORMANCE OF ENTERPRISE M3 BUSINESSES Business resilience – cash reserves A large proportion of businesses in Enterprise M3 (% with no or < 3 months cash reserves*) experienced a decrease in turnover (sales) in mid-to-late December. 50 % 14 - 29 December 2020 40 Falling sales had a significant impact on the UK financial performance of businesses in Enterprise M3. 30 South East • Over a third of Enterprise M3 businesses had 20 less than three months cash reserves in mid- to-late December. 10 rd The 3 national lockdown is likely to worsen 0 cashflow position which could impact on West Surrey North Hampshire Central Hampshire business investment. Source: ONS BICS Survey (2021); *% of single site businesses West Surrey (Surrey Heath, Woking, Guildford, Waverley, Spelthorne, A range of Business Support measures Runnymede Elmbridge); North Hampshire (Basingstoke & Deane, Hart, announced in March 2021 Budget. Rushmoor); Central Hampshire (Test Valley, Winchester, East Hampshire, New Forest*). SLUGGISH BUSINESS GROWTH IN ENTERPRISE M3 PRE-PANDEMIC – BUT HIGH BUSINESS DENSITY MATTERS Business stock, density and growth in 2020 Enterprise M3 has a large number of businesses (as of mid March 2020) and one of the highest business densities in the ) 1,350 . a country. w Buckinghamshire TV f 1,300 o London n o i t Enterprise M3 a 1,250 l Business growth was sluggish in the year before u p Hertfordshire o p the start of the pandemic but similar to several 1,200 0 0 0 , other LEPs in the area. 0 1,150 1 r e p ( 1,100 TV Berkshire y t i s • Enterprise M3 saw a decrease in higher-value n e 1,050 d s C2C added services and an increase in consumer s e n i 1,000 services. s u b 950 Solent South East England A high business density and favourable industry 900 mix (high concentration of professional services) -2.5 -2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 should make Enterprise M3 economy more business growth, % (2019 to 2020) resilient relative to most LEPs. Source: ONS (2020) West Surrey (Surrey Heath, Woking, Guildford, Waverley, Spelthorne, Runnymede Elmbridge); North Hampshire (Basingstoke & Deane, Hart, Rushmoor); Central Hampshire (Test Valley, Winchester, East Hampshire, New Forest*). UNPRECEDENT CONTRACTION IN ECONOMIC OUTPUT IN 2020 2020 saw the sharpest economic contraction in over 300 years. Estimated growth in GVA in 2020 • UK economy contracted by 9.1% in GVA -6 UK terms. Enterprise M3 -7 Official estimates for Enterprise M3 are not available - preliminary estimates for 2019 from -8 ONS due in May. -9 -9.0% A local estimate of the impact on EM3 ranges from: -10 -9.1% -11 • -9% (based on UK sectoral growth) -10.5% To 2020 2020 • -10.5% based on (regional sectoral growth in Q1 and Q2 and national growth in Q3 andQ4 Source: ONS (2021) and EBIS 2021 estimate for Em3 economy Does not factor-in likely greater resilience in Enterprise M3 as seen during the 2008/9 recession. CONSUMER SENTIMENT STARTED TO IMPROVE LATE LAST YEAR Consumer sentiment in Enterprise M3 recovered in the Autumn judging by the number of residential Monthly house sales in Enterprise M3 property transactions. 2.4 sales volume 2.2 Consumer sentiment in the UK improved at the 2.0 strongest pace in eight years in early December Enterprise M3 1.8 before decreasing in January following the introduction of 3rd national lockdown. 1.6 1.4 d 1.2 n We have seen a sharp increase in savings and the a s u consumer appears to be in very good shape in 1.0 o h t early 2021. 0.8 1st lockdown 0.6 Consumers ready to release their pent-up demand Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct for goods and services as soon as the economy 2019 2020 reopens. Source: ONS (2021) LABOUR MARKET & SKILLS HEADLINE EMPLOYMENT TAKES THE HIT BUT THE IMPACT TO DATE HAS BEEN FAR MORE MUTED THAN ON ECONOMIC OUTPUT Enterprise M3 has one of the strongest labour Employment rate in the year to 2020 markets in the country – employment rate at and annual % change around 80% in the year to September 2020. 81 Enterprise In terms of the impact on the economy this was M3 80 the worst recession in over 300 years but the Coast to Capital impact on the labour market has been more ) 79 TV Berkshire Hertfordshire % South East ( muted. e t a average r t Buckinghamshire n 78 On the surface it appears that Enterprise M3 e m TV y o l residents have been affected to a greater extent p m 77 by the pandemic than in most other LEPs in the e South East LEP area. 76 Annual data masks the true impact - apparent Solent London strength/weaknesses might also reflect the 75 strength/weakness in the six-month before the -2 -1 0 1 2 3 pandemic. % change in employment in year to September 2020 Source: ONS (2021) SHARP FALL IN SELF-EMPLOYMENT AND NON-PERMANENT EMPLOYMENT IN ENTERPRISE M3 The fall in overall resident employment in Enterprise M3 to date has been driven entirely by Change in employment in Enterprise M3 the fall in self-employment. (year to September 2020 working-age) 2 • Males accounted for close to 90% of the fall in 0 0.03% self-employment in Enterprise M3 -2 (concentrations of males in some sectors like -4 construction). -6 d n a s u -8 o h • The number of employee females decreased t on the year (concentrations of females in -10 labour intensive consumer services). -12 -12% -14 The fall in non-permanent employment in -16 Enterprise M3 has been about twice as fast as Employees Self-employed the fall in the overall employment (typically happens in recessions) Source: ONS (2021) ENTERPRISE M3 SEES A RELATIVELY SHARP DECREASE IN EMPLOYMENT AMONG YOUNG PEOPLE Young people in Enterprise M3 and across the % change in employment by age country tend to be disproportionately affected in (year to September 2020) recessions. 0 This recession is no different – employment -2 among young people in Enterprise M3 decreased -4 by about 9 times faster than the average -6 employment. -8 Impact to date largely explained by -10 concentrations of young people employed in -12 labour intensive consumer facing sectors (hospitality, non-essential retail, accommodation -14 etc.). -16 aged 16-64 aged 16-24 aged 20-24 aged 35-49 aged 65+ Young people often have less security at work e.g. non-permanent (temporary) contracts, work Source: ONS (2021) fewer hours etc. EMPLOYMENT IN LABOUR INTENSIVE CONSUMER FACING SECTORS AFFECTED THE MOST Annual growth in resident employment by broad industry – Enterprise M3 (year to September 2020, %) Manufacturing Construction Distribution, hotels & restaurants Transport & communication Finance & insurance Public admin, education & health Other services % change -20 -18 -16 -14 -12 -10 -8 -6 -4 -2 0 2 4 6 8 10 12 14 Source: ONS (2021) • -22,800 in distribution, hotels & restaurants • + 26,200 in broad public sector • -7,500 in construction SHARP FALL IN DEMAND FOR UPPER-INTERMEDIATE AND ELEMENTARY SKILLS, RISE OF LOWER-INTERMEDIATE AND PROFESSIONALS Annual growth in resident employment by major occupational group – Enterprise M3 (year to September 2020, %) Managers, directors & senior officials Professional occupations high-skilled occupations Associate prof. & technical occupations upper-intermediate Admin. & secretarial occupations occupations Skilled trades occupations Caring, leisure & other serv ice occup. Sales & customer serv ice occupations lower-intermediate Process, plants & machine operativ es occupations Elementary occupations annual % change -20 -16 -12 -8 -4 0 4 8 12 16 20 Source: ONS (2021) • Upper intermediate: -22,300 • Professional occupations: science, research, • Lower intermediate: +11,700 engineering & technology (+), health (+), teaching & • Professional: +7,700 education (+), business, media & public service (-) SHARP INCREASE IN UNEMPLOYMENT BUT THE LOWEST LEP UNEMPLOYMENT RATE IN THE AREA Sharp increase in unemployment in Enterprise Unemployment rates - February 2021 M3 area over the past 12 months.