Fortnightly insight into the current state of the economy and how it relates to Dorset by Nigel F Jump, Chief Economist of Strategic Economics Ltd (a Dorset Company) and Visiting Professor in Economics at the Universities of Bath and Plymouth.
See: www.strategiceconomics.co.uk
It has been a vibrant two weeks for economic data and news. From the Chancellor’s autumn statement and the Office for Budget Responsibility’s (OBR) forecasts, through the census releases on the make-up of the economic population, to the labour market data for November and the latest sub-national Gross Value Added per head release, we have received some important benchmarks for analysis and prediction. Accordingly, this “story” is a bit more ‘techy’ than most but sets a useful end to the calendar economic year.
The key message from the OBR was that growth will remain below its underlying trend rate into 2016 and the output gap will persist. The OBR is saying the economy will remain very weak in 2013 and the recovery will be very slow in 2014-15. The Autumn Statement was pretty gloomy about the level of public sector debt, with the net debt/GDP ratio now predicted to climb to over 79.9% in 2015.
The census data for 2011 shows a Dorset economic population (active and inactive) of 537,406. The full-time employed range goes from 32.9% of this population in West Dorset to 39.5% in Poole. The part-time employed range is from 13.3% in Bournemouth (lowest in SW England) to 17.1% in Weymouth & Portland. The self-employed spread is from 9.2% in Weymouth & Portland (interesting contrast with the previous measure) to 14.6% in West Dorset. Unemployment varies from 2% in North Dorset to 3.8% in Bournemouth. Most of Dorset has more part-time and self-employment and less unemployment than many areas in England … but not all.
The latest unemployment figures show Dorset’s overall claimant count (CC) at 9,265 in November 2012. The CC rates were 1.6% in Dorset, 1.9% in Poole and 3.3% in Bournemouth. These local rates compare with a UK average of 3.8% and a SW average of 2.6%. The Dorset and Bournemouth rates are unchanged on a year ago while the Poole rate is 0.1 points lower than before. Such CC rates remain remarkably low for an economy with so little growth, suggesting people are keener to find some activity and, perhaps, be under-employed rather than to sign on.
The latest gross value added (GVA) data (released on 14th December) looks at Dorset in 2011 – a year when the initial recovery from recession began to lose momentum. In monetary terms, the combined Bournemouth and Poole (B&P), and the rest of Dorset (RoD) economies remained very similar in size: £6,646mn and £6,709mn respectively. Together, these Dorset economies accounted for 13.2% of the SW economy and about 1% of the UK economy.
GVA per head is a key measure of the economic value created by a spatially defined population, such as Dorset. It is used widely, by analysts and government, to compare economic performance between sub-national places. Moreover, it is the basis on which EU regional funds are allocated. In 2011, B&P recorded GVA per head of £21,218 and the RoD £16,538. This differential between the more urban and more rural parts of Dorset is a little misleading because GVA is measured at workplace and heads at residence. Accordingly, B&P gains from the effects of differences in industrial structure (e.g. higher share of high value financial and business services) and commuting/travel to work patterns.
On this measure of GVA per head, B&P and RoD were 1.6% above and 20.8% below the UK average respectively. Compared with the SW average, the equivalent proportions were 11.1% above and 13.4% below respectively. B&P ranked fourth highest of the 12 SW areas (behind Swindon, Bristol and the rest of the West of England) and the RoD ranked tenth (ahead of just Cornwall and the Isles of Scillies, and Torbay). Interestingly, B&P has moved lower and RoD higher since the start of the downturn. In index terms (UK=100), B&P peaked at 105.3 in 2009 and dropped to 101.6 in 2011. In contrast, RoD has increased from 76.1 to 79.2 over the same period. These changes reflect the differential impacts of the downturn through sectors and across places.
So, how can we summarise all these numbers. First, although there are individual success stories at a business-by-business level, the census, unemployment and GVA per head data suggest that, in recent years, the overall Dorset economy has not improved markedly in absolute and relative terms. Second, the census and the GVA data confirm that the structural differences between ‘rural’ Dorset and the conurbation remain a key feature of our economy. This factor tends to drive differentials on the overall issues of low business productivity, constrained household demand and under rather than overall employment to the fore. Finally, whatever you think of the individual policy measures proposed in the Treasury Statement, the OBR’s official outlooks paints a picture of the weak growth and wider economic performance lasting beyond the next General Election in two and a half years time.
If the consensus is right, next year may not be much more fun than 2012 for the local economy. For the long-term, I am more optimistic. I believe Dorset businesses and young people are as innovative and motivated as ever and they will be able to grasp the opportunities that still exist in a changing economy. This has been a long “Economic Story” to wind up 2012. For now, Merry Christmas and a Happy New Year to all.
Professor Nigel Jump, 14th December 2012
