Insight on 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
At long last, in response to the requirements of the Allsopp Commission of 2003 and, perhaps more pertinently, to meet EU requirements by 2017, the ONS has started to release experimental statistics on real growth at a sub-regional level. (Those who are technically interested should refer to the ONS Real GVA release of 31st January 2014). When finally approved and released, this new data will fill an important gap in the local economic evidence base, providing real Gross Value Added (GVA) statistics at a more local level. By giving information about the real levels and trends in production-based economic activity, it should be as important as the real GDP releases at a national level for local policy makers, business planners and researchers.
The data that has just come out – for consideration by and comment from users – for the first time, means we have official, albeit experimental, real growth rates for Dorset and Somerset (combined) and can compare these to other similar areas as defined in agreement across the EU. For example, the chart below shows the real growth rates for Dorset and Somerset (D&S – red line) from 1999-2011 and compares these with our immediate neighbours Gloucestershire, Wiltshire, Bristol and Bath (GWBB – blue line), Hampshire and the Isle of Wight (H&IoW – green line) and Devon (purple line)
- The first thing to note is the volatility in these series. These areas do not simply follow the national trend in any particular year through they are constrained by it over the long run. If reliable, they suggest that, within the overall trend of decline to recession and recovery during this period, the best forecast of this year’s D&S growth will often be a change in direction from, last year’s growth.
- Second, the trend data suggests the worst year of the recent downturn for Dorset (and Somerset) was 2010 rather than 2009. Moreover, D&S seems to lag the H&IoW trend by a year from 2006 onwards.
- Third, before the credit crunch, D&S real growth averaged about 3.1% per annum, having peaked at 6% in 2003. It averaged 2.3% per annum over the whole 13-year period, including the recession.
If the current recovery is sustained, it will be interesting to see if we can get back to real growth rates of about 3% per annum, or whether we have to tolerate lower growth rates than before because of the lasting damage of the long downturn, or can economic rebalancing push D&S to even higher rates of growth. This is where the overall economic debate should focus across Dorset in the years ahead. What kind of aspiration for growth fits with a realistic assessment of capacity? What changes do we need to make to ‘raise our long-term competitive game’?
Source ONS experimental 2014
At the moment, the key problems with these new statistics are that they are not totally reliable and they out of date. We need figures for 2012 and 2013 to make them more useful and to be able to forecast well for 2014 and 2015. Still, I expect the series to show a sharp downgrade of D&S’s apparent bounce of 2011 in 2012 to about the zero line and a modest recovery for 2013. This year (2014), we might see a recovery to the 2-4% range. The really interesting question is whether this can then be maintained or accelerated.
The ONS experimental sub-regional, production-based, real GVA estimates may be nothing to get too excited about just yet. As time goes by and the data in this area is improved, however, it will become an important benchmark for those trying to understand and take action in support of local economic development. Something for those concerned with the local economy to watch out for over the coming years.
Professor Nigel Jump, 4th February 2014
