UK Industrial Strategy: Rural opportunities and Challenges March - - PowerPoint PPT Presentation
UK Industrial Strategy: Rural opportunities and Challenges March 2018 Contents National productivity problem Profile of the rural economy 5 foundations of productivity Ideas People Infrastructure Business
March 2018
Source: (map) Centre for Cities Trading Places Why firms locate where they do 2
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70 80 90 100 110 120 130 2000 Q1 2001 Q1 2002 Q1 2003 Q1 2004 Q1 2005 Q1 2006 Q1 2007 Q1 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017 Q1
Output per Hour, Actual vs Trend
Output per hour Output per hour (trend) 80 90 100 110 120 130 140 Germany US UK Japan
Index of GDP per hour worked (2016, UK =100 )
‘gap’ ‘puzzle’
Source: ONS International Comparisons of Productivity, ONS Labour Productivity Introduction
The UK has a longstanding productivity gap with its major competitors Added to which since the financial crisis UK productivity growth has been sluggish at best – a productivity puzzle
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rural – approximately 17% of the total population.
(2016).
2% of the Gross Value Added of Predominantly Rural areas comes from farming, forestry and fishing.
urban areas (excluding London) but they are smaller.
(2016/17).
Rural areas are places of opportunity. They contribute significantly to national economies and provide a range of goods, services and amenities that are essential to collective prosperity and well-being
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England and predominantly rural areas generate approximately a sixth of the total economic activity.
(enterprises) registered in rural areas, accounting for 24 per cent of all registered businesses in England.
population is higher in predominantly rural areas (450 per 10,000 population in 2016) than in predominantly urban areas (excluding London) (380 per 10,000 population).
Rural areas generate approximately a sixth of the total economic activity
100 120 140 160 180 200 220 240 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
GVA growth in England (index)
Rural Urban with Significant Rural London Predominantly urban excl London 44.5 27.3 16.4 11.9
Proportion of total GVA
Source: ONS Regional gross value added (balanced) by local authority in the UK; House of Lords Rural Economy: Key Statistics and Recent Developments; European Network for Rural Development, 2014-2020 RDP: Key facts and figures; Defra Statistical digest of Rural England Feb 2018
Source: Defra Statistical Digest of Rural England February 2018 7
identified as predominantly rural – approximately 17% of the total population.
urban areas. Just over 45 per cent of those living in rural areas are aged below 45 years, compared with almost 60 per cent in urban areas
Rural areas are home to more people than London but demography poses a challenge
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Although the UK rural-urban gap narrows when London is removed, there exist inequalities within rural communities and between rural communities and their urban counterparts. There is an opportunity to help increase UK productivity and reduce inequality through investment in boosting productivity in rural communities. Rural communities are less productive than both their rural equivalents in Europe and urban ones in the UK
£32.86 and in predominantly rural areas it was £28.60, 13% lower.
areas, at £124,000 compared to £194,000 in urban areas. although this gap narrows if London is excluded.
to similarly defined areas across the EU.
50 100 150 Average turnover per enterprise Average turnover per person employed £000s
Business performance - England = 100
Rural Urban
Source: ONS Labour Productivity (GVA per hour worked), 2015; Defra Statistical digest of Rural England Feb 2018
GVA per workforce job (£), by Local Authority Classification, 2001 – 2016 (provisional)
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The rural economy is diverse. Whilst agriculture contributes around 2% of the Gross Value Added of Predominantly Rural areas, 85% of rural businesses are unrelated to agriculture, forestry and fishing
Output per hour, Broad Sectors (2014, €)
Source: ONS International Comparisons of Labour Productivity by Industry: 2014; Defra Statistical Digest of Rural England, February 2018
Source: Defra Statistical Digest of Rural England February 2018 10
areas were in employment compared with 74.9% of those living in urban settlements.
rural areas were unemployed compared with 4.8% in urban areas.
economically inactive compared to 22.4 in urban areas. Historically, labour market conditions have been more favourable in rural areas, and that continues to be the case…
Proportion of working are population who were economically inactive, 2016 Employment as a percentage of working age population, 2016
Source: Defra Statistical Digest of Rural England February 2018; JRP A minimum income standard for rural households Nov 2010 11
Lower productivity is reflected in lower wages: workplace based earnings are lower in rural areas than urban ones
lower in predominantly rural areas, compared with predominantly urban areas (excluding London) in 2017.
rural areas. These costs are 10-20% higher than in urban areas, meaning higher income is needed for the same standard of living.
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“Some of the biggest economic
United Kingdom”
Industrial Strategy, Rt Hon Greg Clark MP
The Industrial Strategy sets out how we are building a Britain fit for the future – how we will help businesses create better, higher-paying jobs in every part of the United Kingdom with investment in the skills, industries and infrastructure of the
the opportunity of technological change.
Source: Industrial Strategy: Building a Britain fir for the future
Source: Industrial Strategy: Building a Britain fir for the future 14
Our Industrial Strategy is built on 5 foundations:
businesses, including a new £2.5bn Investment Fund
In order to foster innovation the Industrial Strategy aims to: i. Increase the total R&D spending in the economy, ii. Improve the ability to turn exciting ideas into commercial products, iii. Build research and innovation excellence across the UK, iv. Ensure the UK remains a world leader in global science and innovation
Source: Industrial Strategy: Building a Britain fir for the future 15
Innovation is about new ideas, new products and services, new technologies and new business models. Innovative economies tend to be more productive, therefore, enjoy higher standard of living. This is because innovative solution remove or limit
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Source: ONS Statistical Digest of Rural England, February 2018
Capital investment per employee by LA classification in England, 2007-2013
Across a range of measures, the scale of rural innovation tends to be smaller Overall capital investment per employee in predominantly rural areas is lower than in other areas. In 2013, investment per head in predominantly rural areas was £3,100, less than urban areas even when London is excluded (£3,600).
Obstacles to rural innovation
knowledge transfers more difficult
are also smaller which often means that their
innovate is smaller than that of their urban counterparts.
and the relative thinness of business networks can constrain the ability of business managers to access sources of commercial and technical ‘know-how’ as well as limit their ability to track emerging market opportunities and trends.
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The challenge of stimulating innovation in rural areas
A study has examined the rates of innovative activity of small and medium-sized enterprises (SMEs) in central areas and equally developed but less accessible areas in six European Union member states. The study results suggest that the probability of innovating is well predicted by the observable characteristics of firms, entrepreneurial characteristics, and business networks. More accessible areas consistently present higher rates of innovative activity than do their peripheral counterparts. The difference in the rates of peripheral and central areas is decomposed into observable and non-observable factors. The entire innovation gap is attributed to non-observable factors that constitute a combination
businesses' specific needs (firm-specific factors) and to sustain and improve the innovative environment. Source: Innovation and Peripherality: An Empirical Comparative Study of SMEs in Six European Union Member Countries
Source: Industrial Strategy: Building a Britain fir for the future 18
The Industrial Strategy aims to: i. Improve the quality and reputation of technical education, ii. Tackle shortages of STEM skills, iii. Tackle entrenched regional disparities in education and skill levels iv. Ensure that everyone has an opportunity to enter into and progress at work and through the education and training system Despite the strong employment record and a world class higher education system the UK faces challenges around insufficient provision of talent, skills and labour. Across the country there is a shortage of people skilled in science, technology, engineering and maths. These skills are essential for the economy as it adapts new generation technologies. The ability to improve skills throughout people’s lives is key to increasing their earning power and to finding better jobs
Issues in rural areas relate to skill provision, skill retention and identification of what the skill needs of rural businesses are
Source: Defra Statistical Digest of Rural England, February 2018; NOMIS Annual Population Survey, 2016; The South West Productivity Commission Evidence Report 2017 19
population with higher-level qualifications. 33% of residents in predominantly urban areas had a degree level or higher qualification in 2016. This is compared with 27% in predominantly rural areas.
more hard-to-fill vacancies than urban areas. These are considered to arise from the relative thinness
The problem can be compounded by relatively high housing costs which can deter people considering relocation.
Vision and Objectives
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Source: Industrial Strategy: Building a Britain fir for the future
greater set of options, leading to better matching of workers to jobs.
may deter people from relocating.
means that both occupational and industrial immobility constraints can occur.
“Skills Advisory Panels will be a key factor of local influence in ensuring the supply of skills to an area.”
What positive role can older people in the workplace play? How will a new immigration policy impact rural labour force? How can younger people encouraged to take up opportunities in the land based sector? Is there a need to consider the specific housing needs of key workers?
Source: Industrial Strategy: Building a Britain fir for the future 21
The Industrial Strategy aims to: i. Support other aims of the IS including innovation, skills, business growth, higher productivity and earning power ii. Make sure that infrastructure investment drives economic
iii. Increase the long-tern UK competitiveness Good quality infrastructure is crucial to support the long-term productivity and to make the UK an attractive investment
Digital technologies, such as full fibre broadband play a significant role in the vision laid out in the White Paper
National Productivity Investment Fund allocations to date:
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and business networks that are dispersed across a large area means that rural communities are especially reliant on functioning and effective infrastructure, which does not in many cases exist.
connectivity, can help to mitigate the challenges of operating in dispersed economic geographies.
more jobs from rural areas is double the equivalent from urban areas, reducing access to the labour market from rural areas. For workers, this reduces the pool of available jobs and reduces their job options.
premises in the UK’s rural areas cannot receive download speed of at least 10Mbit/s and an upload speed of at least 1Mbit/s compared to just 2% or 373,500 in urban areas. Only two-thirds of rural premises in the UK have access to superfast broadband.
[1] Defra Statistical Digest of Rural England [2] The South West Productivity Commission Evidence Report 2017
Table: Superfast broadband coverage
Given their often geographically dispersed nature, infrastructure is particularly important in rural communities
Source: Industrial Strategy: Building a Britain fir for the future 23
and rural communities. The Rebalancing Toolkit announced in the White Paper will provide a framework to support high value transport investments in less productive parts of the UK.
provide 95 per cent of UK premises with access to superfast broadband by the end of this year, the IS pledges to provide reliable full-fibre connectivity to UK towns, cities and rural areas.
commercial telecoms network providers to build more full-fibre connections to homes and businesses across the UK.
“We will invest in ways that support all the objectives of the Industrial Strategy: increasing innovation, developing skills, growing business, and driving productivity and earning power in urban and rural places across the UK.”
Source: Industrial Strategy: Building a Britain fir for the future 24
The Industrial Strategy aims to: i. Unlock new investment and support patient investing ii. Increase the diffusion of best practice iii. Support businesses to access international markets iv. Maintaining good quality competition, legal and regulatory frameworks v. Promote sector deals Our Industrial Strategy aims to make Britain the best place to start and grow a business, and a global draw for the most innovative
Source: Defra Statistical Digest of Rural England, February 2018 25
communities have a higher number of businesses per person than urban areas, with a higher number of small businesses.
employed by SMEs, compared with 41% in urban areas.
the SME category. 29% of people employed in rural areas work in businesses with 1-9 employees, compared with 19% in urban areas.
communities, meeting the requirements of SMEs, as well as larger enterprises, needs to be an integral part of the Industrial Strategy. Rural businesses tend to be smaller than urban ones, which presents specific challenges particularly for accessing finance
the needs of rural businesses on the part of the banking system. This has impaired the ability of businesses to invest in training and equipment and thus impacting on their ability to improve productivity.
Source: Industrial Strategy: Building a Britain fir for the future 26
“Some of the biggest opportunities for raising productivity comes from sectors of the economy that have lower average productivity levels, but where many people work and which are vital to our economy. We will work closely with those to progressively drive up the earning power of people employed in these industries, to help enhance national productivity.”
The Government acknowledges the vital contribution SMEs make to productivity and that more needs to be done to increase the number of businesses that achieve their full potential, including the need to make it easier for businesses of any size, in any location, to access finance. The Government is committed to promoting investment in all parts of the country by:
developing clusters of business angels outside London
across the UK know how to access sources of investment It is committed to helping smaller businesses assert themselves amid the larger players in the
Small Businesses, to set up the first Small Business Commissioner. The remit includes helping small businesses on payment issues, dispute resolution and sourcing advice.
Source: Cambridge Econometrics, European Regional Data Base. Cited in ‘Spatially Rebalancing the UK Economy: Towards a New Policy Model?’, Martin, Pike, Tyler, Gardiner. Regional Studies 2016, 50(2), 342-257 27
The Industrial Strategy aims to: i. Strengthening local leadership ii. Encouraging collaboration across local authorities to promote more effective economic governance iii. Making sure that ideas, infrastructure and people policies have a local dimension.
The UK has greater disparities in regional productivity than other European countries.
Every region in the UK has a role to play in boosting the national economy, driven by local leadership and ambitious visions for the
0.05 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 UK Belgium Germany Italy Netherlands France Spain Greece EU-15
Spatial Imbalance in Selected EU Countries: Coefficient of Variation in Regional GDP per Capita, (NUTS2 Regions)
1980 2001 2011
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Industrial policy needs to be place-based
Whilst rural areas face common challenges, there isn’t a singular ‘rural economy’. Rural economies are very diverse, influenced by natural capital, geography and industrial history. They range from Cornish coastal villages to remote Cumbrian farming hamlets and from prosperous market towns to deprived post-industrial
closer to large centres of population. Each place therefore need a bespoke response. Local Industrial Strategies will:
competitiveness.
private sector. Local Enterprise Partnerships are core to the Industrial Strategy and aims to ensure that local areas are more involved in making decisions on policies that affect them. The Strategy also champions collaboration between local areas. The South West Rural Commission – a partnership of 4 LEPs – is an example of how rural areas can benefit from intra- regional cooperation.
Source: The South West Rural Productivity Commission Evidence Report 2017; Industrial Strategy: Building a Britain fir for the future
Our analysis finds that:
services and amenities that are essential to collective prosperity and well-being. They also face potentially significant changes in the near future.
than both their rural equivalents in Europe and urban ones in the UK, although the latter gap narrows when London is
There is an opportunity to help increase UK productivity and reduce inequality through investment in boosting productivity in rural communities.
these issues. Connectivity, problems reaching critical mass and higher costs of delivery all impact upon rural communities’ ability to increase productivity and reduce inequality.
place-based solutions. Such approaches can help to ensure that rural regions make the greatest contribution to national prosperity and well-being so that all rural people have the opportunity to participate in a growing economy.
common challenges. Connectivity (digital, mobile, transport), access to skills, access to business support services including finance .
remain a number of risks to the downside. Underlying risk factors include housing affordability, transport and an ageing
the reliance of agriculture on migrant workers.
issues holding rural areas back.
give a voice to local areas and increase their involvement in shaping policies that affect them.
companies – a commitment reiterated by the Chancellor of the Exchequer in the 2018 Spring Statement.
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There are many ways for places to work with Government on their priorities and put themselves on the front foot for future collaboration on Local Industrial Strategies. Places without a commitment should focus on:
strengths, challenges and opportunities. This should be developed with businesses, the third sector and communities.
strengths are, where it wants to be in 2030 and beyond, and the kinds of interventions that could unlock growth.
(e.g. Skills Advisory Panels, Digital Skills Partnerships) in place.
Strength in Places Fund, Transforming Cities Fund) and how they might be complemented by local investments.
an open offer to places e.g. Housing Deals, contributing the ‘place’ element
Midlands Engine, Northern Powerhouse, South West Rural Productivity Commission.
Source: www.gov.uk Spring Statement 2018; ONS Exploring labour productivity in rural and urban areas in Great Britain: 2014 32
Announced as part of the UK’s Industrial Strategy white paper, the Government has launched the Long Tail Productivity Review that will explore what actions could be most effective in improving the productivity and growth of SMEs, including improving how we spread the best practise of our most productive firms.
UK has a longer productivity distribution than other countries; this includes a ‘long tail’ of lower productivity firms.
tail, the government is looking to further develop its understanding of the principal drivers for both low and high productivity firms in the UK.
announced in the Chancellor’s Spring Statement 2018, to give everyone across the country the chance to tell us their views, and the government will report on progress for the Long Tail Productivity Review in the Autumn.
“We will launch a Call for Evidence to understand how best we can help the UK’s least productive businesses to learn from, and catch-up with the most productive.”
Chancellor of the Exchequer, Rt Hon Phillip Hammond MP
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Clean growth We will maximise the advantages for UK industry from the global shift to clean growth Growing the AI & Data-driven Economy We will put the UK at the forefront of the artificial intelligence (AI) and data revolution The Future of Mobility We will become a world leader in the way people, goods and services move Ageing society We will harness the power of innovation to help meet the needs
Four Grand Challenges areas were identified using five key criteria: 1. critical to the future global economy 2. existing UK strengths 3. clear market opportunities to boost productivity 4. coordination and market failures 5. societal benefits to be realised Alongside the five foundations, there were four Grand Challenges named in the White Paper which aim to put the UK at the forefront of the industries of the future For further information or to submit ideas contact: grandchallenges@beis.gov.uk The independent Industrial Strategy Council will assess our progress and make recommendations to Government.
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For further information please contact: Andrew.paterson@beis.gov.uk
For further information please contact frostphillimore@defra.gsi.gov.uk
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as agricultural land.
12.3 percent of the Scottish population lived in small towns (under 10,000 inhabitants), while 18.5 percent were living in rural areas (under 3,000).
enterprises - 35% of all enterprises in Scotland.
Scotland
agricultural land comprises 67.1% of the total
population of Wales lived in urban areas, while 32.8 percent lived in rural areas.
Wales.
45% of all businesses in the country.
population—live in rural areas, compared to 63 percent who live in mainly urban areas
percent of all VAT and/or PAYE registered businesses in Northern Ireland, the largest proportion of businesses according to Northern Ireland’s Inter Departmental Business Register
was the largest industry group in all local government districts.
Sources: House of Lords Library Note Rural Economy; NI Department for Agriculture, Environment and Rural Affairs; The European Network for Rural Development 2014-2020 Rural Development Programme Fact and Figures; The Scottish Government Rural Scotland Key Facts 2015
Wales Northern Ireland