Graduate ‘brain drain’ – is regional economic growth the solution?

college graduates groupBy Heather Cameron

With the economic performance of cities and regions increasingly reliant on the skills of their workforce, the longstanding issue of graduate ‘brain drain’ to London and the south is something that needs to be addressed.

Although students attend many of the universities spread across the country, a significant number of graduates flock towards the capital at the end of their studies. According to a recent report from Centre for Cities, this deprives other cities of skilled workers and essentially damages the overall economy.

The evidence

A quarter of all new graduates in 2014 and 2015 were found to have moved to work in London within the six months of finishing their degree. And the highest achievers make up a significant proportion. While London accounts for around 19% of all jobs, of the graduates that moved city six months after graduation London employed 22% of all working new graduates, and 38% of those with a first or upper second class degree from a Russell Group university.

Although most cities experience an overall graduate gain, cities outside London don’t retain the majority of students that move to their city to study – the ‘bouncers’ that drive the brain drain overall, overshadowing any gain:

  • Manchester lost 67% of these students upon graduation;
  • Birmingham lost 76%; and
  • Southampton lost 86%.

Other figures show that 310,000 graduates have left the north in the past decade, contributing to a net average deficit of 7,500 highly qualified workers leaving annually, or 75,500 over a decade.

Northern regions have to some extent offset the effect of local brain drain by attracting enough highly qualified foreign workers to fill the gap. But with reductions in immigration, these regions could be left lacking.

Given the UK’s current position regarding the EU, concerns have also been raised over whether Britain faces a further brain drain of academics to Europe, following Brexit. A recent survey highlighted that 42% of academics said they are more likely to consider leaving Britain after the vote to leave.

Why?

While it may seem plausible to assume that higher salaries are the reason for this brain drain, it appears that the main pull for graduates is the availability of jobs and career progression, which London’s vast labour market offers.

However, as recent research from Homes for the North has identified, these are not the only reasons. It highlights the importance of additional non-work drivers of graduate location decisions, including the cost and quality of housing, quality of local amenities and the prospect of home ownership.

Of the graduates polled, 80% said the quality of housing was important, while more than 60% said the cost of housing was important. The quality of green spaces and local amenities was also deemed important by over 60% of graduates.

What can be done to redress the balance?

There have been numerous graduate retention initiatives at the local and regional level aimed at tackling the uneven distribution of graduates, such as graduate wage subsidies and local graduate job matching.  But it seems little has improved. The Centre for Cities research argues that these alone will not tackle the root cause of the graduate brain drain.

It suggests that cities themselves have a vital role to play in ensuring the local job market offers an appropriate number of graduate job opportunities that will allow them to both retain graduates and attract graduates from elsewhere. Policy should therefore broaden its focus to improve local economies by investing in transport, housing and enterprise, rather than focusing solely on graduate retention and attraction policies.

The chief executive of the Centre for Cities commented that the government’s new economic and industrial strategy should be used to strengthen existing devolution deals for city-regions such as Greater Manchester, extending their scope to grow.

Indeed, the industrial strategy green paper, published in January, clearly places emphasis on addressing the economic imbalances across the UK through a number of measures, such as working with local areas to close the skills gap, including new schemes to support the retention and attraction of graduates. However, the strategy has been criticised for providing little clarity on how regional rebalancing and sectoral deals will work in practice.

Final thoughts

While it appears clear that cities outside London need to improve their graduate offer with better job prospects, the evidence on graduate migration suggests it is more complex than this.

As has been argued, the provision of good quality affordable housing could play a role alongside high-skilled job creation and opportunities. With the cost of living in London so expensive, this would make sense, particularly as the average graduate salary in London is not that much higher than the average across other UK cities.


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Managing growth in historic towns

canterbury cathedral

By Heather Cameron

Predominantly set within environmentally attractive surroundings, historic towns and cities have a strong sense of place, offer a good quality of life, are often prosperous and represent models of sustainable development.

Research shows that businesses based in older places are more productive than the average for all commercial businesses across the whole economy. Retail and leisure businesses often seek to cluster in historic areas of towns and cities, and historic buildings are particularly attractive to new business start-ups, especially in the creative and cultural sector. Well-maintained historic places also enhance cultural life and community resilience.

As a result, historic towns are much sought after places to live and work, which has contributed to unprecedented growth.

Growth pressures

While growth is seen as a good thing for the future of town centres, managing it effectively in these areas of historic importance is not without its challenges. Older townscapes and buildings are a valuable and irreplaceable community asset that need to be protected.

Growth in historic towns creates pressure for new housing and development, and the infrastructure that is needed alongside it. It can also lead to increased congestion and depletion of suburban quality through redevelopment and loss of garden space. The traditional infrastructure in these towns may not be able cope with the increased capacity resulting in demand for suitable adaptation.

Managing these growth pressures is a particular challenge for historic towns as they need to try and meet local development need while both conserving the identity and sense of place of the existing town and nurturing the creation of sustainable new communities within them.

The Historic Towns Forum has highlighted that “there are challenges of infrastructure, partnership working, working with major national developers, the tension between modernity and pastiche and how to learn from the past and the present when building at this scale.”

In addition, the main political priority across all areas is economic wellbeing, taking precedence over any heritage considerations. A report from Green Balance in 2014 found that this principle concern was interpreted differently from place to place, with some local councillors viewing heritage as beneficial to a town’s economic and social wellbeing, while others viewed it is a burden and drag on investment.

As the heritage of places can be a particular pull for tourism, not preserving them could lead to a loss in economic wellbeing. The importance of achieving the right balance between sustainable development and heritage conservation is a theme that has been consistently highlighted in the research.

Smarter growth

So how do such places manage growth while also safeguarding both the character of the towns themselves and the settings around them?

According to the Historic Towns Forum, key issues in effectively addressing growth pressures in historic towns include:

  • planning and process;
  • partnerships;
  • finance and economics;
  • climate change;
  • community benefits and community engagement;
  • design; and
  • learning from the past and present.

It has been argued that a strategic approach to growth needs to be taken, such as the approach taken in Cambridge, where the Cambridgeshire Quality Charter for Growth is being used to help steer the creation of high quality sustainable communities.

Partnerships involving a range of local stakeholders, encompassing a shared vision and cooperation are also important for effective growth. Where strategic resources are lacking, which is often the case in smaller towns, community engagement can be of particular importance, as shown in Cirencester.

Key principles of good design have been highlighted to include:

  • learning from the past, including study of appropriate models;
  • localising by understanding local conditions; and
  • transforming action by applying appropriate, robust advances.

The overarching message seems to be that ‘smarter growth’ is required.

Good practice

There are examples of good practice where historic towns are managing growth in a way that protects their heritage. Cambridge, as mentioned previously, is one example. Sutton is another, where the challenges of growth are being addressed through the use of a Heritage Action Zone. The aim here is to balance growth with the management of heritage assets, providing lessons for elsewhere.

It is also important to look further afield. The historic town of Amersfoort in the Netherlands has been presented as a good model for managing housing growth to achieve attractive new settlements and create balanced communities. It has been suggested that this smarter approach is something that historic towns in the UK can learn from.

Another good example is Freiburg in Germany. Although different in terms of development to Britain, some of the issues applicable to British towns and cities have been addressed – including how to attract families to live at higher densities close enough to city centres to avoid car dependency.

As Historic England states:

“Learning is central to sustaining the historic environment. It raises people’s awareness and understanding of their heritage, including the varied ways in which its values are perceived by different generations and communities. It encourages informed and active participation in caring for the historic environment.”


If you enjoyed this blog post, why not read are previous posts on the civic use of heritage assets and the value of preserving our built heritage.

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Is the record high employment rate masking the reality of in-work poverty?

wage-packetBy Heather Cameron

The employment rate may have hit a record high of 74.6%, with unemployment continuing to run at an 11-year low, but in-work poverty has also reached unprecedented levels.

More than half (55%) of people in poverty are living in working households, including millions of children, according to the latest Monitoring poverty and social exclusion (MPSE) report.

And new research for the Joseph Rowntree Foundation (JRF) published last week says four million more people are living below an adequate standard of living and ‘just managing’ at best.

Statistics

The findings of MPSE paint a bleak picture for a substantial share of the UK population. It notes that the proportion of the UK population living in poverty has barely changed since 2002/03, remaining at around 21%. And at 55%, those in poverty in working households has reached its highest level since the data set began in 1994/95.

Of this 55%, four fifths of the adults in these families are themselves working – a total of 3.8 million workers were living in poverty in 2014/15, an increase of around a million since 2004/05.

Female employees make up the single largest group within this group at 1.5 million, followed by male employees at 1.4 million. However, the majority of workers in in-work poverty are male (53%) as there were 620,000 male self-employed workers in poverty in 2014/15, while there were 250,000 female self-employed workers.

The story is different for workless households, however, as the proportion of people in poverty in these households has decreased, with the number in workless or retired families having fallen by half a million. Despite the significant increase in the number of people aged 65 and over, the figures show there are 400,000 fewer pensioners in poverty. There have also been reductions in the number of children in workless households.

While this is clearly encouraging, as the MPSE report suggests, it is difficult to categorise this as progress since there has been little change in the relative poverty measure overall.

Moreover, the new research from JRF warns that millions of just managing families are on the tipping point of falling into poverty as 30% of the population are living below the minimum income standard (MIS). In addition, 11 million people were found to be living far short of MIS, up from 9.1 million, who have incomes below 75% of the standard.

So what is causing these worrying statistics?

Contributory factors

The labour market has undoubtedly had some influence on these figures, with low wages and insecurity. Although average incomes have begun to rise, they are still below their peak. Male weekly earnings are still lower than 2005 levels and female weekly earnings, although now equal to 2005 levels, are still below what they were in 2010.  And with inflation expected to return, it has been suggested that hourly pay is unlikely to reach its pre-recession peak before 2020.

However, this is only part of the issue. There are also a number of other contributory factors, including:

  • increasing cost of living;
  • housing market failures; and
  • cuts in welfare benefits.

The increase in numbers living below an adequate standard of living has been driven by rising living costs while incomes stagnate. The price of a minimum ‘basket of goods’ has risen 27-30% since 2008, and average earnings by only half of this. The JRF analysis suggests the cost of living could be 10% higher by 2020, a period when much state support has been frozen.

Housing is also an important factor. It is often too expensive and of poor quality, particularly in the private rented sector. The MPSE findings show that the number of private renters in poverty has doubled over the last decade, with rent accounting for at least a third of income for more than 70% of private renters in poverty.

Households accepted as homeless and those in temporary accommodation have also increased and landlord evictions are close to a ten-year high.

Added to this, is the four-year freeze on benefits, tax credits and Universal Credit (UC), along with a reduction in the overall benefit cap. The benefit cap mainly affects households with children and will increase the number of families affected, from 20,000 to 112,000.

All this puts those on the lowest incomes at risk.

Way forward

Clearly, strong growth in the number of people in employment does not mean an end to employment-related disadvantage.

To help end poverty, the JRF has called on the government to make a number of changes, including:

  • reversing cuts to the amount people can earn before their benefits are reduced;
  • ending the freeze on working age benefits;
  • extending support to low wage sectors to reduce the productivity gap; and
  • investing in a living rents scheme to provide more affordable housing.

As the MPSE report concludes, “solutions for in-work poverty require more than just more work.”


If you enjoyed reading this, you may also like our previous articles on poverty.

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‘Olderpreneurs’ – the new generation of start-ups?

Senior Man on Laptop_Fotolia_61314537_XXL.jpg

By Heather Cameron

Entrepreneurs are often portrayed as bright young things launching start-ups, but does the reality of start-up demographics paint a different picture?

Changing demographics

The UK has certainly witnessed a boom in young entrepreneurship in recent years – the number of under-35s starting businesses in the UK rose by more than 70% between 2006 and 2014.

However, recent research suggests that the boom in young entrepreneurs may be waning. According to research commissioned by Google earlier this year, the majority of young people are “not interested” in starting a business, with four out of five young people surveyed saying they would rather work for a well-established company. Particular concerns were also highlighted over risk and instability.

The UK is, however, still ranked in the top 10 countries with the most favourable conditions for entrepreneurs to start and scale new businesses. And official data suggests that the UK continues to see record numbers of business start-ups, exceeding 600,000 in 2015, up on the previous two years.

So if it isn’t the younger generation heading up this record number, who is it?

‘Olderpreneurs’

Despite media coverage of the entrepreneurial spirit of the younger generation, the average age of an entrepreneur in the UK has actually been estimated at 47.

And according to the latest data from the Global Entrepreneurship Monitor (GEM), the most notable increase in entrepreneurial activity has been amongst the over 50 age group.

Referred to as ‘olderpreneurs’, this group could arguably be the new start-up generation.

There has been a 46.5% increase in freelancers over 50 since 2008, an age group that accounts for 72% of all self-employed people. According to official statistics there are around 1.8 million self-employed people over the age of 50 in the UK.

With an ageing population that is also becoming healthier, perhaps this shouldn’t be such a surprise.

Motivations

Motivations for people starting up their own businesses include redundancy, retirement, family circumstances, growing older and life stage milestones.

As life expectancy increases, many don’t want to give up work at the traditional retirement age, as they still lead active lives. Retirement has been cited as an ‘important tipping point’ for some, with the main motivation not to make money or grow their business, but rather something to keep them occupied or earn some extra money while doing something relatively easy.

The introduction of pension freedoms last year has also led to more over 50s using their pensions to fund new business ventures. The over 55s cashed in more than £4.7billion of their pensions in the first six months after pension freedoms were introduced.

Economic impact

And such activity is good news for the economy. It has been suggested that if the employment rate of 50-64 year olds matched that of the 35-49 age group, the UK economy could be boosted by £88 billion.

Older entrepreneurs have also been shown to be more successful than their younger counterparts. It has been highlighted that businesses run by owner-managers over 50 drive up revenues at their companies three-and-a-half times faster than GDP growth – 11.5% compared with 3.1%.

And older entrepreneurs create jobs at a rate more than seven times faster than the UK economic average.

It has also been suggested by the Prince’s Initiative for Mature Enterprise (PRIME) that start-up failure rates in this age bracket are remarkably low. It recently revealed that 95% of its members were still in business a year or more after starting up, compared to the national average of just 66%.

Final thoughts

A significant percentage of the UK population is past retirement age. And the number of people aged 50 to State Pension age is expected to rise by 3.2 million, while the number aged 16 to 49 will have reduced by 200,000 over the next 10 years.

As a result, keeping this group economically engaged surely has to be a priority.


If you found this article interesting, you may also like to read our previous articles on entrepreneurship and self-employment

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The pros and cons of the gig economy

By Heather Cameron

The ‘gig economy’, also described as the ‘sharing economy’, ‘collaborative economy’ or ‘on-demand economy’, has grown rapidly in the UK, a trend that is predicted to continue amid post-Brexit uncertainty.

A new study from the McKinsey Global Institute suggests that work in the gig economy is even more widespread than official data suggest, with 20-30% of people in the US and UK working independently. And while the report suggests the majority of these workers are participating in the gig economy by choice, a sizable minority are there reluctantly.

So what exactly is the gig economy and what are its benefits and drawbacks?

What is the gig economy?

The gig economy comprises enterprises such as Uber, the driver hire app, Airbnb, the accommodation-sharing platform, and Deliveroo, the online food delivery company. These enterprises enable people to use digital platforms to buy services from, and sell services to, each other.

A recent PwC study identified five key sectors within the gig economy:

  • peer-to-peer accommodation
  • peer-to-peer transportation
  • on-demand household services
  • on-demand professional services
  • collaborative finance

People that work in the gig economy, as described in the McKinsey report, are independent workers, rather than employees. Three key features of these workers have been identified:

  • a high degree of autonomy
  • payment by task, assignment, or sales
  • short-term relationship between the worker and the customer

Growth

The UK has seen higher growth in the gig economy than the rest of Europe, partly due to the recent establishment of London as a global financial technology (FinTech) hub. Transactions reached £7.4bn in 2015, almost double the previous year.

The number of jobs in the online gig economy advertised by UK employers increased by 14% between May and September, according to the Online Labour Index. This is around double the 7.5% rise elsewhere in Europe, and 6% in the US.

The McKinsey research estimates that there are up to 162 million independent workers in the US and Europe combined. The number of people classified as self-employed in the UK has grown by 47% since 2000, while the number of employed has risen by just 13% over the same period.

Pros

Supporters of the gig economy argue that it enables more people to participate in the labour market by providing flexible working, provides opportunities for the unemployed and could increase productivity.

Indeed, flexible working has proven very popular among the working population as more seek to achieve the perfect work-life balance. Those surveyed for the McKinsey report who chose independent work, reported greater satisfaction with their lives than traditional workers. They were more engaged in their work, and relished the chance to be their own boss and have more control over their hours. Even those working independently out of necessity reported being happier with the flexibility and content of the work they do, although they were less satisfied with their level of income and income security.

Both consumers and organisations can benefit through greater availability and accessibility of services and improved matching that better fulfils their needs.

And there is also the benefit of minimal cost. Digital business models have lower transaction costs for consumers, and organisations can keep costs down by using independent service providers only when they need them.

Nevertheless, challenges exist.

Cons

While there are more people in work than ever before, due in large part to the increase in self-employment, and despite the high levels of satisfaction among independent workers overall, there are concerns over job insecurity and low income.

Those working in the gig economy do not enjoy the same rights and protections as employed workers, such as health benefits, overtime pay and sick leave pay.

The TUC has highlighted that the increase in self-employment has not been driven by a boom in entrepreneurship but, instead, workers are increasingly forced by employers to accept precarious employment with low pay.

Deliveroo has recently come under fire from workers over their employment practices in relation to the minimum wage. And Uber is involved in an employment tribunal where drivers have contested their status as self-employed, suggesting they should be entitled to a range of benefits such as pension contributions as well as holiday and sick pay.

In a bid to address concerns about the lack of rights held by people working in the gig economy, Theresa May has recently appointed a former adviser of Tony Blair to head a review into employment rights across the new economy.

But this will be no easy feat, as the rapid development of the gig economy poses significant challenges for policy makers and regulators to keep up.

Final thoughts

As the McKinsey report argues, “expanding economic opportunities and income security policies for this group should be a priority”. Hopefully the review of employment rights will mark the first step in the right direction.


If you enjoyed reading this, you may also be interested in our previous blog on ‘the self-employment boom.

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Gigabit cities: laying the foundations for the information society

Man sitting at a desk, with stars and nebula's behind him

By Steven McGinty

According to the Foundation for Information Society Policy (FISP), an independent think tank, London’s poor broadband infrastructure will threaten the capital’s ability to compete with other global cities in the future.

David Brunnen, FISP member and an independent telecoms infrastructure expert, explains that although demand for broadband is growing rapidly, the capital still relies mostly on networks of copper wires, which Tech City have described as ‘not fit for purpose’.

The solution, the foundation advocates, is to create a new infrastructure agency, Digital for Londoners (DfL), to ensure that London becomes a ‘Gigabit City’ by 2020.

What are gigabit cities?

In simple terms, gigabit cites provide citizens, business and governments with access to gigabit internet services (1,000 megabits per second or higher). By replacing old copper cables for pure fibre infrastructure, cities can enable public services to take advantage of technology, support businesses to innovate, and improve the lives of citizens. As US President Barack Obama explains, ‘it’s like unleashing a tornado of innovation’.

In the UK, CityFibre, is the main provider of Gigabit Cities. Their network covers 40 cities, including Glasgow and Bristol, across major data centres and busy internet traffic points, and provides 260,000 businesses and 3.7 million homes with gigabit broadband.

On 22nd September 2016, Northampton became the latest UK gigabit city. In an agreement between CityFibre and dbfb, a Northampton-based business internet service provider, businesses will now receive internet speeds of up to 100 times faster than the UK’s average. Paul Griffiths, from Northamptonshire Chamber of Commerce, highlights that this investment will play an important role for start-up businesses competing globally.

The initiative will also help Northampton County Council achieve their target of making gigabit broadband available, countywide, by the end of 2017.

Chattanooga

In 2010, Chattanooga, Tennessee, became one of the first cities to make gigabit connectivity widely available. Its mayor, Andy Berke, has described its introduction as a significant source of the city’s economic renewal.

Gigabit broadband has allowed a tech industry to emerge from a city more commonly associated with heavy manufacturing. Tech companies and investment have been drawn by the ‘The Gig’ – the local name for the network – resulting in the conversion of former factory buildings into flats, open-space offices, restaurants and shops. In the past three years, the city’s unemployment rate has dropped from 7.8% to 4.1%. The mayor has also linked the city’s wage growth to jobs in the technology sector.

‘The Gig’ was funded by a combination of public and private investment. EPB, the city-owned utility company, borrowed $219 million and received a $111 million grant from the US Government. This government-led approach has given Chattanooga broadband speeds greater than Google Fibre, a major gigabit broadband provider. Wired magazine suggests that government involvement raises expectations, and encourages commercial providers to improve their infrastructure.

Stokab, Stockholm

The Stockholm city government have one of the oldest gigabit strategies, founding the private company, Stokab, to deploy and manage their city-wide fibre network in 1994. Stokab was created to help the city benefit from the new digital era by limiting multiple network deployments, and by stimulating the technology sector.  The end-to-end fibre broadband network serves 700 service provider businesses and connects 90% of residential premises.

The gigabit network has provided a wide variety of economic benefits, including:

  • becoming a catalyst for the technology sector (The Kista Science Park has over 1000 technology businesses, with 24,000 employees)
  • creating growth and jobs valued at €900 million
  • providing low cost broadband services to business – through increased competition – has resulted in an estimated €8.5 million worth of savings
  • increasing housing values by €200 million and rental values by €3.5 million per year

Digital inclusion

Although gigabit broadband could create limitless opportunities, it also has the potential to exacerbate existing inequalities. Citizens, and even small businesses, could lose out if they don’t have the skills or technologies to access the internet.

Salford Council realises the important role technology plays in creating vibrant communities. As part of their rollout of gigabit broadband services across social housing, the council are introducing a digital skills campaign to encourage more residents online. Volunteers are being recruited to assist neighbours who are less digitally savvy. As encouragement, they are being offered a free IPad and a free broadband service, if they train more than 20 people a year.

Final thoughts

To compete globally, cities will be looking to introduce gigabit broadband infrastructure. London, as a global technology hub and a key driver for growth across the UK, will need to invest in order to support businesses and meet the expectations of citizens. Government may have to provide greater leadership in order to incentivise private sector involvement. Equally, digital exclusion will need to be tackled, to ensure that everyone can participate in the information society.


Follow us on Twitter to see what developments in public and social policy are interesting our research team. If you found this article interesting, you may also like to read our other smart cities articles. 

The economy and Brexit – what’s next?

money-economics-growth

By Heather Cameron

‘Uncertainty and volatility’ – these were two key terms highlighted at a recent event focusing on the impact of Brexit on the economy, hosted by STEP Stirling.

Following the historic decision of the UK to leave the European Union and all the press that has ensued, it was interesting to hear from experts in the field on what they believe the true impact will be.

Speaker: David Bell, Professor of Economics, University of Stirling

Professor David Bell from Stirling University delivered the first presentation, providing an overview of the key economic implications of Brexit.

David suggested that the negative impacts from a leave vote have not materialised as predicted, noting that “the economics of Brexit has moved at a slower pace than the politics.” Many predicted that there would be an immediate impact on the economy and on consumer confidence, but this hasn’t happened. Retail sales have shown no signs of collapse, with recent research actually showing growth.

Nevertheless, David noted that things were different for businesses, which are experiencing a lot of uncertainty. He indicated that this business uncertainty has dragged UK business output and optimism to a three year low.

What is clear, is that there has been a significant depreciation in Sterling which is unlikely to be reversed in the short to medium term. David considered the implications of this, including that we are poorer, more time will be spent working to benefit smaller businesses, there is lower borrowing costs and it is bad news for pensions.

David also highlighted the issues around the UK’s deficit in goods and surplus in services and trade agreements, which are particularly complicated. To conclude, David acknowledged that negotiations will be difficult and that we will be in the same position for some time to come – with a lot of uncertainty.

Speaker: Craig Wilson, Senior Director Treasury Solutions North England & Scotland at Clydesdale Bank

Following David, was Craig Wilson from the Clydesdale Bank. He considered the impact of Brexit from a financial markets perspective.

To begin, Craig highlighted that what was surprising about the Brexit vote was that ‘the bookies were wrong’, with odds as much as 2/9 suggesting an 82% probability of a remain victory. He noted that the immediate reaction, as similarly highlighted by David, was a drop in Sterling. He said:

“We had a reaction to a recession without the recession taking place.”

Craig also highlighted what has happened since the vote in terms of GBP/Euro stats, interest rate cuts and the price of Brent oil. Interestingly, Brexit hasn’t been shown to have affected commodities as oil prices only dropped slightly and have now increased again.

In agreement with David, Craig argued that there will be a negative impact on the economy in the short to medium term. Economists have cut UK GDP growth going forward to just 1%. Craig suggested that house prices will be important because if they hold up, consumer confidence is likely to remain.

The future, however, was also emphasised as uncertain by Craig. He highlighted that there are lots of variables, both within the UK and abroad, including:

  • UK data
  • Public perception and consumer sentiment
  • Recession?
  • Bank of England monetary policy – will there be more cuts?
  • Negotiations – timing of these, will they be positive or negative?
  • House of Commons/Lords may ignore the vote
  • The US presidential elections
  • US interest rate increases?
  • The Italian debt crisis
  • Emerging markets

In conclusion, Craig suggested the one thing to take away is that so many factors will make the markets volatile.


If you enjoyed reading this, you may also be interested in our other recent blogs on the impact of Brexit:

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Rising household debt: a real risk to the economy?

pink pig and coins

While household debt is still below its pre-crisis levels, it began to rise relative to incomes in early 2015 and remains high by historical and international standards, according to the Bank of England.

With the current uncertainty surrounding the economy following the EU referendum, there are concerns that household indebtedness could present a big risk to the UK economy.

So what do the statistics mean and just what impact could they have on the economy? A recent House of Commons briefing paper highlights the latest statistics and forecasts for household debt in the UK, including international comparisons, and the effects on the economy.

The statistics

The level of household debt more than doubled from £725 billion in early 2000 to £1,600 billion in late 2008. The global financial crisis resulted in a decline in the household debt-to-income ratio, however, from 168% at its peak in early 2008 to just over 140% in recent years. The levels of debt have increased again over the last couple of years, with annual rates of growth of around 3% recorded since 2014.

The Office for Budget Responsibility (OBR) forecasts that the household debt-to-income ratio will increase in coming years, peaking at 167% at the start of 2020, close to the pre-recession peak. However, this has been revised down on earlier forecasts, such as December 2014, when it was forecast to reach just under 184%.

Despite these increases, the costs of household debt is expected to remain low relative to household income, and much lower than pre-recession levels, due to continued low interest rates. As a result, the debt burden is more affordable for households.

Benefits

The negative effects of debt on individuals has been highly publicised, but low levels of household debt can also provide benefits to individuals and the economy, as highlighted in the briefing paper:

“It allows people to buy things, like a house, that they would not be able to pay for in one go, raising their standard of living. In other words, it allows people to smooth their consumption over time, including during periods when their incomes temporarily fall. This can provide stability to the economy.”

Consumer spending can obviously be good news for retailers and the high street and high levels of mortgage approvals is good for the housing market.

The paper highlights evidence that the accumulation of household debt from 1996 to 2003 contributed to economic growth, with indebted households adding roughly 0.35% points a year to overall consumer spending growth of about 4.5% per year over this period. So a total of 2.5% was added to the level of consumer spending from 1996 to 2003.

Nevertheless, higher levels of debt can make households more vulnerable if an economic downturn occurs. And as the briefing paper shows, the households most likely to have debt (excluding mortgages) are those in the lower wealth quintiles – who are already vulnerable.

Economic impact

As the Bank of England has warned, the ability of some households to service their debts would be challenged by a period of weaker employment and income growth, which could have a wider economic impact through reduced expenditure. And higher interest rates may also lead to further reductions.

This could then have a knock-on effect on businesses which, faced with reduced revenues, may have to cut back on costs such as labour costs by reducing wages or the workforce.

Indeed, research on the impact of household debt on the economy highlighted in the briefing paper suggests that large increases in household debt prior to recessions tend to lead to longer and more severe downturns. And this is as a result of households with high debt levels cutting back on their spending by more than other households during and after a recession.

According to a 2012 OECD working paper, high debt levels can create vulnerabilities by impairing the ability of households and companies to smooth their spending and investment.  The paper also found that when household debt levels rise above trend, so does the likelihood of recession.

Other research has also found that large increases in household debt have preceded more severe and protracted recessions. And recovery following a recession was found to be typically slower in countries that carry the legacy of a large private credit boom.

Final thoughts

So it would seem that perhaps a certain extent of household indebtedness is good for individuals and the economy, in terms of maintaining growth. But when it rises above a certain level in relation to incomes, the evidence suggests it becomes a serious concern.

And with the current economic uncertainty, increasing household debt isn’t something to be ignored.


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Women in technology: London Tech Week

From 20-26th June London Tech week will once again be shining a spotlight on all things digital in the UK’s capital. An opportunity to showcase and network, the event will see some of the UK’s biggest tech firms gathering, along with smaller start-ups and keen individuals, to talk all things tech: from enterprise and engagement, to growth and innovation. This year one of the core themes is “talent and inclusion”, with the keynote seminar considering what now seems to many to have become the age old question: what will it take for business to truly take action on diversity within technology, and specifically how can businesses be encouraged to “shift the dial on the gender agenda”?

technology

There have been many studies, blogs, reports and comments about the reasons technology-based careers, or jobs within technology firms seem so inaccessible to women, and chances are many will form the basis of the London Tech Week event discussions.

In the UK today women make up fewer than 30% of the information and communications technologies (ICT) workforce, comprising around 20% of computer graduates and fewer than 10% of app developers. The Lords Select Committee, chaired by Baroness Sally Morgan, produced a report in early 2015: Make or Break: the UKs Digital Future 2015 which urged the UK government to seize the opportunity to secure the UK’s place as a global digital leader by investing in and promoting careers and skill building to try to encourage more young women and girls to consider a career in the tech industry. They state that increasing the number of women working in IT could generate an extra £2.6 billion each year for the UK economy. But just how exactly can women be encouraged to pursue a career in technology? Is it all down to funding or the availability of jobs, or does there need to be a combined approach? The following sections highlight some of the opinions of women who work in the tech industries, and showcase some of the strategies of technology firms to try to diversify their workforce and attract women to a career in technology.

Creating and promoting positive, high profile female role models in the tech sector

As the various magazine polls and top 10 countdowns show, some of the best and brightest minds in the UK tech industry are women. And yet, some girls and young women still feel like the technology world is not open to them. More and more high profile role models may be a way to tackle this – and clearly some do exist – but their profile is limited and more could be done by the industry and the media to promote them in an appropriate way. Similarly, mentoring schemes, like those promoted by Girls In Tech UK, which engages women already in industry by mentoring future tech professionals, could also demonstrate practical ways in which girls can work in a technology based profession.

Emphasising the importance of a female approach to creative technology and technology based problem solving

Women, it is often said in psychology and sociology literature, approach problems in different ways, and will often take a different approach to finding solutions. Including a female perspective brings another set of experiences which can be used to address specific problems. Additionally, the problems women experience are different to those of men and as a result they may allow tech companies to tap into an entirely new market.

Increasing funding and industry promoted schemes specifically to support women entering the tech industry

Although it is recognised that there is still a long way to go, the scope and the space to develop skills within the sector is growing for women. There are many initiatives promoted by large multinationals to encourage more women either to train for a career in tech, or to join their workforce. Many of these employers will be present at tech week but schemes by Microsoft, Apple, Google and Samsung need to have their profiles raised even within the sector; they should also be used as blueprints for others, and act as examples for smaller and medium sized businesses to encourage more women into their workforce.

Marketing a career in tech as desirable

Learning providers should recognise the importance of maintaining relatively low barriers to entry and promoting upskilling and retraining. They should also seek to engage with employers to create easy transition pathways into employment; an almost certain guarantee of employment at the end of a period of training can be a great incentive. Similarly, many courses exist to promote learning and upskilling around the tech sector. These should be made more accessible to women and promoted more widely, as should the availability of grants and additional funding opportunities for women and girls who want to study science, technology, engineering and maths (STEM) subjects.

Education and industry figures should do more to market the tech industry, emphasise the positives and make it an appealing career pathway. Some of the most rewarding aspects of working in the tech sector – problem solving, considering solutions and watching a product develop from start to finish – are not always highlighted as good reasons for joining. Many tech companies also come with a great working ethos. Employees can often work flexibly, or from home, enabling women to maintain a suitable work/life balance, while maintaining their position within the company.

Don’t underestimate the importance of stereotypes and misconceptions

The consistent rhetoric that the tech industry is a “man’s world” can be off-putting for some people; not everyone wants to be a trailblazer within a company. Women’s involvement should be normalised, but so should the language.Talking about women working in tech careers as being unusual can have an effect on the women and their male colleagues. Industry and education both need to be aware of the need to strike a balance between not sounding too complacent about the number of women pursuing careers in tech, and not making too big a deal about women joining the tech industry so as to single them out and place additional pressure on them.

Showing that there’s more to a career in tech than “nerds doing coding”

Careers services and advisers need to be aware that someone who has an interest in STEM (or specifically in technology based subjects) has more career options within the tech sector than “computer coder”. The tech industry is diverse, taking in areas such as social media, gaming, content creation, research and development, digital marketing and product design and development. Technology as an industry also generates products and solutions needed by diverse sectors for their day-to-day business, including health and social care, education, finance, and ICT,

DARPA_Big_DataObviously these are just a few reflections on the literature and some common perceptions of women in the industry. But it is clear that there is a key role for both industry and learning providers in driving the diversity agenda forward.


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Local Enterprise Partnerships – the story so far

 

Business strategyBy Heather Cameron

Following the abolition of the Regional Development Agencies in 2010, 39 local enterprise partnerships (LEPs) were established in England by 2012. Each was designed to represent a functional economic area and steer growth strategically in local communities. These business-led partnerships between the private sector and local authorities are central to government plans for local economic growth.

According to a new report from the National Audit Office (NAO), the role and remit of LEPs has expanded both significantly and rapidly but there are concerns over whether they have the capacity and capability to deliver.

Rapid growth

Since their inception, LEPs have rapidly developed from new start-up organisations to bidders and delivery managers for substantial amounts of national and European funding initiatives to strategic leaders of their local economies.

Between 2010 and 2015 total central government funding directed through LEPs was approximately £1.5 billion. Through the Local Growth Fund, £12 billion will be available from 2015-16 to 2020-21. Growth Deals were agreed with each of the 39 LEPs in 2014, through which £6.3 billion of the Local Growth Fund was allocated. With a further £1 billion allocated in January 2015, the total to date is £7.3 billion. LEPs estimate that the Growth Deals combined will create up to 419,500 jobs and 224,300 housing units.

On the whole, LEPs have been perceived positively and are well established as the main agencies for promoting local growth.

Development has been anything but uniform, however, with a varied pace of evolution. Considering the differing levels of size, urbanisation, population, and existing infrastructure within the LEPs, this is no surprise.

The most advanced LEPs have been identified as those with a history of collaborative working. Greater Manchester leads the way, having already been given powers over skills, welfare and transport, and to be given new powers over the criminal justice system as announced in the 2016 Budget. Greater Manchester has been working in partnership since the 1980s through its local government association, and formally through its Combined Authority since 2011.

And according to a recent Localis report, including London, there are at least a third of LEPs based in and around urban areas which are or could soon be in a position to take on greater powers, with 2017/18 a feasible timeline for them to assume greater powers.

Uncertainty

Despite their rapid development and increased responsibility for substantial amounts of government funding, concerns have been raised over LEPs’ power, resources and accountability.

The NAO report found that only 5% of LEPs agreed that resources available to them are enough to meet government expectations. Additionally, 69% of LEPs reported that they did not have sufficient staff and 28% did not think that they had sufficiently skilled staff.

A survey by the Federation of Small Businesses in 2014 found that: there is a disparity in the levels of funding and capacity across LEPs; a lack of clarity on the remit, purpose and function of LEPs from government has resulted in widespread misunderstanding and friction in practice; and inconsistencies in performance monitoring across LEPs is hampering accountability to local stakeholders and hindering assessment of LEP performance nationally.

Further recent analysis argues that their role and influence are being compromised by a fragmented and changing landscape of economic development governance and the absence of any longer term vision and plan for their evolution.

Given this lack of long term vision and strategy, the fundamental tensions yet to be resolved and their institutional shortfalls and limitations in authority, accountability, capability and resources, the analysis concludes that many LEPs will struggle to exercise substantive influence on economic development at the local level.

Indeed, LEPs reported to the NAO that they were uncertain about their place in the wider devolved landscape. LEPs were also concerned that the government had not made clear their role in economic planning and development as devolution progresses.

Further concerns were raised over funding in terms of pressure to spend their allocation within the year at the risk of not receiving future funding, which could potentially lead to LEPs not funding projects most suited to long-term economic development. And the sustainability of reliance on local authority support at a time of reduced local government funding was another worry.

Future direction

Going forward, the NAO report recommends that the government:

  • clarifies how LEPs fit with other bodies to which it is devolving power and spending
  • distributes Local Growth Funding to LEPs in a form that will give them medium to long-term funding flexibility, subject to performance, to reduce risk of funds being spent on projects that LEPs do not regard as offering the best value for money
  • sets out specific quantifiable objectives and performance indicators for the success of Growth Deals
  • ensures that there is sufficient local capacity within LEPs to deliver Growth Deals by taking a more explicit and consistent account of the financial sustainability of local authority partners
  • uses its approach to monitoring Growth Deals as an opportunity to standardise output metrics for future local growth initiatives, allowing for comparative performance assessment and reducing reporting burdens
  • tests the implementation of local assurance frameworks before confirming future funding allocations, and works with LEPs to ensure that the required standards of governance and transparency are being met.

Only time will tell whether the government expectation of LEPs to deliver Growth Deals effectively and sustainably will become a reality.


If you liked this blog post, you might also want to read our previous post on innovation districts and sustainable growth

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