Surrey Local Economic Assessment    Executive Summary Surrey’s Local Economic AssessmentExecutive SummaryDecember 2010Comm...
Surrey Local Economic Assessment        Executive Summary 1.      What is a Local Economic Assessment?Surrey County Counci...
Surrey Local Economic Assessment           Executive Summary The key information is reflected in the main report accompani...
Surrey Local Economic Assessment                      Executive Summary 4.      Key Findings Key Finding                 H...
Surrey Local Economic Assessment                    Executive Summary base), especially among      population), compared t...
Surrey Local Economic Assessment                     Executive Summary Pressures on road transport    Average daily vehicl...
Surrey Local Economic Assessment                     Executive Summary Commuting patterns and         In 2001, the total S...
Surrey Local Economic Assessment           Executive Summary 5.      ContextWith a resident population of 1.1million, Surr...
Surrey Local Economic Assessment          Executive Summary 7.8% of the working age population have no qualifications (low...
Surrey Local Economic Assessment           Executive Summary 7.      Economic ForecastingImportantly, Surrey’s LEA is not ...
Surrey Local Economic Assessment          Executive Summary September 2010. Demonstrating the value of having a comprehens...
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Surrey Local Economic Assessment Executive Summary Dec 2010 Final

  1. 1. Surrey Local Economic Assessment Executive Summary Surrey’s Local Economic AssessmentExecutive SummaryDecember 2010Commissioned by: Produced by:Surrey County Council Surrey Economic Partnership LtdCounty Hall Surrey Technology CentrePenrhyn Road Surrey Research ParkKingston-upon-Thames KT1 2DN Guildford GU2 7YGContact: Damian Testa Contact: Mark Pearsont: 020 8541 7068 t: 01483 685230e: e: Final December 2010Page 1 of 11 December 2010 
  2. 2. Surrey Local Economic Assessment Executive Summary 1. What is a Local Economic Assessment?Surrey County Council has a statutory duty, from 1 April 2010, to carry out a LocalEconomic Assessment (LEA). In essence, the LEA is a narrative on the broad rangeof factors - economic, social and environmental - that impact on sustainable growth,and identifies challenges and opportunities for the Surrey economy going forward. Indoing this, the LEA provides a sound understanding of the economic conditions inSurrey, and how they affect its residents, businesses and communities. With achanging economic and political climate this is important, so that when decisionsneed to be made there is data readily available to inform and support them.The assessment is supported by a wide range of data, but is not simply a datagathering exercise. The LEA aims to tell a shared ‘story of place’ through thesynthesis of data and evidence across a range of themes. To add importantadditional value to this retrospective assessment, a complementary piece of workhas been undertaken (reported alongside the LEA), which provides economicforecasting of where the Surrey economy might be in 2030, based on a number ofdifferent scenarios.The LEA will support Surrey County Council in playing a more significant role inpromoting economic development; underpin its priority to maintain economicsuccess; and help ensure that the county council is better able to respond to futureeconomic challenges. The assessment provides an opportunity for the countycouncil both to better understand and to inform the strategic direction for economicdevelopment in Surrey, and to start to set out the business case for investment in thelocal economy. The LEA is also a valuable tool for Surrey businesses, publicagencies and district and borough authorities; it can support business/ corporateplanning and help guide capital investment programmes. Surrey County Councilsees the undertaking of this assessment as best practice, because the LEA willupdate its knowledge base and help develop a compelling case for government, andother public and private sector investment, in Surrey.2. About the Local Economic AssessmentSurrey Economic Partnership Ltd was commissioned to produce the Surrey LocalEconomic Assessment (LEA) in collaboration with Surrey County Council. Specialmention must go to Mark Pearson and Lauren Read at Surrey Economic Partnershipand to Damian Testa, Deborah Fox and Lee McQuade at Surrey County Council.The main report covers six broad strategic themes:Economic Performance Labour Market People & CommunitiesBusiness & Enterprise Transport & Infrastructure Sustainable Economic GrowthThese are supported by detailed chapters and a comprehensive technical appendix.A broad range of local, regional, national and international data underpins the LEA.This has been compiled in comprehensive technical appendices to the main report.Page 2 of 11 December 2010
  3. 3. Surrey Local Economic Assessment Executive Summary The key information is reflected in the main report accompanied by a supportingnarrative. The Surrey ‘story’ has been tested and validated through consultation withpartners from the 12 local authorities (county, district and borough), as well as thewider economic development stakeholder community and Surrey businesses. In thisway, Surrey’s LEA has drawn in a wealth of qualitative information to add strength,depth and life to the statistical analysis.The LEA data collection process has also highlighted the wealth of existing economicdata sources; however, the most comprehensive data set informing the LEA is the2001 census data, which does not always provide information at the right spatialscale. There is a shortage of county-level data collected direct from Surrey’sbusinesses. Much existing economic policy work relies on looking back over pasttrends, and, in light of the recent global downturn and national recession, this is nothelpful, given the time lag in the provision of contemporary data. For this reason, theSurrey LEA is complemented by economic forecasting work.Since most of the analysis in this report is based on data and evidence available fromnational sources (which enables comparisons to be made), the data could be viewedas slightly out of date. It does not reflect fully the current downturn in the globaleconomy; although analysis of unemployment is current and available on a monthlybasis at county level. Whilst the global downturn has had an impact on the county, itis too early to be precise about its full effect and for how long the impact will be felt.3. What ‘story of Surrey’ does the Local Economic Assessment tell?Overall, Surrey demonstrates strong performance on a number of measures (relativeto comparator areas). It has high levels of: jobs in knowledge-based sectors;business start-up rates; and residents with high level qualifications – all of which areimportant drivers of productivity. As a result, resident and workplace earnings, aswell as total Gross Value Added (GVA), are generally higher in Surrey than in therest of the South East.However, there are some significant challenges to economic performance goingforward. These include: the declining proportion of residents that are of working age;the declining levels of economically active people in the population; slower rates ofGVA growth; an over-reliance on the banking, finance and public sectors foremployment; a reliance on London for employment; provision of faster and morereliable broadband speeds; retaining the county’s high quality natural environment inthe face of pressures for growth; transitioning to a low carbon economy; and thepressures of globalisation, with the world economy expected to double by 2030.The following table presents the key findings of the LEA, the main evidence on whichthese findings are based, and the associated strategic implications. These do notjump to a solution, as the purpose of the LEA is to provide a narrative on the data,nor to set strategic direction; this will be progressed through other mechanisms.Many of these key findings are inter-related and the relationships between them arecomplex and interdependent. For example, improving skills levels may not result inmore local employment, as this is also influenced by factors such as housingaffordability and salary levels compared to adjacent areas or other parts of thecountry. Policy approaches to address the key challenges will require significantmulti-agency responses.Page 3 of 11 December 2010
  4. 4. Surrey Local Economic Assessment Executive Summary 4. Key Findings Key Finding Headline Evidence Strategic ImplicationEconomic PerformanceComparator economies are The World Knowledge Competitiveness Index (2008) That Surrey will not be able to compete as well on the worldcatching and overtaking shows that the South East of England (Surrey being a business stage. This may reduce levels of new investmentSurrey’s economic significant contributor to the region) was ranked 74th and result in disinvestment by existing Surrey businesses.performance out of 145 global regions; down from 40th in 2004. Recognition of the importance of sectors.Business & EnterpriseImportance of supporting Six of the 11 districts and boroughs in Surrey are in Direct business support is currently changing with publicinnovation and the top 25 areas for numbers of knowledge-based funded support services (i.e. Business Link/ Innovation andentrepreneurship businesses. Growth Teams) altering. The future success of businesses and, specifically, knowledge-based businesses is critical to In 2007, Surrey had 58 business registrations Surrey’s overall prosperity. per10,000 adult population compared to a South East figure of 40. The importance of employment and skills support at a community level.Labour MarketGrowing importance of the Census data shows that 23% of Surrey’s residents Surrey’s on-going ability to support the London workforcerelationship with London work within the Greater London area – about 9% in with skilled workers, its influence and dependency on the Inner London, and 14% in Outer London. capital for commerce, and the necessity for joint working on infrastructure provision. Surrey is under growing pressure from London out migration.Large reliance on ABI (employee data) shows 30% of employment in These sectors are both expected to contract.employment in the public Surrey is in the ’banking, finance and insurance’and financial services sector and 24% in ‘public administration, education & The knock-on effect of public sector funding cuts for privatesectors health’. sector businesses that supply goods and services to local authorities and public agencies. Over time, the direct impact on the productivity of the county from decreasing levels of economic activity.Significant growth in Job Seekers Allowance in Surrey – 12,263 claimants Risk of further deterioration in the quality of life of deprivedunemployment (from a low in August 2010 (1.7% of the resident working age communities and of those on the borderline slipping intoPage 4 of 11 December 2010
  5. 5. Surrey Local Economic Assessment Executive Summary base), especially among population), compared to South East (2.4%) and deprivation.young people Great Britain (3.6%), from less than 4,000 in 2008 (0.7%). Number of JSA claimants aged 20-24 rose to Fewer people able to contribute to and share in Surrey’s a peak of 2,660 in Aug 2009 (2,210 in Aug 2010). economic success.The need for an APS shows 39.3% of the working age population are The need for lower skilled workers as well as higher skilledappropriately skilled qualified to degree level (NVQ 4), 7.8% have no staff for wealth generation.workforce qualifications. A re-emphasis of the need for an enhanced employer voice NVQ Level 2 or above - 73.4% of working age around the skills agenda. population in Surrey; South East 69%; GB 65.4%. Need to up-skill resident population: improve the employability skills of existing and potential workforce to reduce the number of inbound workers, and ensure higher skilled workforce can meet the needs of knowledge-based businesses.Transport & InfrastructureIncreasing pressure on The Surrey Infrastructure Capacity Project quantified Surrey becomes a less attractive location for business andeconomic infrastructure the cost of the non-delivery of infrastructure in the the economy contracts and access to services is reduced – a period to 2026 as a total loss of almost £3.3bn in GVA potential quality of life reduction for all. To reduce the (a 13% loss to Surrey’s economy). likelihood of this there is a need for more and better quality economic infrastructure and government investment to provide this.Significance of broadband In Surrey, 15% of households and 12% of businesses Several areas in Surrey have limited or no connectivity (‘notand superfast broadband are receiving 1.5 Mb/s or less in connection speed. spots’) and are unable to benefit from the significant For example, nearly 40% of premises in the Surrey economic, educational and social benefits of broadband/ Hills AONB, (home to 150,000 people) receive an super fast broadband. This needs to be addressed. internet connection of less than 2 Mb/s. The need for more investment in super fast broadband to 30% of Surrey businesses are knowledge based, enable more innovative, efficient and effective delivery of compared to 24% in London. local authority services, including tele-health and virtual classrooms. Given the increasingly knowledge-based economy of Surrey, it is important to have the right ICT infrastructure to drive growth and innovation, e.g. to exploit emerging markets, develop new business ideas, and to support home working.Page 5 of 11 December 2010
  6. 6. Surrey Local Economic Assessment Executive Summary Pressures on road transport Average daily vehicle flows along Surrey’s motorways As road usage increases and pressures on transportaffect the physical delivery in 2007 were 80% more than the national motorway infrastructure grows, so do the problems for Surrey in termsof goods and services average (139,300 vehicles per day in Surrey of congestion and the efficient movement of and access to compared to 77,400 vehicles per day nationally), and goods and services. The need for investment in the physical 46% more than the South East average of 95,000 road network to avoid gridlock will intensify. vehicles per day. Traffic flows on A roads in Surrey are 66% greater than the national average (21,800 vehicles per day in Surrey compared to 13,176 vehicles per day nationally).Provision of appropriate The 11 district and borough employment land reviews The need for appropriate commercial sites and premises forcommercial sites and recognise a need for more small unit space in most a range of businesses - this may require intervention by localpremises districts, and particularly freehold premises, to meet authorities. For example, with common policies to support needs in locations that are accessible to labour, and encourage the redevelopment and upgrading of existing materials and markets. employment premises to meet the needs of modern, high quality occupiers.People and CommunitiesPopulation pressures Surrey is the most densely populated county in the Surrey’s changing demography, specifically the growing 0-15 South East with 661 people per km2. Surrey’s total and 65+ age categories, will influence the need for and population grew by 4.1% between 2000 and 2008 with shape of services, such as those for education, adult social the highest rate of growth in the 65+ age category. and mental health care, and the infrastructure required to Net internal migration is the biggest driver of support services. population increase in Surrey. A 20% increase in the birth rate in Surrey between 2002 and 2008, will The need for more primary school places comes at the same require a further 8,000 primary school places. The time as the Department for Education is preparing to cut its population of Surrey is projected to grow by 19.5% or capital budget by 60% by 2015. This is likely to place further by around 215,000 people, between 2008 and 2033, financial pressure on the local education authority if it is to with over half of this increase accounted for by people meet the increased demand for places. of pensionable age (i.e. 65+).Page 6 of 11 December 2010
  7. 7. Surrey Local Economic Assessment Executive Summary Commuting patterns and In 2001, the total Surrey resident population (aged 16- There is the need to reduce inbound workers, for example bylevels of Surrey’s workforce 74) in employment was 533,000; of these 342,000 increasing the employability of the existing and potential (64%) worked in Surrey and 191,000 worked outside Surrey workforce, to fill local jobs; and also reduce the the county, predominantly in London. In addition, reliance on jobs outside the county. The need to encourage there were 145,000 inward commuters. new local businesses and more flexible working/ working from home.Contraction of the working APS shows Surrey’s working age population grew by An effective shortfall in working age population means it isage population only 4% between 2000 and 2008, the lowest rate of all increasingly difficult to recruit locally. This may increase the its LEA comparators (except Buckinghamshire). reliance on importing skills to meet employer needs, which could also result in a need for more housing.Sustainable EconomicGrowthLimits of sustainability Surrey Structure Plan 2002 identified 73% of total Surrey’s natural environment is both an asset and a area of Surrey is protected green belt land. constraint to future economic growth, suggesting a greater need for productivity/ spaceless growth over labour growth. Surrey is the most wooded county in Great Britain with 22% woodland coverage (37,564 hectares) The sustainable use of Surrey’s natural resources, such as compared to a national average of 12%. wood fuel, must be considered. The percentage of household waste recycled and The need to reduce further the reliance on landfill and composted in Surrey is well above the 2007/ 08 LAA improve household and commercial waste recycling rates. baseline of 35%. The 2009/ 10 trend rate was 46.1%. This is above the South East and national averages, The need to provide the appropriate volume and type of 35.57% and 34.34% respectively. housing to support a successful economy.Transition to a become a In Surrey, there has been a 4.3% reduction in CO2 If Surrey is to be a world-class sustainable economy, greaterlow carbon economy emissions from 7.0 tonnes of CO2 per capita in 2005 effort has to be made to reduce CO2 emissions further, to 6.7 tonnes per capita in 2008. This is on a par with whether through transport, residential and commercial the South East regional reduction of 4.3%, but lower buildings, or the development of new carbon products and than the national (England) reduction of 5.6%. services. For example, supporting commercial opportunities to develop and export building technologies and renewables, as part of the growing global Low Carbon and Environmental Goods and Services (LCEGS) market sector, which was worth £107bn in the UK in 2007/8 and £3 trillion globally.Page 7 of 11 December 2010
  8. 8. Surrey Local Economic Assessment Executive Summary 5. ContextWith a resident population of 1.1million, Surrey is the third most populated and themost densely populated county in the South East. Economically diverse, itscommunities range from outer London suburbia to some of the most attractive ruralvillages in England. Surrey’s geography, location, environment, history and culturalassets have all played an important role in shaping its economy. Against thisbackdrop, Surrey has developed its position as a strong, knowledge-driven, wealth-creating, ‘powerhouse’ economy.However, Surrey’s economic performance remains dependent on the performance ofregional, national and international economies, and much of its wealth is earnedoutside its boundaries, particularly in London. Surrey, as with many local economiesin the 21st Century, is increasingly affected by external events and competition on aglobal scale - whether of a social, environmental or economic nature. Furthermore,Surrey exhibits many of the downsides of success – congestion, high house prices,pressures on infrastructure, and growing socio-economic disparities.Despite Surrey’s past economic successes, in relative terms it is slipping in thecompetitiveness stakes. The World Knowledge Competitiveness Index (2008),shows that the South East of England was ranked 74th out of 145 global regions(down from 40th rank in 2004) – London is now 102nd down from 46th in 2004. Theregion has also slipped within the European Competitiveness Index (2006/ 07) beingranked 16th among 118 European regions (down from 12th in 2004). If the relativerank of the South East economy is falling then it follows that Surrey’s is also falling,although within the UK Competitiveness index (ranking 12 regions), for the first timethe South East has displaced London into second. For individual Surrey districts, sixare within the top 25 most competitive areas in the UK (although there were eight inthe top 25 in 1997).Surrey’s GVA was worth £26.5bn in 2007; its economy being almost equivalent, inGVA terms, to that of Birmingham and Liverpool (England’s second and third largestcities by population) combined, and comfortably larger than that of Liverpool andLeeds (England’s third and fourth largest cities) combined. GVA per capita in 2007was £24,103 (the third highest of its LEA comparators). While Surrey’s total GVAgrew by 32% between 2000 and 2007, this was a slower rate than its LEAcomparators, and GVA per capita did not grow at all during the same period.Surrey is home to an estimated 61,600 workplaces, of which around 53,000 are VATor PAYE registered enterprises. The vast majority of Surrey’s businesses (88%) aremicro businesses employing less that 10 people and 81% employing fewer than fivestaff. There are around 300 businesses in the county employing 200+ employees.The number of new business VAT registrations for Surrey in 2007 was 58 per 10,000of the adult population; higher than the level for the South East (40 per 10,000) andthe UK (42 per 10,000). Surrey has a higher business survival rate than itscomparators; after five years, the survival rate of businesses in Surrey is 50.2%(second only to Berkshire). Surrey enjoys a well qualified workforce: 39% of the resident working age populationare qualified to NVQ4 (degree level) and above, and 73% are qualified to NVQ Level2 and above; well above the South East and Great Britain rates. Conversely, onlyPage 8 of 11 December 2010
  9. 9. Surrey Local Economic Assessment Executive Summary 7.8% of the working age population have no qualifications (lower than the South Eastand Great Britain as a whole). Surrey has a very similar population age profile to that of the South East as a whole:18% of its population is aged 0-14 years; 64.2% are of working age (16-64); and16.5% are of pension age or older (65+). The population of Surrey is projected togrow by 19.5%, or by around 215,000 people, between 2008 and 2033 (with over halfof this increase accounted for by people aged 65+).6. Functional Economic Areas and Comparator EconomiesIt is important to provide an understanding of Surrey’s performance relative to othereconomic sub-regions in the greater South East, which share commonalities, be iteconomic profile, aspirations, challenges, opportunities or functional economicgeographies. Surrey also has a complex set of ‘closer’ functional linkages with bothUK and international sub-regions, depending on which aspect of the economy isbeing looked at.Surrey has a strong, well-connected, knowledge-driven and wealth-creatingeconomy. It supports a diverse business base of local, national and globalcompanies. Surrey has the potential to drive a world-class regional economy.However, economic activity cannot be neatly defined in terms of local authorityboundaries. What happens outside Surrey has a significant impact on Surrey’seconomy, such as turbulence in financial and currency markets and the generalhealth of the UK and global economy.For the purpose of the LEA, three Functional Economic Areas (FEA) have beenselected (Surrey, the Gatwick Diamond and the Blackwater Valley and WesternCorridor) which have been the focus of economic development policy activity andresearch in recent years. The LEA has not focussed on either rural Surrey or theLondon Fringe as an FEA; this is predominantly because of the complex nature ofthese relationships, which could be the focus of separate assessments. However,the importance of rural issues and London and its inter-linkages with Surrey arereferred to throughout the main report.In terms of comparator economies, Berkshire, Buckinghamshire, Cambridgeshire andOxfordshire have been explored; Berkshire and Buckinghamshire being part of anexisting local government group of statistical partners that are benchmarked againsteach other; Cambridgeshire and Oxfordshire reflecting Surrey County Council’sperception that there is some phenomenon attracting people and businesses awayfrom Surrey to these locations that needs to be understood better.The LEA shows that whilst Surrey has the largest economy of our comparator areas,it grew more slowly than all comparator areas and the UK between 2000 and 2007,and latest data show that GVA per head in 2007 was lower than both Berkshire andOxfordshire. On enterprise, Surrey outperforms all comparator areas apart fromBuckinghamshire where business start-up rates and business stock (per 1,000population) are considerably higher. However, growth in Surrey’s business stock haslagged behind all comparator areas and the UK since 2000, which suggests Surreyneeds to take action in this area to maintain its advantage in the enterprise driver ofproductivity.Page 9 of 11 December 2010
  10. 10. Surrey Local Economic Assessment Executive Summary 7. Economic ForecastingImportantly, Surrey’s LEA is not purely a retrospective look at the economy. As partof the process, SQW and Cambridge Econometrics have undertaken economicforecasting work, which provides forward looking data on which to consider the keypolicy drivers for economic success in Surrey. It is important to note that economicforecasting is not a perfect science; it does not predict what will happen, only whatmight occur under particular conditions and policy approaches.The forecasting considered the baseline position as well as three scenarios: greaterglobal competitiveness, less global competitiveness and the impact of the anticipatedpublic sector funding cuts on the Surrey economy over a 20 year timeframe to 2030.It considered these relative to the four comparator areas.The forecasting shows that, overall, Surrey has hitherto demonstrated strongperformance in a number of areas relative to comparator areas. For example, Surreyhas a high proportion of jobs in knowledge-intensive businesses, business start-uprates and residents with Level 4+ qualifications – all of which are important drivers ofproductivity – and, as a result, resident and workplace earnings are generally higherin Surrey.The forecasting work also indicates that there is relatively little difference in Surrey’sperformance under the baseline projection (i.e. in which Surrey remains on itspresent course, unchanged) and under the less favourable projection of the Surreyeconomy becoming less globally competitive. SQW sees this as a ‘wake up’ call forSurrey, particularly given that it has better intrinsic assets than some of itscomparators – such as its residents’ skills profile and its knowledge base. Themodelling also predicts that, over the 20 year period, Surrey will under perform inrelation to Berkshire (the strongest of the comparators), in terms of GVA andproductivity, and that Surrey’s productivity will lag notably by 2030.However, there are other weaknesses that might challenge economic performancegoing forward, particularly around the lower proportion of residents that are ofworking age and, in turn, the proportion of these that are economically active. Surreyhas also seen slower growth in business stock, work-based pay rates and the overallGVA level since 2000, which provides an opportunity for comparator areas that aregrowing faster to close the gap (and thereby reduce Surrey’s comparativeadvantage).The economic forecasting is reported in a separate stand-alone report to the LEA.8. What next for the Local Economic Assessment?The Surrey LEA is not meant to be either an economic strategy or a new policy;rather the evidence base to support future economic strategic thinking and planning.It is therefore a tool that will enable private and public sector partners to plan thedirection of travel for successful economic development in the future.The LEA has already been used to inform the development of the ‘Surrey Connects’Local Enterprise Partnership Expression of Interest; submitted to government inPage 10 of 11 December 2010
  11. 11. Surrey Local Economic Assessment Executive Summary September 2010. Demonstrating the value of having a comprehensive economicdata set in one location.The Surrey Local Economic Assessment will also provide the foundation for thedevelopment of a ‘New Business Plan for Surrey’, being taken forward throughSurrey Economic Partnership. This initiative has arisen from the need to look atSurrey’s global position, and where the county wants to be in the future. The LEAhelps set the context for this work through providing a good understanding of whereSurrey sits today.The LEA will also support funding bids, such as the recently announced RegionalGrowth Fund, which requires proposals to be underpinned by published robustevidence and data sets.Critically, Surrey’s past success cannot be used as a guide to its future performance.Nevertheless, Surrey continues to benefit from its unique strategic location, first classtransport and communications links (including two international airports), threeuniversities, highly qualified residents, and a high quality natural environment. It isstill an attractive environment for international businesses and has a strong culture ofenterprise and innovation.The challenge for Surrey going forward is not to be complacent, i.e. to rely on pastsuccess, but to build on its inherent strengths to ensure a competitive future.December 2010 Page 11 of 11 December 2010