TGLP Digital Gateway Seminar: Will Hutton


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  • The first is low economic growth and high unemployment. This recession was very severe, with steeper falls in economic output than even the Great Depression (although it stopped falling before the Great Depression did). Private sector investment and confidence is very low, consumer demand is low and the economy has been significantly damaged. Even without a possible ‘double-dip’, it is likely to take 3-4 years for the economy to recover to 2008 levels, with all the knock-on impacts on businesses, jobs, revenues for the public sector etc.
  • The recession as a whole affected some places more than others. The places affected the most have been those with the lowest levels of skills, those with the highest levels of employment in manufacturing, and those with financial services employment (outside London and the SE). You can see the cluster around the Thames Gateway, with high changes in the claimant rate there – unsurprising given the skills profile.
  • …And the 1990s. And it looks set to drive economic recovery in the future too.
  • These are the sectors on which the Thames Gateway needs to focus. And it already has some strengths…
  • Thames Gateway local authorities can benefit from investment in creative industries because of their relevance to a range of national, regional and local policies, as well as their potential to impact on economic and social outcomes. Creative industries can contribute to generating jobs, innovation and productivity, as well as to enhancing the quality of life in an area and stimulate new ideas and thinking within communities. Benefits of investment in creative industries can include: • Productivity: over the past decade the creative industries grew at an average of 4 per cent GVA per annum between 1997 and 2006, compared to 3 per cent across the economy as a whole. • Jobs: creative employment grew at twice the national average, increasing on average by 2 per cent per annum between 1997 and 2007, compared to 1 per cent in the economy as a whole over this period. In local areas, investment in creative industry interventions such as festivals can create employment and generate income for the visitor economy. Innovation: innovation can create new markets, productivity growth, spillovers and improved efficiency, and creative industries are identified as an important source of innovation. Creative firms tend to be early adopters of innovation as well as stimulators of innovation in firms that they work with as partners and/ or suppliers. • Regeneration: creative industries have the potential to contribute to physical and social regeneration as well as community cohesion, although projects need to ensure that they are embedded in the local community. • Place-making: creative industries can contribute to improved quality of life for residents and increased attractiveness of places for investment. Both cities (such as Manchester and Glasgow) and more rural areas (such as Cornwall) have benefited in this way. These benefits are not guaranteed, however, and the precise impact of investment in creative industries will vary at a local level based on the characteristics of the local economy. This means that any decisions about investment in creative industries need to consider what the desired outcomes of investment are and to review whether the characteristics of the local area make this outcome likely to be achievable.
  • TGLP Digital Gateway Seminar: Will Hutton

    1. 1. The Digital Economy and the Thames Gateway Will Hutton January 24 th 2011
    2. 2. The tough 2010s <ul><li>Minimum 5 per cent of GDP lost for ever. Loss could be as high as 10 per cent. </li></ul><ul><li>Trend growth rate 1991 to 2009 ( trough to trough) was 2.0 per cent but contained bubble effects. Note between 1997 and 2007 half GDP growth financial services, property and construction. </li></ul><ul><li>There will be deleveraging and build up of saving </li></ul><ul><li>Yet 3 million economically inactive, 2.8 million involuntarily idle and 2.5 million unemployed. </li></ul><ul><li>Public sector has generated half jobs growth since 1997. Cannot be repeated 2010-20. </li></ul><ul><li>…… . Where are growth and jobs to come from in the 2010s? </li></ul>
    3. 3. Challenge 2: Low skills and high unemployment The recession has been very severe; it is likely to take at least 3-4 years for economic output to recover to 2008 levels…
    4. 4. A recession of the North, Midlands and Wales – and areas such as the Thames Gateway <ul><li>Places affected the most are those with: </li></ul><ul><li>Lowest levels of skills </li></ul><ul><li>Highest levels of employment in manufacturing </li></ul><ul><li>Mainly the North, Midlands and Wales, but also areas in the Thames Gateway </li></ul>
    5. 5. % Net public sector jobs 1998-2008
    6. 6. Net Public Sector Job Creation 1998 - 2008 Source: TWF & Annual Business Inquiry – Workplace Analysis
    7. 7. Knowledge economy and the 1980s recession and recovery Total employment, EU KLEMS database definition 1980=100. KE market based is telecoms, high tech, business, financial, and cultural services; KE public based is education and healthcare 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 index 1980 =100 KE market based KE public based Manufacturing Other Services
    8. 8. Knowledge economy and the 1990s recession and recovery Total employment, EU KLEMS database definition 1980=100. KE market based is telecoms, high tech, business, financial, and cultural services; KE public based is education and healthcare 0 0.2 0.4 0.6 0.8 1 1.2 1.4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 index 1990=100 KE market based KE public based Manufacturing Other Services
    9. 9. Knowledge based industries defined by the OECD Note: manufacturing classified by R&D intensity; services classified by ICT use and employment of graduates. Recreational and cultural industries recognised as knowledge based by EU but not OECD, and includes libraries and museums. Market based Knowledge industries Public based knowledge industries Other market based industries Other public based industries <ul><li>High to medium high tech based manufacturing </li></ul><ul><li>High tech services (telecommunications, computer services, R&D services) </li></ul><ul><li>Financial services </li></ul><ul><li>Business services (real estate, advertising, accountancy, legal, technical, consultancy) </li></ul><ul><li>Cultural and creative industries </li></ul><ul><li>Education </li></ul><ul><li>Health and social work </li></ul><ul><li>Low to medium low tech based manufacturing </li></ul><ul><li>Distribution, hospitality </li></ul><ul><li>Transport </li></ul><ul><li>Other services (dry-cleaning, hairdressing, refuse collection </li></ul><ul><li>Recreational and cultural services* </li></ul><ul><li>Public administration </li></ul>
    10. 10. Key drivers of the knowledge economy Growing as proportion of GDP in all western & advanced Asian economies <ul><li>Driver Two Shift in demand towards higher value added, </li></ul><ul><li>experiential services and tech based goods as consumers have become more sophisticated and diversified. </li></ul>Driver One New technologies, especially General Purpose Technologies ( GPTs), create new goods, services, processes and business models with multiple spill-overs.
    11. 11. The rise and rise of “intangibles” – proof positive of the emergent Knowledge Economy Intangibles investment share 1970-2004 Business investment in intangibles as a share of market sector value added adjusted to take account of intangibles. HMT October 2007. 0% 2% 4% 6% 8% 10% 12% 14% 16% 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 20 21 22 23 24 share of market gross value added
    12. 12. <ul><li>Recovery from the 2008/09 recession in the UK and US </li></ul>
    13. 13. Enterprise Cities – or growing divides?
    14. 14. The knowledge economy in the Thames Gateway Source: Annual Business Inquiry – Workplace Analysis (2008) % Workforce employed in knowledge industries (2008)
    15. 15. A short history of general purpose technologies (GPTs)… <ul><li>9000 BC – 1400AD Seven GPTs domestication of animals & plants; wheel; smelting of ore; writing; use of bronze; iron & steel; creation of water wheel </li></ul><ul><li>1400 – 1750 Two GPTs three masted sailing ship and printing </li></ul><ul><li>1750 - 1900 Five GPTs </li></ul><ul><ul><ul><ul><ul><li>steam engine; factory system; railway; iron steamship; communications </li></ul></ul></ul></ul></ul><ul><li>1900– 2000 Nine GPTs internal combustion engine; electricity; motor vehicle; airplane; mass production; computer; lean production; internet; biotechnology </li></ul>
    16. 16. Twenty-first century prospects ? Grand Challenges for Engineering <ul><li>Nanotechnologies </li></ul><ul><li>Energy from fusion </li></ul><ul><li>Advanced materials </li></ul><ul><li>Carbon sequestration </li></ul><ul><li>Manage the nitrogen cycle </li></ul><ul><li>Water </li></ul><ul><li>Health informatics </li></ul><ul><li>Durable customised infrastructure </li></ul><ul><li>Customised medicine </li></ul><ul><li>The brain </li></ul><ul><li>Cyberspace security </li></ul><ul><li>Enhance virtual reality </li></ul><ul><li>Personalised learning </li></ul>
    17. 17. Some 21 st century jobs – UK Dept of Business <ul><li>Body parts manufacturing and storing </li></ul><ul><li>Pharming – cultivation of genetically modified crops </li></ul><ul><li>High rise farming – cultivation in skyscrapers </li></ul><ul><li>Personal brand consultants for social networking </li></ul><ul><li>Customised avatars as teaching aids </li></ul><ul><li>Space guides </li></ul><ul><li>Miniaturisation doctors </li></ul><ul><li>Old age well being advisers </li></ul><ul><li>Care assistants </li></ul>
    18. 18. Rebalancing the economy <ul><li>Drivers of growth and jobs over past decade no longer available… </li></ul><ul><li>financial services </li></ul><ul><li>property boom </li></ul><ul><li>consumer debt </li></ul><ul><li>public sector </li></ul><ul><li>Must be replaced by big growth areas the UK has some advantage in… </li></ul><ul><li>manu-services (integration of high value services with manufacturing) </li></ul><ul><li>low carbon economy </li></ul><ul><li>creative and cultural industries </li></ul><ul><li>high tech and intermediary services </li></ul>
    19. 19. The highly skilled are clustering in highly skilled cities
    20. 20. The Innovation Ecosystem Public research Source: NESTA Openness Access to finance Skills Competition Demand
    21. 21. A new architecture of “ intermediate institutions” <ul><li>Research Universities </li></ul><ul><li>Technology Transfer Institutes </li></ul><ul><li>Creative hubs </li></ul><ul><li>Network of intermediate financial institutions – Green Bank, Infrastructure Bank </li></ul><ul><li>Long term ownership, anchor companies </li></ul><ul><li>Comprehensive lifelong learning </li></ul><ul><li>Intermediate employment insurance mutuals, residential FE colleges, vocational academies to support flexi-security </li></ul><ul><li>Cities with innovation “anchor” institutions </li></ul>
    22. 22. Net Private Sector Job Creation 1998 - 2008 Source: TWF & Annual Business Inquiry – Workplace Analysis
    23. 23. Skills have been key drivers of success Source: Annual Population Survey (2008) Residents with graduate level qualifications (2008)
    24. 24. Creative industries are a strength for the Thames Gateway – digital is part of this
    25. 25. Cultural and creative assets in the Thames Gateway
    26. 26. Key challenge - fewer opportunities for the unskilled Source: Annual Population Survey (2008) Residents with no qualifications (2008)
    27. 27. The Thames Gateway <ul><li>Think innovation and investment ecosystem </li></ul><ul><li>Pivotal role of universities as nodes </li></ul><ul><li>Innovative science parks </li></ul><ul><li>Digital sector / wider creative industries linkages </li></ul><ul><li>“ Five minds of the future” curricula for Universities and colleges </li></ul><ul><li>How to get spill-overs? </li></ul><ul><li>Key challenge: Sharing the benefits of potential growth with existing, often low skilled residents </li></ul><ul><li>Transport ? </li></ul><ul><li>East London or Thames Gateway? </li></ul>