Surrey Local Economic Assessment Executive Summary Dec 2010 Final

Surrey Local Economic Assessment Executive Summary

Surrey’s Local Economic Assessment

Executive Summary

December 2010

Commissioned by: Produced by:

Surrey County Council Surrey Economic Partnership Ltd
County Hall Surrey Technology Centre
Penrhyn Road Surrey Research Park
Kingston-upon-Thames KT1 2DN Guildford GU2 7YG

Contact: Damian Testa Contact: Mark Pearson
t: 020 8541 7068 t: 01483 685230
e: damian.testa@surreycc.gov.uk e: mark@surreyeconomicpartnership.org

Final
December 2010

Page 1 of 11 December 2010


1. What is a Local Economic Assessment?

Surrey County Council has a statutory duty, from 1 April 2010, to carry out a Local
Economic Assessment (LEA). In essence, the LEA is a narrative on the broad range
of factors - economic, social and environmental - that impact on sustainable growth,
and identifies challenges and opportunities for the Surrey economy going forward. In
doing this, the LEA provides a sound understanding of the economic conditions in
Surrey, and how they affect its residents, businesses and communities. With a
changing economic and political climate this is important, so that when decisions
need 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 data
gathering exercise. The LEA aims to tell a shared ‘story of place’ through the
synthesis of data and evidence across a range of themes. To add important
additional value to this retrospective assessment, a complementary piece of work
has been undertaken (reported alongside the LEA), which provides economic
forecasting of where the Surrey economy might be in 2030, based on a number of
different scenarios.

The LEA will support Surrey County Council in playing a more significant role in
promoting economic development; underpin its priority to maintain economic
success; and help ensure that the county council is better able to respond to future
economic challenges. The assessment provides an opportunity for the county
council both to better understand and to inform the strategic direction for economic
development in Surrey, and to start to set out the business case for investment in the
local economy. The LEA is also a valuable tool for Surrey businesses, public
agencies and district and borough authorities; it can support business/ corporate
planning and help guide capital investment programmes. Surrey County Council
sees the undertaking of this assessment as best practice, because the LEA will
update its knowledge base and help develop a compelling case for government, and
other public and private sector investment, in Surrey.

2. About the Local Economic Assessment

Surrey Economic Partnership Ltd was commissioned to produce the Surrey Local
Economic Assessment (LEA) in collaboration with Surrey County Council. Special
mention must go to Mark Pearson and Lauren Read at Surrey Economic Partnership
and 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 & Communities

Business & Enterprise Transport & Infrastructure Sustainable Economic Growth

These 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.



The key information is reflected in the main report accompanied by a supporting
narrative. The Surrey ‘story’ has been tested and validated through consultation with
partners from the 12 local authorities (county, district and borough), as well as the
wider economic development stakeholder community and Surrey businesses. In this
way, 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 economic
data sources; however, the most comprehensive data set informing the LEA is the
2001 census data, which does not always provide information at the right spatial
scale. There is a shortage of county-level data collected direct from Surrey’s
businesses. Much existing economic policy work relies on looking back over past
trends, and, in light of the recent global downturn and national recession, this is not
helpful, given the time lag in the provision of contemporary data. For this reason, the
Surrey LEA is complemented by economic forecasting work.

Since most of the analysis in this report is based on data and evidence available from
national sources (which enables comparisons to be made), the data could be viewed
as slightly out of date. It does not reflect fully the current downturn in the global
economy; although analysis of unemployment is current and available on a monthly
basis at county level. Whilst the global downturn has had an impact on the county, it
is 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 (relative
to 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 are
important drivers of productivity. As a result, resident and workplace earnings, as
well as total Gross Value Added (GVA), are generally higher in Surrey than in the
rest of the South East.

However, there are some significant challenges to economic performance going
forward. These include: the declining proportion of residents that are of working age;
the declining levels of economically active people in the population; slower rates of
GVA growth; an over-reliance on the banking, finance and public sectors for
employment; a reliance on London for employment; provision of faster and more
reliable broadband speeds; retaining the county’s high quality natural environment in
the face of pressures for growth; transitioning to a low carbon economy; and the
pressures 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 which
these findings are based, and the associated strategic implications. These do not
jump 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 are
complex and interdependent. For example, improving skills levels may not result in
more local employment, as this is also influenced by factors such as housing
affordability and salary levels compared to adjacent areas or other parts of the
country. Policy approaches to address the key challenges will require significant
multi-agency responses.



4. Key Findings

Key Finding Headline Evidence Strategic Implication

Economic Performance
Comparator economies are The World Knowledge Competitiveness Index (2008) That Surrey will not be able to compete as well on the world
catching and overtaking shows that the South East of England (Surrey being a business stage. This may reduce levels of new investment
Surrey’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 & Enterprise
Importance of supporting Six of the 11 districts and boroughs in Surrey are in Direct business support is currently changing with public
innovation and the top 25 areas for numbers of knowledge-based funded support services (i.e. Business Link/ Innovation and
entrepreneurship 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 Market
Growing importance of the Census data shows that 23% of Surrey’s residents Surrey’s on-going ability to support the London workforce
relationship 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 private
sectors 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 deprived
unemployment (from a low in August 2010 (1.7% of the resident working age communities and of those on the borderline slipping into



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 skilled
appropriately 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 & Infrastructure
Increasing pressure on The Surrey Infrastructure Capacity Project quantified Surrey becomes a less attractive location for business and
economic 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 (‘not
and 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.



Pressures on road transport Average daily vehicle flows along Surrey’s motorways As road usage increases and pressures on transport
affect the physical delivery in 2007 were 80% more than the national motorway infrastructure grows, so do the problems for Surrey in terms
of 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 for
commercial sites and recognise a need for more small unit space in most a range of businesses - this may require intervention by local
premises 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 Communities
Population 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+).



Commuting patterns and In 2001, the total Surrey resident population (aged 16- There is the need to reduce inbound workers, for example by
levels 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 is
age 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 Economic
Growth
Limits 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, greater
low 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.



5. Context

With a resident population of 1.1million, Surrey is the third most populated and the
most densely populated county in the South East. Economically diverse, its
communities range from outer London suburbia to some of the most attractive rural
villages in England. Surrey’s geography, location, environment, history and cultural
assets have all played an important role in shaping its economy. Against this
backdrop, Surrey has developed its position as a strong, knowledge-driven, wealth-
creating, ‘powerhouse’ economy.

However, Surrey’s economic performance remains dependent on the performance of
regional, national and international economies, and much of its wealth is earned
outside its boundaries, particularly in London. Surrey, as with many local economies
in the 21st Century, is increasingly affected by external events and competition on a
global 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 the
competitiveness 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. The
region has also slipped within the European Competitiveness Index (2006/ 07) being
ranked 16th among 118 European regions (down from 12th in 2004). If the relative
rank 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 time
the South East has displaced London into second. For individual Surrey districts, six
are within the top 25 most competitive areas in the UK (although there were eight in
the top 25 in 1997).

Surrey’s GVA was worth £26.5bn in 2007; its economy being almost equivalent, in
GVA terms, to that of Birmingham and Liverpool (England’s second and third largest
cities by population) combined, and comfortably larger than that of Liverpool and
Leeds (England’s third and fourth largest cities) combined. GVA per capita in 2007
was £24,103 (the third highest of its LEA comparators). While Surrey’s total GVA
grew by 32% between 2000 and 2007, this was a slower rate than its LEA
comparators, 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 VAT
or PAYE registered enterprises. The vast majority of Surrey’s businesses (88%) are
micro businesses employing less that 10 people and 81% employing fewer than five
staff. 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 10,000
of the adult population; higher than the level for the South East (40 per 10,000) and
the UK (42 per 10,000). Surrey has a higher business survival rate than its
comparators; 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 population
are qualified to NVQ4 (degree level) and above, and 73% are qualified to NVQ Level
2 and above; well above the South East and Great Britain rates. Conversely, only



7.8% of the working age population have no qualifications (lower than the South East
and 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); and
16.5% are of pension age or older (65+). The population of Surrey is projected to
grow by 19.5%, or by around 215,000 people, between 2008 and 2033 (with over half
of this increase accounted for by people aged 65+).

6. Functional Economic Areas and Comparator Economies

It is important to provide an understanding of Surrey’s performance relative to other
economic sub-regions in the greater South East, which share commonalities, be it
economic profile, aspirations, challenges, opportunities or functional economic
geographies. Surrey also has a complex set of ‘closer’ functional linkages with both
UK and international sub-regions, depending on which aspect of the economy is
being looked at.

Surrey has a strong, well-connected, knowledge-driven and wealth-creating
economy. It supports a diverse business base of local, national and global
companies. Surrey has the potential to drive a world-class regional economy.
However, economic activity cannot be neatly defined in terms of local authority
boundaries. What happens outside Surrey has a significant impact on Surrey’s
economy, such as turbulence in financial and currency markets and the general
health of the UK and global economy.

For the purpose of the LEA, three Functional Economic Areas (FEA) have been
selected (Surrey, the Gatwick Diamond and the Blackwater Valley and Western
Corridor) which have been the focus of economic development policy activity and
research in recent years. The LEA has not focussed on either rural Surrey or the
London Fringe as an FEA; this is predominantly because of the complex nature of
these relationships, which could be the focus of separate assessments. However,
the importance of rural issues and London and its inter-linkages with Surrey are
referred to throughout the main report.

In terms of comparator economies, Berkshire, Buckinghamshire, Cambridgeshire and
Oxfordshire have been explored; Berkshire and Buckinghamshire being part of an
existing local government group of statistical partners that are benchmarked against
each other; Cambridgeshire and Oxfordshire reflecting Surrey County Council’s
perception that there is some phenomenon attracting people and businesses away
from 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 and
Oxfordshire. On enterprise, Surrey outperforms all comparator areas apart from
Buckinghamshire where business start-up rates and business stock (per 1,000
population) are considerably higher. However, growth in Surrey’s business stock has
lagged behind all comparator areas and the UK since 2000, which suggests Surrey
needs to take action in this area to maintain its advantage in the enterprise driver of
productivity.



7. Economic Forecasting

Importantly, Surrey’s LEA is not purely a retrospective look at the economy. As part
of the process, SQW and Cambridge Econometrics have undertaken economic
forecasting work, which provides forward looking data on which to consider the key
policy drivers for economic success in Surrey. It is important to note that economic
forecasting is not a perfect science; it does not predict what will happen, only what
might occur under particular conditions and policy approaches.

The forecasting considered the baseline position as well as three scenarios: greater
global competitiveness, less global competitiveness and the impact of the anticipated
public 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 strong
performance in a number of areas relative to comparator areas. For example, Surrey
has a high proportion of jobs in knowledge-intensive businesses, business start-up
rates and residents with Level 4+ qualifications – all of which are important drivers of
productivity – and, as a result, resident and workplace earnings are generally higher
in Surrey.

The forecasting work also indicates that there is relatively little difference in Surrey’s
performance under the baseline projection (i.e. in which Surrey remains on its
present course, unchanged) and under the less favourable projection of the Surrey
economy becoming less globally competitive. SQW sees this as a ‘wake up’ call for
Surrey, particularly given that it has better intrinsic assets than some of its
comparators – such as its residents’ skills profile and its knowledge base. The
modelling also predicts that, over the 20 year period, Surrey will under perform in
relation to Berkshire (the strongest of the comparators), in terms of GVA and
productivity, and that Surrey’s productivity will lag notably by 2030.

However, there are other weaknesses that might challenge economic performance
going forward, particularly around the lower proportion of residents that are of
working age and, in turn, the proportion of these that are economically active. Surrey
has also seen slower growth in business stock, work-based pay rates and the overall
GVA level since 2000, which provides an opportunity for comparator areas that are
growing faster to close the gap (and thereby reduce Surrey’s comparative
advantage).

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 the
direction 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 in



September 2010. Demonstrating the value of having a comprehensive economic
data set in one location.

The Surrey Local Economic Assessment will also provide the foundation for the
development of a ‘New Business Plan for Surrey’, being taken forward through
Surrey Economic Partnership. This initiative has arisen from the need to look at
Surrey’s global position, and where the county wants to be in the future. The LEA
helps set the context for this work through providing a good understanding of where
Surrey sits today.

The LEA will also support funding bids, such as the recently announced Regional
Growth Fund, which requires proposals to be underpinned by published robust
evidence 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 class
transport and communications links (including two international airports), three
universities, highly qualified residents, and a high quality natural environment. It is
still an attractive environment for international businesses and has a strong culture of
enterprise and innovation.

The challenge for Surrey going forward is not to be complacent, i.e. to rely on past
success, but to build on its inherent strengths to ensure a competitive future.

December 2010


Surrey Local Economic Assessment Executive Summary Dec 2010 Final

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