The Warwickshire Outlook

Signs of a slowing economy nationally

There has been a spate of bad news stories recently on the economy, including TATA Steel, BHS and Austin Reed all being placed into administration; UK GDP growth in the first quarter of 2016 falling to 0.4% (down from 0.6% for the last three months of December); market confidence as measured by public attitudes at its lowest for the last 15 months; and confidence in the UK’s manufacturing sector (measured through the Purchaser Managers’ Index) falling to its lowest level for three years.

Latest data from the Office for National Statistics on industrial production shows that this broad sector (which includes manufacturing, mining, oil, gas and water supply) has just had its second consecutive quarter of negative growth – the official definition of recessionary activity. Output for this sector is 10% lower than it was when the UK entered recession in early 2008. 

Manufacturing, which makes up 70% of industrial production, has been hard hit by the crisis in the steel sector, with output almost 2% lower in March 2016 than it was a year earlier. Manufacture of basic metals and metal production has dropped by 4% over the past year, contributing to the steepest fall in industrial production since May 2013.

While this is concerning at the national level, it is important to highlight that Coventry & Warwickshire does seem to be bucking the trend. The Chamber of Commerce’s Quarterly Economic Survey showed that business confidence in Q4 of 2015 was at the highest level for a decade, with a significant majority of businesses optimistic about the future and with strong order books. 

Jaguar Land Rover are investing heavily in the area, generating new jobs and increased orders in the supply chain, which is clearly a key factor for this optimism.  There have been a number of good news stories locally, including Semcon investing in Tournament Fields, Autins at Birch Coppice, Greenmech in Alcester, and Fanuc UK at Ansty Park.

Forecasts for Future Jobs Growth

The Economy & Skills Team at the County Council have led a major piece of analytical work to look at the future employment growth in Coventry & Warwickshire to feed into the Area Review of Post-16 Education & Training institutions into the area. 

Looking at a range of forecast models, the analysis identified the following key conclusions:

• Total net new employment growth in the Coventry & Warwickshire area is forecast to be between 21,000-22,000 by 2025.
• The biggest areas of new job growth will be in Business & Professional Services (c. 8000 new jobs), Accommodation & Food Services (c. 7000, and particularly strong growth in food and beverage service activity), Construction (c. 2000) and Transport & Storage (c. 2000).
• New employment growth will be focused on higher level occupations (particularly senior managers, professional occupations and associate professional and technical occupations). There will also be reasonably good growth in caring, leisure and other service occupations.
• However, a lot more employment opportunities will be generated through replacement demand – i.e. jobs that need filling due to retirement or people changing jobs. We forecast that a total of 187,000 replacement demand jobs will be created in Coventry & Warwickshire by 2025. As a result, nine out of 10 jobs in the area will be existing employment opportunities generated through this replacement process.
• The greatest demand for these replacement demand opportunities will be in wholesale & retail, health & social work, education and business & professional services.
• New (expansion) employment growth is more focussed around jobs requiring Level Three (a-level equivalent) and Level Four (degree equivalent) qualifications, and a fall in new jobs requiring just Level Two qualifications (GCSE equivalent). However, replacement demand will see a large need for workers with Level Two (c. 72,000), and around 115,000 at Level Three.