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									Nottingham City Council

Economic Monitor
June 2009
Welcome to the June Economic Monitor
It is has been six months since we published our first Economic Monitor. I am encouraged to see that the increase in unemployment has slowed and that there has been some improvement in business confidence. However, it is clear that these are still difficult times for many which is why Nottingham City Council and its partners have implemented a range of measures to help residents and businesses. You can find out more about the „We‟re on You Side‟ programme at http://www.nottinghamcity.gov.uk/index.aspx?articleid=3100 . We have also been planning for the long term. In June the newly formed Nottingham Economic Resilience Forum met for the first time. John Peace, Chair of Experian and one of the country‟s most respected business minds, is heading up this consortium of economic experts. Other forum members include the Vice-Chancellors from both Universities, the Managing Director of Experian, a Chief Executive from Alliance Boots, Sir Harry Djanogly and Professor Nat Puri. The forum will help us ensure our long term prospects remain promising and optimistic. It will provide cutting-edge insight from Experian, expert intelligence and advice on business, finance and economic matters, oversee the city‟s recession, realignment and recovery plans, including advising on Nottingham‟s unique economic selling points and members will act as ambassadors for the city. I am grateful to all those who have given their time and support to bring about the best possible future for Nottingham, and I look forward to reporting on our collective progress. Jane Todd, Chief Executive

Key Messages
 Reports from local businesses regarding their performance and immediate circumstances have varied, but overall there are signs that the business community is feeling more positive about the future outlook than last quarter. Access to finance still remains the main concern for most businesses. Unemployment increased in Nottingham City in recent months, although the pace of increase has slowed. Unemployment in Nottingham City has begun to account for an increasing share of Greater Nottingham‟s unemployment. The latest quarterly figures for house possession orders and County Court Judgements also show tentative improvements, although advice services are still running at capacity. Looking ahead, Experian research concluded that the city‟s economy is not forecast to decline as much as nationally in 2009, and could grow more strongly in 2010, although unemployment is expected to take longer to recover.

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National Overview
   The contraction in the UK economy continued for a third successive quarter. According to preliminary estimates from the Office for National Statistics (ONS), output fell by 1.9% in the first quarter of 2009. Manufacturing and production industries made the largest contributions to falling output. Construction, hotels and catering, and financial and business services also showed strong falls and public sector finances weakened significantly. Lost output since the start of the current recession has already exceeded that of the early 1990s recession, but is still less than recorded in the early 1980s, as shown in the chart below.

Peak to trough output losses in this and previous recessions
1973 Q2 to 1974 Q1 0.0 -1.0 -2.0 -3.0
%

1979 Q2 to 1981 Q1

1990 Q2 to 1991 Q3

2008 to date

-2.47 -3.45 -4.08

-4.0 -5.0 -6.0 -7.0

-5.89

Source: ONS GDP preliminary estimate, Economic and Labour Market Review, May 2009

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Research by ONS found that the path of the recession so far had closely followed that of the 1980s. The research also warned that unemployment took longer to recover than GDP in previous recessions. Other findings included that the recession had impacted more on men than women so far (in part reflecting the types of industry and occupation the different genders tend to work in). Younger people of working age had been most affected by unemployment and redundancy. Provisional figures for April showed a better than expected performance in industrial output, possibly reflecting manufacturing companies recommencing production after periods of closure and running down of stock. This led a number of independent organisations to take a more optimistic view as to the likely severity and length of the recession. The June Bank of England Agents‟ summary of business conditions, however, reported that investment intentions remained subdued. In HM Treasury‟s June publication of independent forecasts for the UK economy, the average outlook for GDP was a decline of 3.7% in 2009, and growth of 0.7% in 2010. This represents a slightly more optimistic outlook than in the May publication. Forecasters anticipate claimant unemployment to continue rising to 2010. Experian research on behalf of the Nottingham Economic Resilience Forum indicates the city‟s economy is not forecast to decline as much in 2009, and is forecast to grow more strongly in 2010.

Local Update
Unemployment and job vacancies
 In May 2009 the claimant unemployment rate (those receiving Job Seekers Allowance) was 5.9% in Nottingham City, more than 11,800 claimants and higher than nationally (4.1%).

Note: This alert is for information only, and does not constitute Nottingham City Council policy

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Unemployment increases of 300 and 30 people in April and May respectively were low in comparison to previous months There were nearly 19,000 claimants in Greater Nottingham, a rate of 4.5%. In May, unemployment in Greater Nottingham fell by 68 people. The unemployment figures should be viewed in their seasonal context. In May, there is usually a small reduction in unemployment. The largest increases in unemployment over the last year were amongst the under 30s, although there has been a fall in unemployment in amongst these groups in recent months. More comprehensive analysis of the latest local unemployment figures can be found in the Monthly Unemployment Update at http://www.nomadplus.org.uk/reports.asp - select „Social Issues‟ then „Economic Deprivation‟. Claimant Unemployment Rates (%) 2004-09
7.0 6.0 5.0 England 4.0 3.0 2.0 1.0 0.0 May-04 May-05 May-06 May-07 May-08 May-09 East Midlands Nottingham Greater Nottingham

Source: ONS Claimant Count (May 2004 – May 2009)

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The increase in Nottingham was the second lowest of the eight Core City local authorities in the last month. Greater Nottingham was one of only two Primary Urban Areas (larger, more comparable geographic areas) which saw a decrease in unemployment. Unemployment rates and change for Core Cities – May 2009
Local Authority Boundary Primary Urban Area Monthly Annual Monthly Annual Number Rate % change change change change 48,493 7.7 0.9 47.1 1.4 62.5 11,472 4.1 3.7 119.6 3.8 139.5 23,952 4.8 2.9 90.4 2.9 90.4 21,219 7.5 0.8 43.1 0.9 50.2 17,333 5.5 0.9 61.1 0.9 79.7 8,733 4.9 0.5 53.8 -0.6 59.5 11,843 5.9 0.3 56.7 -0.4 72.9 15,370 4.5 0.1 86.0 0.4 95.9

Birmingham Bristol Leeds Liverpool Manchester Newcastle-upon-Tyne Nottingham Sheffield

Source: ONS Claimant Count (May 2009). Note Greater Nottingham has been used as the Primary Urban Area.

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Looking ahead, the Experian research for the Nottingham Economic Resilience Forum warned that unemployment in Nottingham City might take longer to recover than nationally.

Note: This alert is for information only, and does not constitute Nottingham City Council policy

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In May 2009 there were 3,876 unfilled vacancies advertised by Job Centre Plus in Greater Nottingham. Vacancies were lower than in April, but a fall at this time of year is usual. May vacancies were considerably lower than in May 2008 when nearly 6,700 jobs were advertised. Note it is generally considered that only around one third of all vacancies are advertised through Job Centre Plus.

Housing benefit and repossessions
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Housing Benefit is a means tested benefit available for tenants in rented accommodation. The number of Housing Benefit claimants now stands at over 40,200, an increase of nearly 1,000 since the end of February. The percentage of Housing Benefit claimants claiming the maximum rate has remained stable at around 80% since the monitor began in November 2008. For the second quarter running there is evidence that the package of measures introduced nationally in late 2008 is having an effect, and the Council of Mortgage Lenders have now revised down their estimate of possessions for 2009. Ministry of Justice figures show mortgage and landlord possession orders issued by the county courts for Qtr1 2009 are down by around one fifth in Nottingham compared to the same quarter last year. In this context Nottingham broadly equates to the conurbation and surrounds. Comparing the full year to Qtr 1 2008 and Qtr 1 2009 figures for mortgage and landlord possession still show increases, but both are lower than reported in the previous monitor. Possession orders give a crude indication of people getting into financial difficulty, and not the actual number of people losing their home. A possession order is the point at which a claimant can apply for a warrant to have the defendant evicted, but in 40-50% of cases negotiations follow which resolve the issues. Because of the national interest in this the Department of Communities and Local Government have provided analysis of 2008 data by local authority. This shows that a higher rate of possession orders per household in Nottingham City than in Broxtowe, Gedling and Rushcliffe. This may reflect the reduced availability of mortgage products for people on more modest incomes or in the buy-to-let market. It should be noted, though, that figures are still historically low. Nottingham City Council‟s council tax records indicated a small decline in the number of vacant residential properties between April 2008 and April 2009 – from 6,273 to 6,235. This was the first annual decline in the total since before 2002. Perhaps more importantly, private sector vacancies fell by over 5%, from 5,135 to 4,841. Nottingham City Homes (NCH) and Registered Social Landlord (RSL) vacancies rose because more properties were awaiting demolition, improvement or sale, although the NCH vacancy rate (2.8%) remained low compared to both the private sector rate (5.5%) and the RSL rate (6.0%). In the same period, the overall number of properties vacant for 6 months or more fell slightly from 3,363 to 3,316. The number in the private sector fell from 2,953 to 2,682, a decline of over 9%. Contributory factors to this trend may be that many vacancies are due to inefficiencies in the housing market, rather than anything intrinsically wrong with the property. As fewer people are likely to be moving house in a time of recession and decline in the housing market, fewer properties are at risk of being vacant for this reason. Coupled with this, there is national evidence of an increasing trend towards short-term rentals of previously owner-occupied properties, due to the problems of arranging sales, leading to an increase in so-called “accidental landlords” (e.g. see „The rise of the accidental landlord, Times Online, 22nd August 2008). Some properties which could previously have been vacant awaiting sale may, therefore, now be occupied.

Housing prices and building
  The average house price fell by 16.5% in the last year, both in Nottingham and nationally. House prices in the City are at their lowest since June 2003. In February and March there were very small declines of 0.3% and 0.4%, but April showed a steeper 3% decline in house prices. Nationally the pattern was the opposite with a 2.1% fall in February, followed by less steep falls of 0.3% in each of the two following months.

Note: This alert is for information only, and does not constitute Nottingham City Council policy

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More recently, national press report regarding the housing market have been more positive and in the Bank of England Agents‟ summary of business conditions for June increasing viewings, reservations and sales of houses were reported.

House Price Index Comparison House Price Index
320 300 280 260 240 220 200 180 160 Apr04 Oct04 Apr05 Oct05 Apr06 Oct06 Apr07 Oct07 Apr08 Oct08 Apr09

Nottingham City England and Wales

Source: HM Land Registry – House Price Index

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House building levels remain low. Construction started on only 5 sites in Nottingham, totalling 10 properties, in the last three months. In total, Building Control received 229 applications in the last three months, an increase of 60 over the previous quarter. Applications were largely for extensions or improvements to existing residential or commercial properties.

Personal finance and debt
 County Court Judgements (CCJs) are recorded when individuals are taken to court for the recovery of debt, and are an indication of both current financial difficulties and future creditworthiness. Data for England and Wales showed a 7.2% increase between Qtr4 2007 and Qtr4 2008, but there was a 5.1% decrease in most recent quarter. More than 1000 residents attended a partnership event in late April to get financial advice, including information on how to manage debt and benefit entitlement for families and those receiving pensions. Local advice centres are still running at capacity and officers have reported dealing with more debt related issues. The effect of the recession on Council Tax collection rates has remained minimal. 93.2% of Council Tax was collected in 2008-09 compared to 93.4% in 2007-08. Collection rates for May 2009 are only slightly below the same point in time last year.

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Business overview
  Nottingham City Council‟s Business Rates collection figures fell in January 2009 and finished the 2008-09 financial year 1.5 percentage points behind the collection figure for 2007-08. Collection rates for May 2009 were already 2.4 percentage points behind the May 2008 figure. Business Rates data shows a small improvement in the number of firms going into liquidation and administration. In March and April, seven businesses in Nottingham went into liquidation, the same as in February. A further eight went into administration compared to 12 in February. This data was a snapshot at the 9th of June and more businesses may be added to earlier months‟ figures at a later date due to a time lag in reporting of this information to Business Rates. Research by Experian to inform the Nottingham Economic Resilience Forum found Nottingham and the East Midlands showed somewhat higher than average levels of business bankruptcies.

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Note: This alert is for information only, and does not constitute Nottingham City Council policy

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However, Experian also found that levels are still well below those in the early 1990s, and appear to be considerably less volatile than in those periods. The latest Derbyshire and Nottinghamshire Chamber Quarterly Economic Survey (businesses surveyed in February and March 2009) indicated more positive expectations for the economy in the next quarter and concluded that „the economic decline may be bottoming out‟. It also reported that interest rate cuts, support for training and bringing forward public sector projects had been the most effective interventions to assist business, whilst accessing finance had got harder. The results indicated a slight improvement in cashflow balances in Nottinghamshire and over the coming months, a higher number of businesses are expecting to increase their workforces. Updates provided by regional offices of both Business Link and the Bank of England also confirmed that limited access to finance remains a main concern, along with weaker demand for goods and services. Business Link has received ongoing reports from Nottinghamshire businesses that banks have withdrawn overdraft facilities and are charging high interest on loans. Overall, businesses, as well as the banks, continue to tread cautiously. Some businesses were reported as doing well including family owned businesses and those that did not have to apply to the financial industry for loans. The latest Business Link report (mid April to mid May 2009) concluded that there were some signs that business conditions had improved slightly, including higher levels of confidence compared to six to eight months ago. The report also mentioned that many businesses had been proactive in seeking support and that there had been strong interest in start-up activity, particularly from former directors and senior managers and other skilled individuals who have been made redundant. The Federation of Small Businesses latest „snap poll‟, carried out in April 2009 on its East Midlands members, showed that for nearly half (48%) of East Midlands based businesses trade decreased in the previous two months. This is marginally worse than the England average (46%). However, one fifth (21%) reported an increase in trade. Just over one quarter (26%) reported they had experienced an increase in the cost of new credit (England average was 27%) and nearly a fifth have been refused credit in the form of loans and overdrafts (18%), which is on par with the England average. However, one quarter of business in the East Midlands reported that they had successfully obtained credit from a bank in the previous two months. Overall than, the picture has been mixed. Businesses are still very much affected by the tougher economic conditions and limited access to credit, but recent surveys appear to indicate greater optimism amongst businesses. The next 12 to 18 months are uncertain and having seen vast fluctuations in the market in the last year businesses Economic Development Account Managers have spoken to are planning for a number of different scenarios over the coming year.

Business sectors
Economic Development Account Managers work with companies in five sectors identified as important to the future growth of Nottingham. There are positive reports from local creative industries and the science and technology sector, but challenges for finance, business and retail. Finance and business services
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Feedback from local companies to date has been mixed, and by no means all negative. Many successfully prepared for the recession and streamlined accordingly, without too many job losses. The Finance and Business Services Advisory Board, run by the City Council, is looking at ongoing property requirements. However, the immediate future remains uncertain and, to a certain extent, depends on decisions being made within many organisations at a national level. The biggest reported losses in this sector in recent months have been within Virgin Media (150 job losses). However, the City Council, Jobcentre Plus and partners are in the process of delivering an immediate intervention programme to support those affected in finding alternative opportunities in the City. The feedback from Virgin Media about this service has been very positive to date.

Note: This alert is for information only, and does not constitute Nottingham City Council policy

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Public sector
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A bid to DWP will be submitted at the end of June for £1.5m from the Future Jobs Fund to fund the creation of approximately 600 jobs (minimum of 12 months) within a number of public sector organisations, social enterprises and the voluntary and community sector organisations. In addition to this, the Working Neighbourhoods Fund will help create a further 150 apprenticeships over the next two years. The apprentices will be places across a number of public sector organisations.

Retail
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The Bank of England Agents‟ summary of business conditions in June reported that there was further evidence that the rate of contraction had eased for both retail sales and consumer services, although in Nottingham city centre the number of vacant properties has increased (see below).

Science and technology
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The majority of the companies Economic Development‟s Account Managers have spoken to within the BioMed and ICT sectors are still reporting positive news about their health. There are one or two exceptions and, overall, companies are treading much more cautiously. Ongoing access to finance remains concern. The City Council, supported by the private sector, is continuing to explore new opportunities/markets for the benefit of local businesses. In July, the City Council will bring together a number of high profile individuals within the veterinary medicine field to enable local companies to find out more about the opportunities in this sector and provide a networking opportunity. The City Council is also working with Karlsruhe in Germany to facilitate linkages between their ICT business association, the Cyberforum, and ICT companies in Nottingham. The Cyberforum is Europe‟s third largest ICT business association. The Medipark scheme was endorsed by City Councillors in June and outline application will be submitted in the coming months. The scheme would provide accommodation for up to 200 science and medical-related businesses in the future.

Construction
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The engineering and construction sectors have suffered the most in recent months. However there is greater optimism that the market may be starting to gradually turn around. For example, house builder Taylor Wimpey has reported „continued stability‟ in the UK housing market since April in the press.

Commercial property and investment activity
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In May, Nottingham City Council conducted a visual survey of ground floor, mainly retail, city centre premises. The survey found 190 vacant properties, an increase of 20 since the previous survey in February 2009. In common with the previous city centre survey, the main concentrations of long term vacant properties were outside of main thoroughfare in Hockley, Hurts Yard and the West End Arcade. The City Council has allocated £220,000 to improve the appearance of empty units and to commission an action plan in areas where the vacancy rates exceed 20% Since February, there have also been noticeable increases in the Victoria and Broadmarsh Centres and also along Derby Road. In the Victoria Centre, it is understood that many of the properties have been let and although vacant, are not available. The City Council has also worked with the Broadmarsh Centre to allow other retailers to display in empty units and Nottingham Trent

Note: This alert is for information only, and does not constitute Nottingham City Council policy

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University has taken vacant units in the Flying Horse Walk to give Art and Design students experience of running a business. Figures for the Nottingham conurbation from FOCUS, a company which tracks commercial property transactions, show the amount of square footage let or sold in April and May 2009 was down by 14% compared with April and May 2008. However, the number of units let or sold increased (by 26%). In terms of property type, the biggest decrease was in office use (down by 50%), whereas industrial/warehouse and High Street retail activity rose. Business rates figures for the whole of the Nottingham City area showed there were 1,905 empty commercial properties in Nottingham, a rise of 119 in just over two months. Of this increase, 42 properties were designated as offices, 32 were shops and 24 were small industrial units. Inward Investment enquiries 2008-09
30

25

20

15

10

5

0 Feb- March April 08 May June July Aug Sep Oct Nov Dec Jan09 Feb March April May09

Source: Invest in Nottingham, 2009

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Investment inquiries have fallen over the last year. Inquiries in May 2009 were higher than in the previous month but still lower than for the same month last year. Data is only available back to February 2008, but this suggests there a seasonal dip in inquiries in February before recovering throughout spring and early summer. This year the dip lasted slightly longer. In April the Invest in Nottingham Team were successful in attracting new company LEDinLight to the City, which has initially created three jobs. The company has developed cutting-edge, energy efficient (and cost saving) technology to replace fluorescent lighting in a market that is expected to flourish. Significant additional job creation is expected over the coming years. In addition to this, there have been a number of good quality enquiries in recent months with a strong possibility of success. The Invest in Nottingham Team is hoping to make two to three positive announcements later in the summer with a combined worth of up to 50 new jobs.

Note: This alert is for information only, and does not constitute Nottingham City Council policy

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Implications for Nottingham
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The latest review of the economy and its impacts on residents and businesses support the proposals of the Nottingham Economic Resilience Forum, namely that  Support for the small business sector facing difficulties accessing finance will be vital in the short term, and ultimately help drive a recovery;  Improving skills will be crucial to ensure those with lower skills can compete for jobs, and so prevent unemployment and the household pressures this can cause from being prolonged;  Measures will be most effective if steps are also taken to sell all Nottingham has to offer to investors, and as confidence returns to local businesses and local communities. Securing funding (such as from the Future Jobs Fund) will significantly improve our ability to deliver these activities.

Further reading
This report is available to download at http://www.nomadplus.org.uk/reports.asp The BBC‟s UK „recession tracker‟ http://news.bbc.co.uk/1/hi/business/7844861.stm HM Treasury‟s latest summary of independent forecasts for the UK economy http://www.hm-treasury.gov.uk/data_forecasts_index.htm The Office for National Statistics monthly Economic and Labour Market Review http://www.statistics.gov.uk/elmr/ The impact of the recession on the labour market, published by the Office for National Statistics http://www.statistics.gov.uk/cci/article.asp?id=2187

Further questions or advice
Geoff Oxendale Information and Research Officer, Policy and Information Claire Richmond Senior Information and Research Officer, Policy and Information Anna Phillips Project Manager, Economic Development Tel: (0115) 9155451

Tel: (0115)9155076

Tel: (0115) 9155342

If you have questions regarding the Council‟s response to the economic downturn, please contact Andrew Hall, Head of External Affairs, on (0115) 9154394.

Note: This alert is for information only, and does not constitute Nottingham City Council policy

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