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					The Recession & Emerging Recovery
       in Rural Communities

  West Midlands Rural Affairs Forum

             Glynn Jones
             9th June 2010
Presentation

 1. Economic update

 2. Recession & the
    rural economy

 3. Looking forward

 4. Conclusions



                      1
   The UK economy returned to growth in Q4 2009, but output
   fell by a total of 6.3% during the recession

                                                                               Growth is being supported by
                                                                               a range of factors:
                                                                                Economic stimulus
                                                                                 measures
                                                                                Businesses re-stocking
                                                                                 their inventories
                                                                                Growth in overseas
                                                                                 markets
                                                                                Sterling’s weakness



Source: ONS, UK Output, Income & Expenditure, February 2010
Notes: Q4 2009 GDP was revised up from +0.1% up to 0.4%; Q1 2010 up from 0.2% to 0.3%
Estimates of the recession have been revised downwards from 6% to 6.3%.
                                                                                                              2
Growth wavered in Q1 2010, with emerging recovery
dampened by a number of temporary events

1. Snowfall impacted business activities in Jan / Feb
2. Volcanic ash cloud impacted on business in April
3. General election prompted consumer & business
   caution
4. End of stimulus measures has artificially boosted sales,
   will take time to settle out:
      - standard rate of VAT returned to 17.5% on 1st January 2010
      - Stamp duty holiday ended 31st December 2009
      - UK Car Scrappage Scheme closed in March



                                                                     3
2. How has the rural economy fared
       during the recession?




                                     4
  England’s rural economy saw sharper contractions in output
  than the wider economy for much of the recession period
                                                       PMI Business Activity (seasonally adjusted)
                                                  60                                                    By April 2010 England’s rural
                                                                                                         economy had seen 10
   PMI Index (50 = no change on previous month)




                                                  55
                                                                                                         consecutive months of rising
                                                                                                         business activity
                                                  50


                                                  45                                                    BUT the rate of expansion in
                                                                                                         business activity has been
                                                  40                                                     weaker in the rural economy
                                                                                     Rural England       than the English average
                                                  35                                 West Midlands
                                                                                     England
                                                                                                        These patterns may have been
                                                  30
                                                                                                         even sharper in the West
                                                                                                         Midlands’ as it was the hardest
                                                  25
                                                                                                         hit of the English regions


Source: Markit Economics / AWM / DEFRA, May 2010


                                                                                                                                           5
     But job-shedding in the rural economy has not been as sharp
     as seen in the wider economy – suggesting spare capacity
                                                      PMI Employment (seasonally adjusted)      The West Midlands has seen the
                                                 60
                                                                                                 sharpest job-shedding of the UK
  PMI Index (50 = no change on previous month)




                                                                                                 regions during the recession
                                                 55               Rural England
                                                                  England
                                                                                                As a result job-shedding may have
                                                                  West Midlands
                                                 50                                              been sharper in our rural
                                                                                                 communities than others in
                                                 45                                              England

                                                 40                                             England’s rural economy saw a
                                                                                                 slight increase in staffing levels in
                                                 35
                                                                                                 April 2010

                                                                                                This was a month later than the
                                                 30
                                                                                                 wider economy and only the 3rd
                                                                                                 increase in two years
Source: Markit Economics / AWM / DEFRA, May 2010


                                                                                                                                         6
Whilst the absolute increase in claimant numbers in rural
areas was small in contrast to that in urban areas......
                                                          Absolute Rise in Claimant Level (Apr 08 - Apr 09)
                                    16,000

                                              Rural 80 Districts
                                    14,000
                                              Rural 50 Districts
                                              Significant Rural Districts
  Absolute rise in claimant level




                                    12,000

                                    10,000

                                     8,000

                                     6,000

                                     4,000

                                     2,000

                                        0




                                                                                                              7
                        The relative impact was marked and districts such as
                        Cannock saw nationally significant increases
                                                           Percentage Rise in Claimant Level (Apr 08 - Apr 09)
                                        250%

                                                Rural 80 Districts
Percentage increase in claimant level




                                                Rural 50 Districts
                                        200%
                                                Significant Rural Districts
                                        150%



                                        100%



                                        50%



                                         0%




                                                                                                                 8
  Notified redundancies have now dropped from the peak of
  the recession, but remain fairly significant......




Source: Jobcentre Plus, May 2010
Marches sub-region = Herefordshire, Worcestershire, Shropshire, Telford & Wrekin

                                                                                   9
  With the public sector now bearing the brunt of the impacts
       Notified Redundancies (Jan-Mar 09)                                           Notified Redundancies (Dec - Feb 10)

                                                                                                  29%



                                                                                                                    3%

             56%


                                                         32%                      21%




                                                                  manufacturing                                   39%
                                                                                         8%
                                                                  services
                                          4%                      construction
                                   6%
                                                                  public
                            2%                                    other

Source: Jobcentre Plus, Notified Redundancies, February 2010
Note: ‘Other’ includes Agriculture & Fishing and Energy & Water

                                                                                                                           10
3. Looking forward…




                      11
  Forecasts for 2010 have levelled out, but a v-shaped
  recovery is very unlikely.....
                                                                                          2010 GDP Growth Forecasts
                                                    1.6                                                                                                                                                   “It is possible we will have a
  Average of Independent GDP Growth Forecasts (%)




                                                    1.4                                                                                                                                                   quarter when GDP falls, but I
                                                                                                                                                                                                          don’t think it will be a double dip.
                                                    1.2
                                                                                                                                                     May 10 = +1.2%
                                                                                                                                                                                                          I would be surprised if we go
                                                    1.0                                                                                                                                                   back to recession but I think
                                                    0.8                                                                                                                                                   recovery will be bumpy and
                                                    0.6
                                                                                                                                                                                                          fragile”
                                                    0.4
                                                                                                                                                                                                          Kate Barker
                                                    0.2
                                                                                                                                                                                                          Bank of England Monetary Policy
                                                    0.0                                                                                                                                                   Committee, March 2010
                                                                                                                                  Oct-09
                                                                                                                Aug-09
                                                                                              Jun-09




                                                                                                                                                             Jan-10
                                                          Feb-09




                                                                                                                                                                      Feb-10
                                                                            Apr-09




                                                                                                                                                                                        Apr-10
                                                                                                                                           Nov-09
                                                                                                                                                    Dec-09
                                                                                                       Jul-09


                                                                                                                         Sep-09




                                                                                                                                                                               Mar-10
                                                                   Mar-09


                                                                                     May-09




                                                                                                                                                                                                 May-10




                                                                                                                Date of Forecast

Source: HM Treasury, Forecasts for the UK Economy: a comparison of independent forecasts,
May 2010

                                                                                                                                                                                                                                             12
   And there remains considerable uncertainty about the timing
   and strength of recovery
         GDP projection based on market interest rate     Recent improvements are still
         expectations and £200 billion asset purchases
                                                           being boosted by remaining
                                                           stimulus measures

                                                          Export recovery remains patchy

                                                          Public spending will be very
                                                           constrained in future years

                                                          Financial institutions are
                                                           redressing their balance sheets,
                                                           with impacts on lending

                                                          Many businesses are choosing
                                                           to save rather than invest due
                                                           to uncertain outlook
Source: Bank of England Inflation Report , May 2010


                                                                                           13
                                 The rural and region economies facing particular pressures on
                                 their profit margins from rising input prices......
                                                         PMI - Input Prices (seasonally adjusted)                                                                                                                                                PMI - Output Prices (seasonally adjusted)
                                               90                                                                                                                                                                                 70




                                                                                                                                                                                   PMI Index (50 = no change on previous month)
PMI Index (50 = no change on previous month)




                                                                                                                            Rural England                                                                                         65                                                                           Rural England
                                               80
                                                                                                                            England                                                                                                                                                                            England
                                                                                                                            West Midlands                                                                                         60                                                                           West Midlands
                                               70
                                                                                                                                                                                                                                  55


                                               60                                                                                                                                                                                 50


                                                                                                                                                                                                                                  45
                                               50

                                                                                                                                                                                                                                  40

                                               40
                                                                                                                                                                                                                                  35


                                               30                                                                                                                                                                                 30
                                                    Jan-08




                                                                                                          Jan-09




                                                                                                                                                                 Jan-10




                                                                                                                                                                                                                                       Jan-08




                                                                                                                                                                                                                                                                                             Jan-09




                                                                                                                                                                                                                                                                                                                                                    Jan-10
                                                                                                 Nov-08




                                                                                                                                                        Nov-09




                                                                                                                                                                                                                                                                           Sep-08
                                                                                                                                                                                                                                                                                    Nov-08




                                                                                                                                                                                                                                                                                                                                           Nov-09
                                                                               Jul-08
                                                                                        Sep-08




                                                                                                                                      Jul-09
                                                                                                                                               Sep-09




                                                                                                                                                                                                                                                                  Jul-08




                                                                                                                                                                                                                                                                                                                         Jul-09
                                                                                                                                                                                                                                                                                                                                  Sep-09
                                                             Mar-08




                                                                                                                   Mar-09




                                                                                                                                                                          Mar-10




                                                                                                                                                                                                                                                Mar-08




                                                                                                                                                                                                                                                                                                      Mar-09




                                                                                                                                                                                                                                                                                                                                                             Mar-10
                                                                                                                                                                                                                                                                                                                May-09
                                                                      May-08




                                                                                                                             May-09




                                                                                                                                                                                                                                                         May-08

Source: Markit Economics / AWM / DEFRA, May 2010


                                                                                                                                                                                                                                                                                                                                                                      14
 And whilst unemployment has started to settle, employment
 has been falling as people move into inactivity
                                      Unemployment Rate (seasonally adjusted)                                      Employment Rate (seasonally adjusted)
                                 12                                                                           76

                                                                                                              75                            West Midlands
                                 10
  % of 16+ economically active




                                                                                                              74                            UK




                                                                                % of working age population
                                 8                                                                            73

                                                                                                              72
                                 6
                                                                                                              71

                                 4                          West Midlands                                     70
                                                            UK
                                                                                                              69
                                 2
                                                                                                              68

                                 0                                                                            67




Source: ONS, Labour Market Statistics, May 2010


                                                                                                                                                            15
  The recession has had varied effect on demographic groups –
  increasing the gap for young people and the low skilled

                                     Youth unemployment risks long-
                                      term, generational impacts

                                     A longer-term fall in employment
                                      rates for the low skilled will only
                                      continue in an increasingly
                                      knowledge-based economy

                                     Will be key challenges for some
                                      of our ‘significant rural’ districts,
                                      e.g. Cannock Chase, Wyre
                                      Forest, North Warwickshire



Source: Labour Force Survey, 2009


                                                                              16
                                      Number of JSA per Notified Vacancy




                                0.0
                                       1.0
                                                   3.0
                                                         4.0
                                                               5.0
                                                                     6.0
                                                                           7.0
                                                                                 8.0




                                             2.0
         North Warwickshire
          Stratford-on-Avon
                 Wychavon
                    Lichfield
          East Staffordshire
                   Warwick
               Warwickshire
                  Worcester
                Wyre Forest
                 Shropshire
              Herefordshire
     Newcastle-under-Lyme
             Worcestershire
                    Stafford
               Staffordshire
                  Tamworth
                     Rugby
                Bromsgrove
               Malvern Hills
     Staffordshire Moorlands
                     Solihull
         Telford and Wrekin
     Nuneaton and Bedworth
         South Staffordshire
                                                                                   Claimant to Notified Vacancy Ratio (April 2010)




             Stoke-on-Trent
                   Redditch
             West Midlands
            Cannock Chase
                   Coventry
                   Sandwell
                     Walsall
                Birmingham
                                                                                                                                     Cannock Chase and South Staffordshire appear to face




                     Dudley
                                                                                                                                     particular challenges in finding employment opportunities




            Wolverhampton
17
Some rural districts could be particularly at risk from future
public sector cuts: Stafford, Bromsgrove, Shropshire
                                                                               Public Sector Employment
                                    45
                                                Rural 80 Districts
                                    40
                                                Rural 50 Districts
                                                Significant Rural Districts
 % of employment in Public Sector




                                    35

                                    30   Great Britain & West Midlands Average = 27%

                                    25

                                    20

                                    15

                                    10

                                    5

                                    0




                                                                                                          18
4. Conclusions




                 19
Rural economies face a number of specific challenges which
will influence the pace of recovery
 Dependence upon a limited number of key employers, closure
  can have significant long term effects
 Often a ‘double-whammy’ in ‘commuter areas’
 National evidence that rural labour market is ‘different’, with
  long term unemployment tending to be proportionally greater
     Support available for businesses and individuals often more patchy
      and harder to reach – e.g. Job Centres
     Many communities distant from sources of employment
     Specific challenges in accessing employment opportunities,
      particularly for low skilled and young people
 Impact on many communities of pub, shop closures plus
  tightening of public sector budgets, out-migration

                                                                           20

				
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