DerryLondonderry Today and tomorrow Baseline outlook and challenges

1
DerryLondonderry Today and tomorrowBaseline
outlook and challenges
2
Overview
2

• The context end of an era
• DerryLondonderry today and tomorrow
• The challenge ahead less with more (time to
  act)
• Complexity of economic success growth, wealth,
  equality and sustainability
• The Citi-scope model
• How can the Citi-scope model help address
  DerryLondonderry challenges?
• Beyond headline economics measuring equality
• Summary
• Annex A A scenario walkthrough
• Annex B User interface
• Annex C Additional information

3
3
The context end of an era
4
First global recession in a generation
5
All major economies feeling the strain
5
Acute where combination of house price crash and
trade exposure But Trade most acute
Source Oxford Economics
6
What caused the recession?
6

• In summary
• Debt
• Confidence
• Complacency
• Essentially the rapid escalation of financial
  sector debt (and personal sector debt in some
  countries) unwound when uncertainty arose over
  asset values
• Led to a spectacular collapse in confidence,
  liquidity and valuations (plus the Lehmans
  collapse) left the financial world close to
  collapse
• World bail out (largely) to avoid deep
  recession and stabilise spending
• Global demand feel as a result of the turmoil,
  adding export problems
• Now a legacy of scarred consumers, nervous
  business, indebted governments (in West) and
  rising protectionist sentiment makes outlook
  fragile

7
The wide reach
7
Finance
construction
World impacts
Housing sectors
Wider impacts
Spending sectors
Export sectors
Public sectors
8
As much as a decade for recovery
8
Total employment forecasts

• Year when employment returns to 2007 / 2008 peak
• ROI 2022
• NI 2016
• UK 2015

Source CSO, ONS, DETI and Oxford Economics

• Northern Ireland forecast to lose 37,360 net jobs
  over recession

9
Unemployment - here to stay?
9
Claimant unemployment forecasts
Source Nomis, Oxford Economics
Unemployment to remain higher than recent
historic lows
10
House price collapse no surprise
10
House prices forecast
Source Oxford Economics
11
DerryLondonderry today and tomorrow
11
12
Economic activity and structure
12
DerryLondonderry
Sectoral chart
Source Census, 2001
Source DETI, Oxford Economics
13
Population rising strongly
13
Source Oxford Economics, NISRA
14
Migration not adding to population in
DerryLondonderry
14
Migration expected to be negative over the
forecast period
Source Oxford Economics and NISRA
15
Employment structure professional services a gap
15
Relative to Belfast (2008)
Less dependent
More dependent
Source DETI and Oxford Economics
16
A low level of full-time gross weekly wage
16
Source ASHE
17
Looking back retail and business key
17
Business services and Distribution (retail) have
experienced the strongest growth in employee jobs
Source Oxford Economics Note red cells
highlight where DerryLondonderry underperformed
relative to NI. Green cells highlight where Derry
out performed NI.
18
Job growth only in a select few Wards
18
19
DerryLondonderry job legacy severe
19
Source Oxford Economics
Employment not expected to return to 2008 peak
until 2017
20
Employment forecasts
20
DerryLondonderry is expected to experience
faster decline in employment than NI up to 2011.
However we expect future growth to out perform
the regional average.
Only two sectors expected to experience growth
over the next few years
Source Oxford Economics Note Green cells
highlight where we expect DerryLondonderry to
outperform NI with positive growth.
21
Unemployment highest in Derry Londonderry
21
Source Claimant count, Nomis
22
Resident employment rates to remain low
22
Source Oxford Economics
23
Unemployment rates to remain above recent lows
23
Source Oxford Economics
24
Relative productivity to remain static
24

• Productivity is expected to remain below the NI
  average over the forecast period

Source Oxford Economics
25
25
The challenge ahead less with more
26
Public finances in a sorry state
26
ROI and UK public finances outlook (April 2009)

• Note no NI budget a telling difference
• UK deficit now likely to be perhaps 14 GDP

27
NI Departmental finances pressures will come
27
Source calculated from the NI Budget 2008-11
(excludes AME and capital investment) Note Other
Departments include Assembly Ombudsman /
Commissioner for Complaints, Food Standards
Agency, NI Audit Office and NI Authority for
Utility Regulation
To put these figures in context,
DerryLondonderrys GVA is estimated at 1.476bn
in 2008
28
Global job loss protectionism likely
28
Source Oxford Economics
29
Benefits high and rising in NI
29

• Source DSD
• Population aged 65, 2006 Mid Year Estimates,
  Northern Ireland Statistics
• 2007 Mid Year Estimates, Northern Ireland
  Statistics and Research Agency
• Population aged 16, 2007 Mid Year Estimates,
  Northern Ireland Statistics
• NISRA Mid 2007 Population Estimates
• Mid 2007 Population Estimates. Population aged 16
  and over
• 0-59 Population per 2007 Mid-Year Estimate for
  Northern Ireland
• Working Age Population per 2007 Mid-Year
  Estimates for Northern Ireland. Namely 16-59 for
  Females, and ages 16-64 for Males.
• Note recipients of benefits could receive a
  number of the above benefits. Therefore summing
  the number of recipients will double count some
  people

30
Pressure on services acute
30

• Population is forecast to grow year on year over
  the forecast period
• unemployment is expected to remain higher than
  previous lows

Source Oxford Economics
31
How will the world be different?
31

• Debt levels will not return to recent highs
• Borrowing will not be as easy to acquire
• Construction and retailing cannot lead growth
• Public services boom era is over for some time
• Cuts and tax rises inevitable
• NI will have to find its own money to tackle
  challenges and exploit opportunities
• However
• There is still global money looking investment
  opportunities
• Economic recovery will see job growth return
• The offer from Ireland (north and south) will
  improve in some ways (lower costs, labour
  availability)
• Tourism, Environmental technologies, professional
  services, advanced engineering, pharmaceuticals,
  healthcare, elderly services all offer
  opportunities

32
And what does that mean for Derry?

• The economic environment has changed for the
  foreseeable future
• Challenges have increased and will continue to do
  so as they have for many places
• Previously reliable sources of jobs could come
  under greater pressure e.g. public services and
  voluntary sector
• Funding streams will be under greater pressures
  a clear evidence base is required
• The prospect of cuts is both real and potentially
  extremely damaging
• ISNI 3, CSR, budget debates all coming soon
  time to position is now

33
What is the scale of the challenge?
33

• In OEs view DerryLondonderrys challenges look
  to be something in the order of
• With employment estimated at 47,830 in
  DerryLondonderry in 2009, DerryLondonderry is
  only 23 the size of Belfast (in employment
  terms). It would take an additional 13,300 jobs
  to bring DerryLondonderry up to 30 the size of
  Belfast
• Thinking with DerryLondonderrys current labour
  market in mind
• 9,500 jobs for existing residents would raise
  employment rate to 72.5, moving
  DerryLondonderry to mid table on the UK cities
  ladder
• Reducing the claimant unemployment by 1,300 would
  place DerryLondonderry mid table in the city
  rankings (currently 79th of 86)
• Income support levels would need to fall by over
  4,000 to more Derry Londonderry to NI average

34
What is the scale of the challenge?
34

• Thinking with DerryLondonderrys current labour
  market in mind
• Halving the proportion of the working age
  population with no formal qualifications (10,000
  people) would move DerryLondonderry from 85th in
  the city rankings to 41st in the City rankings
• DerryLondonderry would need to raise the
  proportion of the working age population
  qualified to NVQ level 4 from 21.1 to 28.7
  (5,350 people) to match Belfast
• Only Ballynashallog has over 28.7 of its working
  age population qualified to NVQ Level 4 (34)
• No ward less than 50 employment rate there are
  currently 13 wards with employment rates less
  than 50 (Strand, Creggan South, Brandywell, and
  Creggan Central have employment rates ranging
  from 37 to 32)

35
35
Complexity of economic success growth, wealth,
equality and sustainability
36
Measuring economic success
36

• GVA / GDP common but is this really appropriate
  / sufficient? Especially at local level
• Economic activity very useful - employment rates
  key?
• Wages / incomes / wealth?
• Benefits levels?
• Social factors - crime, etc?
• Physical factors place image?
• Community factors ownership, spirit, local
  bodies?
• Cultural factors?
• Quality of life measures?
• Many factors hard to measures or gather evidence
  on, a selection of contextual data follows
  focusing on measurable economic factors
• Note the project will provide current Ward
  labour market profiles and forecasts

37
Upper skills relatively weak (2007)
37
Source NOMIS Note NVQ 4 equivalent to Degree /
HND / HNC Excludes commuters (important in many
locations)
38
Level of no formal qualifications a major concern
(2007)
38
Source NOMIS
39
3 out 5 with no formal skills in some areas (2001)
39
Source NI Census Office
40
Still an inflow of no qualifications
40
of pupils achieving no GCSEs (2007)
Source NINIS Note Based on place of pupil
residence
41
Relatively low levels of school pupils achieving
5 GCSEs grade C and above
41
of pupils achieving at least 5 or more GCSEs at
grade C and above (2007)
Source NINIS Note Based on place of pupil
residence
42
FE a popular destination
42
Destination of schools leavers (2007)
Source NINIS Note Based on place of pupil
residence
43
Returns to education in NI skills matter
43
44
Skills and likelihood of employment Derry
Londonderry below average
44
Actual versus expected resident employed (2001)
Source Census and RF/Oxford Economics
Across all skill levels, DerryLondonderry has a
lower likelihood of employment, which is
particularly high or those with no formal skills
45
Key performance metrics
45

• DerryLondonderry has
• A larger percent of people inactive compared to
  Belfast (37 versus 35)
• A high dependence on the public sector for jobs
• With the exception of Belfast, the largest
  proportion of households renting from the NIHE
  and Housing Association
• The 2nd lowest level of household access to cars
  or vans
• Only 16 of its working age population qualified
  to level 4/5, according to the 2001 Census
  (Creggan South had the lowest with only 5)
• Compared to other UK cities, the highest sickness
  benefits per capita at 244
• Very few residents commute outside of Derry to
  work (only 6 in The Diamond, Beechwood, and
  Shantallow West)

46
Deprivation - confirming the scale of the problem
46
DerryLondonderry is ranked consistently within
the 3 most deprived Local Government Districts
Source NINIS Note The table has been sorted by
average rank (1 most deprived, 26 least
deprived)
47
High proportion of lone parent households with
dependent children
47
Lone parent households with dependent children
(2001)
Source NINIS and Census (2001) Note A dependent
child is a person in a household aged 0-15
(whether or not in a family) or a person aged
16-18 who is a full time student in a family with
parent(s).
48
Rates bill is low, but not the lowest
48
Average rates bill (2008)
Source NINIS
49
Employment rate is worryingly low / even for a
city
49
Employment rate (2008)
Source Oxford Economics
50
Employment rates extreme variation
50
Note The final model will estimate current
employment rates
51
Claimant unemployment amongst the highest in UK
urban areas (July 2009)
51
Source NOMIS and NISRA
52
Youth Unemployment also amongst the highest (July
2009)
52
Source NOMIS and NISRA Note Youth defined as
aged 18 to 24
53
Long term unemployment again amongst the highest
(July 2009)
53
Source NOMIS and NISRA Note Claiming for over
12 months
54
Wages low - as expected (2008)
54
Source NOMIS and ASHE
55
DLA over 1 in 5 in certain Wards
55
56
Very little in commuting
56
57
Very specific city centre movements
57
Residence matters for City Centre working
58
Job locations and performance
58
Over half the jobs are in 4 wards
13 wards have less than 1 of jobs
59
Employment rates and qualifications a clear link
59
60
Non-employed (excluding students and retired)
clear sign of the equality issues
60
61
Non-employed no qualifications again a clear
link
61
62
Car ownership again reflects the wide variation
62
Inequality signs
63
63
The Citi-scope model
64
The rationale

• To assist the development of the plan by
  measuring the current economic conditions and
  quantifying proposed initiatives at a Ward level
  within Derry Londonderry
• to go beyond Council level analysis and take
  modelling closer to the within Council issues
  which define the city, its challenges and its
  strengths
• By designing a unique and powerful tool using
  best practice techniques to validate and depict
  the impacts of the initiatives and idea
  originating from the workgroups
• To leave a lasting evidence base for use in
  future work and analysis in the area
• To ask questions and help provide answers to
  test theories and anecdotes and ultimately to
  contribute to the overall vision of the plan
• to help avoid mistakes of other regeneration
  plans which lacked proper sequencing,
  co-ordination, equality consideration
• To assist making the clear evidenced arguments
  necessary to secure and identify funding
  opportunities

65
What is the Citi-scope model?
65

• A comprehensive economic model for the North West
  (DerryLondonderry, Limavady, Strabane, Donegal)
• A user friendly model delivered to Ilex for
  ongoing use and internal scenario testing
• The model encompasses demography, labour market,
  output, skills, land use, environment, traffic
  flows and fiscal balance under one roof (plus
  appraisal output tables) other modules could be
  added later
• Entirely developed for this project in Excel

66
The case for developing a model
66

• Coverage existing models insufficient
• Consistent - evidence base, thus grounding the
  plans
• Save money - by reducing data collection
  reputation and tweaked re-runs
• Stimulate debate
• Holistic both with regards to people and to
  distinct projects
• Detail Ward level accounting for all citizens
  and workers
• Funding support aiding the evidence based cases
  required
• New data and evidence - Fiscal balance figures,
  ward projections and environmental accounts for
  the first time
• Improve the plan by preventing wish list
  regeneration plans and avoid the inconsistencies
  so common in the myriad of projects / initiatives
  that are often treated in isolation
• Benchmarking framework

67
Challenges in modelling
67

• Not everything can easily be monitored (e.g.
  governance)
• Models only as good as data and assumptions (need
  to be transparent)
• Research on certain issues unclear (e.g. returns
  to education)
• Not everything in life is about numbers and
  economics! (e.g. diversity, quality of life)
• Quality of data at DC level in NI is very poor
  indeed (and worse at ward level)
• Acceptance of results is key for the work to have
  merit
• Results needed to be viewed as elements in the
  basket of factors helping to make decisions not
  the single factor
• Keeping the model up to date is vital and can
  undermine its usefulness if not carried out
• Can be complex to run, understand and interpret
  (but hopefully not if well documented and
  designed!)

68
68
How can the Citi-scope model help address
DerryLondonderrys challenges?
69
Identifying the problem
69

• The baseline outlook is less than desirable and
  the fiscal balance will face a level of scrutiny
  not experienced before
• So what is desirable?
• An increase in employment rates and less
  benefits?
• A more diverse sustainable economy more
  exporting firms?
• More productive companies requiring higher
  skills and therefore demanding more support
  labour?
• A better skilled workforce with more talent
  retained?
• A more mobile labour force within and outside
  the City (willingness to travel for work)?
• An improved tourism offering?
• Less segregation of employment and communities?

70
Measure the pot of actions
70

• The Citi-scope model will allow us to test the
  various options coming from the comprehensive
  consultation exercise, identifying their impact
  on the labour market, output, public finances,
  etc
• It will identify potential problems (e.g. lack of
  skilled labour) and
• Allow us to sequence options so that they
  compliment each other and maximise the benefits
  of the regeneration plan
• By looking at the impacts in this holistic way
  the spatial, equality, infrastructure and
  environmental aspects of proposed initiatives can
  be considered collectively

71
The core model structure
71
PE estimates
Demography
Housing
Fiscal balance
Labour market (residential) Economic activity
Traffic flows (commuting)
Environment Co2
Ward (Derry only) Economic activity
Labour market (workplace) By sector
Land
Skills
GVA
Quality of life
City comparisons
72
Site scenario
72
Construction phase
Direct jobs
Full model
Less additionally (substitution / displacement
Additionaility assumptions
Input / Output matrix
total impact
Indirect jobs
Labour search (wages, skills, distance)
Commuting impact
Migration impact
Local impact
Ward impact
Induced impacts
Traffic flows
Housing services
total impact
Carbon emissions
73
What it will contain
73

• Population (total, working age, elderly, young)
  (inc by ward)
• Migration (interregional and internationals)
• Housing stock (inc by ward)
• Unemployment (claimant and ILO) (inc by ward)
• Inactivity (by category) (inc by ward)
• Resident employment
• Skills of resident population (by economic
  activity)
• Commuting flows by mode of transport
• Workplace employment (14 sectors, self employed
  and employed)
• GVA (workplace by sector)
• Wages, resident and workplace
• Environmental accounts (primarily C02)
• Land use estimates
• Fiscal balance (and range of fiscal categories)

74
Feeding the model
74

• Transparent model no black box best practice
  and suggestions welcome to improve refine and
  update
• Dependent on the outcome of the qualitative
  workstreams no pre-population by OE (other than
  the baseline)
• Baseline detailed report end October
• Initiative translated into jobs, people,
  productivity type assumptions
• Not possible to model everything
• A system of flags will alert the user to issues
  a particular input raises (shortage of labour,
  dependence on migrants, infrastructure concerns,
  environmental concerns etc.)
• It is to be queried questioned and debated
• No initiatives have been selected (or will be
  selected by Oxford) testing the suggestion
  generated by the extensive consultation exercise

75
What will it produce?
75

• A set of baseline projections for labour markets
  at DC level and Ward level within
  DerryLondonderry
• Environmental, skills, land and transport
  accounts
• A software tool for Ilex
• A database of empirical data
• A methods report retailing the modelling approach
• A set of ward profiles
• Urban benchmark data for UK
• A quantified (where possible) measurement of the
  final plan

76
76

• Beyond headline economics - Measuring equality

77
How can Citi-scope measure equality
77

• Equality is a complex issue and in many ways hard
  to measure and forecast
• Citi-scope will focus on economic outcomes as
  primary measurement of equality
• At Ward level (not ideal but only level
  applicable)
• Technical measurements include Gini coefficients
  (or Lorenzo curve type approaches) but the income
  data is not available with any reliability for
  Derry Londonderry
• Measures used will be
• Economic activity / Employment levels
• Unemployment / benefit levels
• Skills profiles
• Spread, differentials gaps across the city and
  relative to NI

78
How can Citi-scope measure equality
78

• Some measurement and benchmarking of quality of
  life measures but hard to reliable forecast
  factors such as cultural diversity. Community
  engagement etc.
• Measurement of a range of section 75 groups not
  applicable for this type of model (e.g. religion,
  disability etc) captured elsewhere in the
  process
• Augmented by other equality measurement through
  qualitative work and surveys

79
Equality module (labour market element)
79

• Based around ward labour market forecasting model
  (enhanced version of Belfast ward model report
  available upon request)
• Requires spatial information on housing
  allocations (Area Plan up to date?), location of
  workplace jobs, commuting patterns (what impact
  footbridge?)
• Essentially jobs search for labour using skills
  and traveling pattern matrix to fill vacancies
  thus each new jobs is allocated to an individual
  (care over house moves needed)
• Output will be a full set of historical and
  forecast labour market accounts (by individual
  economic activity status categories and skill
  levels) for each ward for the baseline and
  scenarios (presented via individual ward
  PowerPoint slides)

80
Measuring and forecasting equality key economic
measures
80
Source Oxford Economics
81
81
Summary
82
Summary
82

• The recession has focused the minds on the scale
  of economic challenge
• The economy in Derry Londonderry, though making
  progress, continues to have extreme challenges
• Worklessness
• Equality
• Public sector dependence
• Wealth levels
• City Centre vibrancy
• Public funding is coming under extreme pressures
  and important decisions will be made in coming
  years that will define a generation
• Forecasts suggest many of the challenges will
  remain and intensify left to the market
• The challenge is significant and the range of
  initiatives will need to be creative, connected
  and courageous respond to this is what is
  happening now in the Plan process

83
Lets not forget the strengths!

• A young population
• A university within the city (plus schools and
  care services)
• Strong community engagement
• An attractive riverside location
• Desirable hinterland and rural living options
• Cultural and artistic offer and heritage
• An acceptance of the challenge ahead
• In global terms available resource

84
Contact DetailsNeil Gibson 02892 660669 /
07803 728994ngibson_at_oxfordeconomics.comThe
Oxford teamNeil GibsonPhilip McDonagh
(advisor)Kerry HoustonNeil McCulloughGraeme
HarrisonAshleigh CraigSaite Lu
85
85
Annex A A scenario walkthrough
86
Scenario walk through
86

• Two simple job creation scenarios (akin to site
  development) easily extended for multi-sector,
  inputting direct say Ebrington assumptions
• Scenario 1 High skill / high value added job
  creation 10,000 jobs in high skilled business
  services
• Scenario 2 Low skill / low value added job
  creation 10,000 jobs in retail (model will
  prompt warning flags asking where spend will come
  from high local displacement for non-export
  sector)
• Aim is to illustrate input-output in practice
  (show alternative supply-chain linkage impacts)
  and differing success of local job search (easier
  to find labour locally if skill requirements
  lower)

87
Scenario 1 10k business service jobs
87
Indirect / supply chain impact
88
Scenario 2 10k retail jobs
88
Indirect / supply chain impact
89
Labour market search phase 1
89
10,000 business service jobs
Other commuter flows and induced effects to be
added Supply across categories research ongoing
Note Phase 2 is the same pattern for induced jobs
90
Labour market search phase 1
90
10,000 retail jobs
Higher than business
Note Phase 2 is the same pattern for induced jobs
91
Capacity for firm closure / job loss impact
91
Indirect / supply chain impact
92
A tough challenge in tougher times
92

• Economy is facing biggest economic crisis in 30
  years (arguably more)
• The PE squeeze and no return to debt levels will
  raise the bar in terms of challenge
• DerryLondonderry has significant economic
  challenges and lies low in UK when league tables
• Making a real change involves further growth but
  also an equitable spread of growth
• Skills, benefits data, commuting information and
  job data clearly depicts the scale, location and
  severity of task
• Modeling has helped measure the problem it can
  help quantify the proposed solutions
• Tool will raise questions, debate, formalise
  anecdotes, and ultimately measure the vision
  culminating from the current round of
  consultations and evidence gathering

93
93
Annex B User interface
94
Citi-scopes main menu
94
95
Running a site scenario
95
96
Producing data reports
96
97
97
Annex C Additional information
98
Risks abound
98

• Positive factors
• NAMA still an uncertainty
• Competitive position has improved costs were
  getting too high
• Ireland still a trusted location (esp. RoI)
• Swift and decisive government action still
  focussed on business
• Capacity in the economy (for first time in a
  while)
• Investment and spending has not been wasted a
  better sell
• Reputation matters as does precedent

• Negative factors
• NAMA still an uncertainty
• The global economy is fragile
• Tools at govt disposal limited
• Cost corrections have many casualties
• Spreading growth and north south linkages may be
  pushed down priorities
• Oil price a risk
• Bank failure a risk
• Can tax incentives / subvention survive?
• Little sign of marked improvement in government
  financial position

99
House prices (NI and UK)
99
Mix adjusted average house prices (Jan02 - Jun09)
Source DCLG
Annual average house price growth (Jan02 Jun09)
Source DCLG
100
Economic activity (percent of working age)
DerryLondonderry
Belfast
Source Census, 2001
DerryLondonderry has a marginally larger percent
of people inactive (37 versus 35)
101
Employment structure relative to NI (2008)
101
Less dependent
More dependent
Source DETI and Oxford Economics
102
Teenage birth rate well above the NI average
(2006)
102
Source NINIS
103
High household size especially compared to
Belfast (2001)
103
Source NINIS, Census (2001)
104
High rented proportion
104
DerryLondonderry and Belfast have the largest
proportion of households renting.
Household ownership (2001)
Source NINIS and Census (2001)
105
Access to car or van (2001)
105
Source NINIS, Census (2001)
106
Ward skills (2001)
106
107
Benefit levels (per head)
107
Source NOMIS and DSD
DerryLondonderry received the highest sickness
benefits per capita
108
Benefit levels correlated with sick levels (2001
Census)
108
It is unlikely that this trend has changed since
the Census in 2001
109
Ward city centre working
109
110
Ward working close to home
110
111
Few commuters to City Centre
111
112
Ward out commuting
112
113
Commuting contrasts
113
114
Posh car ownership
114
115
DerryLondonderry ward commuting patterns
115
116
Commuting variation clear
116
Note Ebrington Barracks
117
Benefits high and rising
117