Annex D
CASE STUDY: REGIONAL INTELLIGENCE SNAPSHOT
FOR THE SOUTH EAST
SEEDA WRitten Evidence to the South East
England Regional Select Committee Inquiry into the South East
England Development Agency and the Regional Economic Strategy
SUMMARY OF
ECONOMIC CONDITIONS
— he latest evidence from businesses and
business representative organisations shows that the rate of deterioration
in business conditions in the South East has started to slow down,
with output, new orders and numbers employed being broadly flat
compared to last month. — Manufacturing firms continue to
face adverse trading conditions in both domestic and export markets.
Significant depreciation of the pound has so far failed to improve
the fortunes of the region's manufacturers with depreciating currency
continuing to put upward pressure on import prices. — Largely
anecdotal evidence from businesses suggests that there are signs
of a more positive outlook for the next few months. Corroborating
our latest business survey results (the Quarterly Snapshot), the
latest EEF survey shows that the region's manufacturers are more
upbeat about the outlook with businesses expecting a generally
higher volume of new orders over the next three months.
— The labour market continues to weaken.
Over the past quarter for which data is available the number of
people in employment fell by 32,000—the largest decline
of any region—and the number of people claiming JSA reached
136,000 in February (the highest level since May 1997). With redundancy
notifications in March increasing to 5,900 or 9% up on February
the labour market is expected to weaken further over the coming
months.
— Inward investment inquiries are holding
up but difficulties in obtaining investment finance remain an
obstacle in converting these into solid investments.
KEY CHALLENGES
AND HOTSPOTS
— Falling demand, managing cashflow, and
retaining skilled staff to prepare for the upturn are some of
the most pressing issues affecting businesses. — Accessing
finance is still proving difficult for many businesses.
— Further weakening of the labour market
in coastal areas, smaller commuter towns and rural areas is of
particular concern where even relatively small job losses could
have a significant impact on demand. Further restructuring within
the financial sector, lower demand for other services and the
impact of falling incomes as a result of reduced revenues in the
public sector are likely to lead to a new round of redundancies
in these sectors over the coming months.
BUSINESS SPECIFIC
INTELLIGENCE/INFORMATION
ON KEY
QUESTIONS
— Anecdotal evidence suggests that the
take up of the EFG has been slow due to the personal guarantees
required, and several other strings attached. — General
feedback is that banks are still calling back existing credit
arrangements and in some cases reducing overdraft facilities that
have already been agreed. See Annex for sectoral and business
intelligence.
SECTORAL OVERVIEW
The downturn has spread out across a broad range
of sectors, with retail, construction and property related activity,
manufacturing (especially automotive) and financial services affected
the most. Furthermore, Business Link Surrey are seeing increasing
volumes of enquiries from businesses in sectors they wouldn't
normally hear from, such as dentists, solicitors, plumbers and
opticians.
Manufacturing: continues
to face adverse trading conditions in both domestic and export
markets. A significant depreciation of the pound has so far failed
to improve the fortunes of South East manufacturers. Manufacturers
who import are continuing to feel pressure from higher import
prices. A number of manufacturing firms have got into difficulties
in March, including Carringworth, the West Sussex-based metal
components manufacturer with about 250 staff, which has gone into
administration, while the engineering firm Active Signs has also
gone into administration with the loss of 70 jobs at its Ramsgate-based
sign manufacturing business. Kemble & Co, the Milton Keynes
based piano manufacturer is said to be considering plans to close
its factory in Bletchley with the loss of up to 96 jobs.
The automotive sector is experiencing very challenging
conditions because of low consumer confidence and high levels
of uncertainty. New car sales are significantly down on last year,
but there may be some slowing of the decline in April following
the issuing of new plates in March. Uncertainty about the introduction
of the "scrappage tax" has severely dampened demand,
as potential car buyers wait to see if there are likely to be
any incentives on offer. The latest business specific intelligence
includes the news that Greens Motor Group, the Kent-based Vauxhall
car dealership, has gone into administration with the loss of
about 70 jobs. Kent Economic Board report that used car sales
are holding up, as are repairs and servicing. Defence orientated
manufacturers are still doing reasonably well but some firms are
concerned that government contracts could "dry up" over
the next couple of years.
According to the latest EEF survey, manufacturers
in the South East are less pessimistic about the next three months
than they were previously. Businesses expect a generally higher
volume of new orders over the next three months, with export orders
being higher, while the outlook for the volume of domestic orders
and volume of output is broadly flat. Employment levels and profit
margins are expected to be lower, with further worsening of cash
flow over the next three months. Cashflow and access to credit
still remain significant challenges for the region's manufacturers.
Energy: The energy sector appears to
be performing relatively well, with no major redundancies announced
in the past two months, and a number of new plants to be set up
and new jobs to be created. For instance, Scottish Power has unveiled
plans for a new £500 million 1,000MW gas-fired power station
at its Damhead Creek site in Kent, with the creation of 50 permanent
jobs, while Ceres Power is to set up a fuel cell manufacturing
plant in Horsham, Sussex, creating hundreds of jobs.
Retail: Footfall is holding up in some
areas such as Brighton and Hove and Milton Keynes, although in
West Sussex town centres footfall is down. Food shops are doing
reasonably well, but fashion shops and high-end retail continue
to struggle, as customers think hard before making non-essential
or larger purchases. Home Retail Group has shed 300 of the 1,500
jobs at the Milton Keynes head office of its Argos and Homebase
operations, while Waitrose is due to create 140 jobs with the
opening of a new store in Ashford, Kent later this year. The number
of vacant shops is continuing to increase in many town centres,
with more redundancies associated with troubled major national
chains (eg recent closures of Principles and Marks and Spencer
stores across the region). Landlords are being flexible in offering
monthly rental payments for retailers with cashflow problems.
Some market traders are seeing a drop in trade as larger stores
have reduced their prices heavily.
Construction and property: Developers
are still trying to sell their stocks of new homes quickly at
discounted prices in anticipation of further price falls. One
of the most recent casualties of the downturn in house building
is Cadenza, the Windsor-based house building firm, which has gone
into voluntary liquidation. However there is evidence that some
larger developments with long lead times (c 18 months) are starting
to come out of moth balls—suggesting that developers are
planning to have projects ready to bring to market in anticipation
of the upturn. As evidence of this preparation for the upturn,
Laing O'Rourke, the Dartford based construction firm is to create
a further 1,000 positions for construction apprentices, in partnership
with ConstructionSkills, with 200 to be recruited this year. Some
increase in construction activity has been reported in West Sussex
due to falling raw material prices.
There are some reports of buyers still waiting
for the housing market to bottom out, but there are signs of increased
activity in several parts of the region. Kent Economic Board reports
that demand from first time buyers with savings to draw on has
increased significantly, which is borne out by increased auction
sales and some growth in demand for domestic conveyancing. The
rental market remains buoyant, although rents are static or falling.
According to Hampshire Economic Partnership
employment levels in electrical, plumbing, heating and ventilation
and air conditioning are predicted to fall by up to 50% and some
apprentices may also be made redundant.
Leisure and tourism: The number of pub
closures is increasing in some areas. The restaurant trade has
been affected significantly by the downturn except in those cases
where outlets (largely chains) offer discounts or special offers.
Tourist operators are fairly confident of a good summer season,
but less optimistic about the off-season. Conference venues are
reporting a significant drop in bookings and luxury hotels are
having to reduce their room rates to attract business customers,
but budget hotels are doing well. The Forbury Hotel, a Reading-based
luxury hotel that recently underwent a £6 million renovation,
has gone into administration. Caravan parks are seeing an increase
in bookings (up by 40% on a year ago). Holidaybreak is setting
up a new chain of none Eurocamp campsites in the UK, including
two sites in the New Forest. As the downturn continues to bite,
visitor numbers at museums and heritage sites are increasing.
Agriculture/land-based: Businesses in
West Sussex are reportedly benefiting from higher food prices
and the weakness of sterling. Investor Development Managers report
buoyant orders for horticultural growers from garden centres in
West Sussex. However, the weak pound is leading to increases in
the cost of imported inputs.
Creative and cultural: There is a mixed
picture in this sector, with publishing, design and fashion, leisure,
advertising and architecture generally struggling, while music,
software and computer services are doing relatively well. Web
developers are reportedly seeing increasing orders from businesses
seeking new markets. Theatre bookings are holding up quite well,
perhaps because people are swapping holidays for less expensive
"treats".
Printed media (particularly local newspapers)
are struggling due to reduced advertising spend and the challenge
from online media. Many businesses are reducing their budget for
printed media and switching to online media instead. A number
of local newspapers in the region are restructuring and shedding
jobs. For example, Kent Messenger Group is planning to shed up
to 159 of the 560 jobs at its media operations in Kent, and its
printing, mailroom and distribution operations will be outsourced.
Meanwhile, the Reading Evening Post is to move from a five-day
to a twice-weekly publication.
Both feature film and TV production were lower
than usual in the first quarter of 2009, but the outlook for the
next few months is more positive, with significant budgeting and
scheduling work taking place. However, the possible scarcity of
good soundstage space in the second quarter of 2009 may limit
the appeal of the South East and the UK more generally as a location
for TV drama production, with consequent shifting of some projects
to central and eastern Europe.
Security Innovation and Technology: From
a general SME perspective, the market situation continues to deteriorate.
Many major customers, potential customers and partner organisations
are tightening their belts, reducing budgets and either cancelling
or postponing previously planned projects. Very few companies
have not laid off staff in the last few months and most have more
cut-backs in the pipeline.
Third sector: Figures from Citizens Advice
Bureaux indicate that the South East CABx have seen by far the
largest number of enquiries of any region regarding unemployment
benefits and redundancy. Between January and March 2009 there
were more than 5,500 enquiries about Jobseekers' Allowance (almost
one fifth of the total for England and Wales), and at least 5,000
enquiries relating to redundancy (more than one fifth of the total).
This equated to more than 100 enquiries per working day. In addition,
over 3,100 enquiries about mortgage arrears were received in this
period, and more than 3,600 enquiries relating to council tax
arrears.
Redundancy Notifications: According to
HR1 data, the level of redundancy notifications in the South East
in March was higher than in February. There were some 5,900 redundancy
notifications in the South East in March against 5,400 in February
2009.[52]
Relative to their share of regional employment,
the telecommunications and finance sectors have seen the greatest
increase in redundancy notifications over the past month. These
two sectors accounted for over 40% of all redundancy notifications,
with telecommunications alone accounting for over one fifth of
all redundancy notifications in the South East in the past month.
There has been a relatively large number of redundancies in manufacturing,
printing & publishing activities, construction and other business
activities.
Berkshire and West Sussex recorded disproportionately
more redundancy notifications than other sub-regions (see map
below). For example, over a quarter of all redundancies notified
via HR1s in the past month were recorded in Berkshire, which is
well above its share of total employment within the South East.
With more than one in ten redundancy notifications,
Horsham and Newbury, relative to their share of regional employment,
were affected by redundancies disproportionately more than other
urban areas, followed by Slough. Dartford and Bracknell were also
affected disproportionately more than other urban areas.
Over the past month there was a decline in the
proportion of redundancy notifications in the South East due to
lower demand. In March 2009 some 44% of redundancy notifications
in the South East were entirely or partially caused by lower demand
against almost two thirds in February and more than half in January.
In Berkshire and Buckinghamshire lower demand
accounted for over 70% of all redundancy notifications in March
2009.
52 Note that this data only captures redundancies of
more than 20 employees; some of the job losses are not scheduled
to take place until later in 2009; and in some cases the redundancies
are happening in another region but are registered in the South
East because it is home to the company's headquarters. Back
|
