South Somerset Employment Land Evidence: Long Term Economic Forecasting and Implications for Employment Sites and Premises Final Report
Prepared on behalf of South Somerset District Council
July 2017
ContentsExecutiveSummary.................................................................................................................................i
1 Introduction....................................................................................................................................1
2 EconomicBaselineandContext......................................................................................................3
3 EconomicGrowthForecastsandScenarios..................................................................................10
4 FutureEmploymentSitesandPremisesRequirements................................................................22
5 Conclusions...................................................................................................................................32
Appendix1:MethodologyDetails.......................................................................................................35
Appendix2:Consultees.......................................................................................................................40
JobNumber: 170111b
VersionNumber: Final2.0
Approvedby: StuartHardisty
Date: 6July2017
HJA would like to thank all those that provided input to this study, giving up valuable time tocontributetotheresearch.AlistofconsulteesissetoutatAppendix2tothereport.
i
ExecutiveSummary
i. HardistyJonesAssociatesLtd(HJA)wasappointedbySouthSomersetDistrictCouncil(SSDC)toprovideareviewoflong-termeconomicforecastsforthedistrict,andtheirimplicationsforfutureemploymentsitesandpremisesrequirements.ThiswillformpartoftheevidencebasetounderpintheearlyreviewoftheSouthSomersetLocalPlan. Themethodologyemployedhas been designed to align to the requirements of theNational Planning Policy Framework(NPPF)andPlanningPracticeGuidance(PPG).
EconomicContext
ii. The startingcontext for the forecastperiod is important.A reviewofofficial statisticaldatashowsthatSouthSomersethasnotseengrowthintotalemploymentovertheperiod2010-15,andhasperformedbelowcountyandnationalbenchmarks. This is largelyexplainedbythe sectoral structure of the local economy, with over-representation in sectors that haveexperienced employment decline in recent times. However, strong labourmarketmetrics,including high levels of participation and lowunemployment suggest this is not presently acauseforconcern.
iii. The South Somerset economy has a strong over represention of themanufacturing sector,particularlyaerospacemanufacture, reflectingthe longhistoryofrotocraftmanufacturing inthedistrict.Thepredominanceofmanufacturingisoffsetbyanunder-representationofwhatmightbetermed‘officebased’activities,suchasfinancial,professionalandbusinessservices.Growthinthenumberofbusinesseshasalsobeenslowerthaninbenchmarkareas,however,thesurvivalratesofthebusinessesthatdoformaregenerallyhigherthanbenchmarkareas.Overall the economy is ranked below average in terms of competitiveness by the UKCompetitivenessIndex.
EconomicForecastScenarios
iv. Economic forecasts from two sources, Experian and Oxford Economics (OE), have beenreviewed. The two forecastersusedifferentmodels andhavediffering expectationsof thegrowthpotentialoftheUKeconomyandtherespectivesectorswithinit.Utilisingmorethanone forecast is therefore useful for understanding the range of potential futures. BothforecastersanticipatestrongeraverageannualgrowthinGrossValueAdded(GVA),ameasureofeconomicoutput,andloweraverageannualgrowthinemploymentovertheperiod2014-34thanthehistoricperiod2000-14.Inordertoachievethisproductivitygrowthwillneedtobe higher than it has been historically. This is particularly the casewithin theOE forecastwhichforecaststhehigherGVAgrowthandloweremploymentgrowthofthetwoforecasters.
v. Closerinspectionofsectorbysectorforecastsshowssomesubstantialvariationbetweenthetwoforecastinghouses. HJAinconjunctionwithSSDChasthereforeundertakenasectorbysectorreviewoftheforecasts,drawingonlocal intelligencetounderstandthemostrealisticassessment hybrid assessment of the forecasts. The output of which was a moderatedbaselineforecastfor8,500additionaljobsoverthePlanperiod.Thisfallswithinthemiddleofthe6,000–10,700rangeemergingfromthetwoforecasters.
ii
vi. These results were cross-checkedwith potential labour supply projections arising from theStrategic Housing Market Assessment (SHMA). The SHMA suggests that there will beinsufficient laboursupplytomeetthemoderatedbaselinewhichwill requireadjustments inthe local labourmarket. On this basis it was determined inappropriate to consider higheremployment growth scenarios. Neitherwas there any clear basis from the labour demandperspective to develop any such scenarios, particularly with a constrained labour marketposition across thewider county and a substantial jobs demand resulting from theHinkleyPoint C new nuclear power station construction phase. The focus should be on drivingproductivitygrowthinlinewithcountyandLEPgrowthplans.
FutureEmploymentSitesandPremisesRequirements
vii. Theforecastemploymentchangewillbespreadacross thePlanningUseClassesOrder.Thisincludes around2,000 jobs in theAUseClass, 1,000 in theBUseClass, 1,700 in theCUseClass and 1,400 in the DUse Class. A further 1,900 jobs are forecast thatwill not requiredirectprovisionofsitesandpremises,eitherasaresultofhomeworking,peripateticworkingorwithintheworkplacesofothers.TheimplicationswithintheA,CandDUseClasses(retail,leisure, health, care and education etc) will be picked up through other evidence basedocuments(e.g.retailstudyandinfrastructuredeliveryplan).
viii. ThesitesandpremisesrequirementswithintheBUseClassarisefromtwoelements.Firstly,adaptingtothenetchangesinemploymentandsecondly,ensuringthattheexistingstockofpremisesismaintainedinthefaceofchangingoccupierrequirements,dilapidationandlossestootheruses.AccountistakenintheforecastingofthepotentialtoreprovidesomeoftheBUse Class development on sites that have previously accommodate B Use Class premises.Thereisalsoanallowancetoensureflexibilityandchoiceinthemarket.Figure1summarisestheresultsoftheforecastassessment.Thisissplitintoofficeandindustrialrequirements.
ix. Within the office sector, growth of some 1,600 jobswill fuel an additional requirement forapproximately13,100sqmofofficespace.Inaddition,21,600sqmwillberequiredtoretainahighqualitystockofpremises.AfterdeductionsforreplacementonpreviouslyusedBUseClasssitesandallowingforchoiceandflexibilityprovisionwillneedtobemadefor30,500sqm, approximately 3-8 hectares depending on development density. Based on marketintelligence this should be deemed a top side estimate,with the potential for someof thisrequirementtobeaccommodatedatlargerurbancentressuchasTaunton,ExeterandBristolthroughthechangingworkforcerequirementsofoccupiers,aswellasthroughmoreintensiveoccupationofexistingofficestocksinthearea.
x. WithintheindustrialsectorthenetadditionalrequirementisnegativeasaresultofadeclineinemploymentintheB2general industryUseClass. However,replacementdemandwillbesubstantial at approximately 190,000 – 390,000 sq m over the 20 year Plan period. Thisaccordswithsubstantialdevelopmentlevelswitnessedinthedistrictinthefaceofdeclinesinmanufacturingemploymentinthepast.Afteradjustingforthere-useofpreviouslyusedBUseClass sites and for flexibility and choice there is an outstanding requirement for 42-85hectaresof industrialdevelopment land. Theresultsof theforecastanalysiswerevalidatedthroughcross-referencinghistoriclevelsofdevelopmentactivityandwithcommercialmarket
iii
stakeholders.Theseboth indicated figures towards theupperendof the rangeof industrialfloorspace were achievable and it would be short-sighted to fail to plan for such levels ofdevelopment. However, development viability issues remain a challenge in both the officeandindustrialsectors.
Figure1TotalEstimatedFutureSitesandPremisesRequirements(sqmunlessstated) Office IndustrialReplacementProvision(A) 21,600 197,600-395,200NetAdditionalRequirement(B) 13,100 -6,800GrossRequirement(C=A+B) 34,700 190,800-388,400DeliveredonExistingEmploymentSites(D) 6,940 38,160-77,680NetRequirement(E=C-D) 27,760 152,640-310,720FlexibilityAllowance(F) 2,780 15,260-31,070TotalRequirement(G=E+F) 30,540 167,900-341,790AverageAnnualRequirement 1,530 8,400-17,090TotalLandRequirement 3–8ha 42-85haAverageAnnualLandRequirement 0.2-0.4ha 2.1-4.3haSource:HJA
1
1 Introduction
1.1 SouthSomersetDistrictCouncil(SSDC)iscurrentlyundertakinganearlyreviewoftheSouthSomerset Local Plan. In order to inform this review, the Council requires robust evidencepreparedinlinewithnationalpolicyandpracticeguidance.
1.2 HJA was appointed by South Somerset District Council to provide a review of long-termeconomic forecasts for the district, and their implications for future employment sites andpremisesrequirements.ThisreportsetsouttheresultsofthestudyandwillformpartoftheevidencebasetounderpinemploymentandeconomicpolicieswithintheLocalPlan.
1.3 Thisreportcomplementsasecondresearchstudywhichfocusesonshorttermissuesinthecommercialpropertymarket,basedprimarilyonconsultationwithlocalcommercialpropertymarketstakeholders.
NationalPolicyandGuidance
1.4 Theapproachadoptedhasbeeninformedby,andalignedto,nationalpolicyandguidance.
1.5 Planning Practice Guidance provides advice on undertaking economic development needsassessments (section reference ID 2a). The entire section is of relevance and has beenconsidered.Thisincludesthefollowingspecificguidancerelatingtotheassessmentoffuturerequirements:
Local authorities should develop an idea of future needs based on a range of datawhich iscurrentandrobust(PPGID2a-032)
Planmakersshouldconsider:
• Sectoralandemploymentforecastsandprojections(labourdemand)• Demographicallyderivedassessmentsoffutureemploymentneeds(laboursupply)• Analyses based on past take-up of employment land and property and/or future property
marketrequirements• Consultation with relevant organisations, studies of business trends, and monitoring of
business,economyandemploymentstatistics
1.6 Insettingthetonefortheassessment it isalso importanttoconsidertheNationalPlanningPolicyFramework(NPPF).Thisnotesthattheplanningsystem,infulfillingitseconomicrole,needstoensure“thatsufficientlandoftherighttypeisavailableintherightplacesandattheright time to support growth and innovation” (paragraph 7). That “every effort should bemade to objectively identify and then meet the…business…needs of an area, and respondpositivelytowideropportunitiesforgrowth”(paragraph17).SpecificallyindrawingupLocalPlanstheNPPFstatesthat“LocalPlansshouldbeaspirationalbutrealistic”(paragraph154).Theseprinciplesunderpintheapproachemployed,ensuringapositiveviewoffuturegrowthpotential,unencumberedbyconstraintbutgroundedinreality.
2
Methodology
1.7 The assessment of future scenarios and associated employment sites and premisesrequirements contained within this report is not designed to be a detailed prediction ofexactlywhatwillhappeninthefuture.Anyexercisewhichincludesanelementofforecastingincludes substantial risk and uncertainty. Therefore, the results of this exercise are notintendedtobethebasisofa ‘predictandprovide’policyresponse. Rather,theapproachisdesignedtobringtogetheravailableevidenceinorderthatthereisaclearbasisonwhichtoconsiderpolicyoptions, inconjunctionwithothercomplementary,orpotentiallycompetingevidence. Inparticular, themethodhasbeendesigned in linewithnationalpolicyandbestpracticeguidance.Policiesdevelopedusingthisevidenceshouldberegularlyreviewedinthelight of new evidence and the passing of time as part of the on-going planning policydevelopmentandreviewprocess.
1.8 Insummary,theapproachfollowedcontainsfourkeystages:
• Review of forecasts – a review of econometric forecasts for the district sourced from twoproviders.ThisreviewincludedaconsiderationofthebaselineeconomicconditionsandtestedlabourdemandagainstthelaboursupplyfromthedemographicmodellingwithintheStrategicHousingMarketAssessment(SHMA).
• ScenarioWorkshop–adiscussionwitharangeofofficersoftheCounciltodiscusstheforecastsand the potential for considering alternative economic scenarios based on local knowledge,evidenceandaspiration.
• Employment sites and premises modelling – analysis of the future employment sites andpremisesrequirementsarisingovertheLocalPlanperiodasaresultofforecastchangesintheeconomyincludingtestingagainsthistoriclevelsofdevelopmentactivity.
• TestingwiththeLDS1BoardandCommercialAgents–twoworkshopswithCouncilMembersand local commercialpropertymarket stakeholders to testemerging findingsandmodellingassumptions.
1.9 Additionalcommentonthedetailedmethodologyemployedisincludedwithinthereportandsupportingappendiceswhererelevant.
ReportStructure
1.10 Thisreportisstructuredsimplyto:
• Setoutthecurrentandrecenthistoriceconomicperformanceofthedistricteconomy;• Provideasummaryoftheunderpinningeconomicforecastsandassociatedscenarios;and• Setouttheimplicationsforfutureemploymentsitesandpremisesrequirements.
1LocalDevelopmentStrategy2ONSPopulationEstimates(2015),figuresroundedtonearestthousand3ONSAnnualPopulationSurvey(2016)4ONSAnnualPopulationSurvey(2016)5ONSAnnualSurveyofHoursandEarnings(2016)
3
2 EconomicBaselineandContext
2.1 It is helpful to understand the starting point from which future scenarios are beingconsidered.However, it shouldbecautioned that socio-economicdataat the local (district)level has some limitations, particularly where sample based surveys are used.Whilst suchtechniquesaredesignedtoprovideveryrobustdataatthenationallevel,astheareaoffocusnarrows and the samples become smaller the data is subject towider confidence intervalsandgreatervolatility.
SummaryLabourMarketProfile
2.2 TheSouthSomersetdistricthasaresidentpopulationof165,0002.ThepopulationhasbeensteadilyrisingformanyyearsalthoughataslightlyslowerratethantheGBandSouthWestregionalpopulations. Thepopulationaged16-64 (aproxy forworkingagepopulation)hasbeenfallingasaproportionofthetotalpopulationandisnownotablybelowtheaveragesforGBandtheSouthWest.Theabsolutenumberof16-64yearoldshasbeenfallingsince2008.
2.3 Theeconomicactivityrateandemploymentrate3arebothhigherinSouthSomersetthantheGBaveragewhilstverymarginallybelowtheSouthWestfigures.Asasamplebaseddatasetthere is a high degree of local volatility but over the medium to longer term the SouthSomerset economic activity and employment rates have generally been above both thenational and regional benchmarks. This suggests a high degree of labour marketparticipationinSouthSomerset.Thereissomeevidenceofadeclineinthemostrecentdatabut potentially as a result of sampling error it is too early to determinewhether this is anestablishedchange.
2.4 Unemployment as recorded by both the Annual Population Survey and Claimant Count islower in South Somerset than regional and national benchmarks. In keeping with theparticipationdataabove,thereisnoevidenceofafundamentalissueintermsofengagingtheworkforceinemployment.Unemploymenthasgenerallybeenfallinginrecentyearssinceapost recession peak around 2012. Claimant numbers have slightly increased in early 2017,althoughthisisinlinewithregionalandnationaltrends.
2.5 SouthSomersethasalowerproportionofitsworkingagepopulationqualified4tothehighestlevel(Level4andabove)thanGBandSouthWestbenchmarks,buthigherproportionsatallother levels. This is reflected in theoccupationalprofile,with fewer residentsemployed inprofessionaloccupationsorasseniormanagers,buthigherproportions inmiddleandlowerorder occupational groupings. This is also reflected in the sectoral structure of the localeconomyasdescribedbelow.
2.6 Earnings5,whenmeasuredbothbywherepeopleliveandwherepeopleworkarerecordedaslowerforSouthSomersetthanSouthWestandGBbenchmarks.Thisagainalignstothelower
2ONSPopulationEstimates(2015),figuresroundedtonearestthousand3ONSAnnualPopulationSurvey(2016)4ONSAnnualPopulationSurvey(2016)5ONSAnnualSurveyofHoursandEarnings(2016)
4
proportionofworkers in thehighest order occupational groups,whichoften attract higherearnings.
RecentChangesinTotalEmployment
2.7 There aremultiple official measures of employment for local areas, all with strengths andweaknesses.Wehaveconsideredeachtobuildapictureofthelocaleconomy.
2.8 TheONS Jobs Densitymeasure is themost completemeasure of all jobs in an area. Thisrecords82,000 jobs in SouthSomerset in2015. This equates to0.86 jobsperworkingageperson. This ratio is in linewith theSouthWest regionalaverage (0.86)andabove theGBaverageof0.83.Whilstatime-seriesofdataisavailable,theONSdonotrecommendusingit.Althoughthismeasureisthebestpointintimeestimateofalljobswhenitisreleased,basedon a combination of other datasets, the figures are not revised as and when the variouscomponentdatasetsarerevised.Hencethetime-seriesbecomesunreliable.
2.9 The time-series data that is available shows a steady increase in employment through theearly2000sfrom74,000to84,000jobs,beforeadeclinefrom2007-09backto80,000jobs.Therewasthenfairlyrapidincreaseinemploymentto2011,reachingapeakof85,000jobs.Sincethatpointthedatashowsaperiodofmodestupsanddownswithneithergreatdeclinenorgrowth.
2.10 Other measures of workplace based employment (i.e. employment located in SouthSomerset)includetheONSBusinessRegisterandEmploymentSurvey(BRES),whichprovidesthemostdetailedsectoraldata,andtheONSAnnualPopulationSurvey(APS)workplacejobsmeasure, which is generally regarded as a weaker indicator, but is used to assess selfemployment. TheBRESdatahasbeenreliedupon inmuchofthe followinganalysisduetothelevelofsectoraldisaggregationthatisavailable,aswellasareasonablyconsistenttime-series.
2.11 Figure2.1shows the recent trend inemploymentchange from2010onwards for the threeemploymentdatasets. This ishelpful to illustrate firstly that thedifferentdatasetsprovidediffering assessments of employment and that the Jobs Density measure is the mostcomprehensive. Also, that on all measures the broad pattern is of minor year-on-yearfluctuationsbutwithnorealchangeintermsofgrowthordecline.
2.12 In order to provide some comparison with national trends the BRES is the most reliablesource. Figure2.2 shows the indexedchange in totalemployment forSouthSomerset, thecountyofSomersetandGBovertheperiod2010-15.ThisshowsabroadlysimilarpatterninthedataforSomersetandSouthSomerset,albeitwithasteeperdeclineintheyear2011-12.GB did not experience that decline and therefore shows a much greater growth inemploymentovertheanalysisperiod.
5
Figure2.1ChangeinTotalEmploymentinSouthSomerset2010-15
Source:ONSJobsDensity,APS,BRES
Figure2.2ChangeinTotalEmploymentvsBenchmarkAreas2010-2015
Source:ONSBRES
2.13 Incombination,whatthisanalysisshowsisthatinrecentyearstherehasnotbeensubstantialgrowthinnetadditionaljobsinSouthSomerset.Broadlythelevelofemploymenthasbeenstatic (with some variation and volatility which is common with survey based datasets).However, the labourmarket analysis does not suggest anymajor cause for concern at thisstage.Economicactivityandemploymentratesremainhighandunemploymentremainslow.
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2010 2011 2012 2013 2014 2015
TotalEmploymen
tBRESAnnualPopula9onSurveyJobsDensity
85
90
95
100
105
110
2010 2011 2012 2013 2014 2015
Inde
xed(2010=100)
SouthSomerset
Somerset
GB
6
EmploymentbySector
2.14 TheSouthSomerseteconomyhasaparticularlyhighconcentrationofemploymentwithinthemanufacturing sector. This arises primarily through its longstanding role as a centre foraerospace (rotocraft) manufacturing and its associated supply chains. There is also aconcentration in terms of food manufacture (including pet foods). Figure 2.3 shows thelocation quotient (LQ) of sectors in the South Somerset economy. This illustrates howconcentratedasectoris,relativetothenationalaverage.IfasectorisrelativelyconcentratedinSouthSomerset(i.e.agreaterproportionofemploymentfallswithinthatsector inSouthSomerset compared to the UK) then the LQwill be greater than 1. If the sector is under-representedtheLQfigurewillbelessthan1.Thechartclearlyshowsthehighconcentrationof manufacturing. There are also concentrations in the construction sector, wholesale &retail sector and health sector. The chart also shows the under-representation ofemployment in what might be typically thought of as ‘office based activities’ includinginformationandcommunication, financialand insurance,professional servicesandbusinessservices.
Figure2.3SectoralLocationQuotients
Source:ONSBRES
2.15 Thissectoralprofileislikelytoexplainsomeoftherelativelypoorerperformanceintermsofchangesinemployment.Figure2.4showsboththeabsolutenumbersofpeopleemployedineachsectorat2015,andalsothechangeinemploymentbysectorovertheperiod2010-15.This showshow the sectors inwhichSouthSomersethasparticular concentrationsandarealso large in absolute terms, have almost all experienced employment decline over thatperiod, namelymanufacturing, construction andwholesale& retail. The sectors that haveexperienced growth, of which there are relatively few, are primarily sectors in which thedistrictisrelativelyunder-represented.
0.00
0.50
1.00
1.50
2.00
2.50
PrimaryIndustry
Manufacturing
U8li8es
Construc8on
Wholesale&Retail
Transporta8on&
Storage
Accomm
oda8on&FoodServices
Inform
a8on&Comm
unica8on
Financial&Insurance
ProfessionalServices
BusinessServices
PublicServices
Educa8on
Health
OtherServices
7
Figure2.4SectoralEmploymentChange2010-15
Source:ONSBRES
BusinessDemography
2.16 TheONS InterDepartmentalBusinessRegister (IDBR) showsa steady rise in thenumberofenterprisesinSouthSomersetsince2011,to7,165in2016.However,overtheperiod2010-16thegrowthinthenumberofenterprisesinthedistrictisapproximately7%.Thiscomparestomorethan14%intheSouthWestregionasawholeandmorethan22%inGreatBritain.
2.17 The South Somerset economy has a slightly higher proportion of enterprises classified asmicroenterprises(i.e.0-9employees)with89.7%ofallenterpriseswithinthisclassification.However,theUKeconomyischaracterisedbyaverylargemicrobusinesssector(89%GB).
2.18 Dataonbusinesssurvival6showsageneraltrendforhigherratesofbusinesssurvivalinSouthSomersetthanthecounty,regionalandnationalaverages.
Competitiveness
2.19 Data on the competitiveness of local economies can be found in the UK CompetitivenessIndex7 (UKCI). Thisworkmeasures the competitiveness of places in theUK according to anumberoffactors,whicharesummarisedinfigure2.5below.Thesefactorsarecombinedtoproduceascoreof100fortheUK.Ascorebelow100indicatesalesscompetitiveplacethanaverage,andascoreabove100suggestsamorecompetitiveplace.
6ONSBusinessDemography7Huggins,RandThompson,P(2016)UKCompetitivenessIndex
(4,000)
(2,000)
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
PrimaryIndustry
Manufacturing
U=li=es
Construc=on
Wholesale&Retail
Transporta=on&
Storage
Accomm
oda=on&FoodServices
Inform
a=on&Comm
unica=on
Financial&Insurance
ProfessionalServices
BusinessServices
PublicServices
Educa=on
Health
OtherServices
2015
Change2010-2015
8
Figure2.5TheFactorsofCompetitivenessInputFactorsEconomicactivityrateBusinessstart-uprateNumberofbusinessesProportionofworking-agepopulationqualifiedtoNVQ4Proportionofknowledge-basedbusinessesOutputFactorsGVAperheadProductivity(outputperhourworked)EmploymentrateOutcomeFactorsGrossweeklypayUnemploymentrateSource:Huggins&Thompson,2013
2.20 TheUKCI provides a benchmarkingof the competitivenessof different spatial scales acrosstheUK,namelylocalauthorities,cities,LEPs,andregions(butnotcounties).Itisdesignedtobe an ‘integrated measure of competitiveness focusing on both the development andsustainability of businesses and the economicwelfare of individuals’ (p7, UKCI). The reportconsiderscompetitivenesstobethecapabilityofaneconomyto‘attractandmaintainfirmswith stable or rising market shares in activity’, while maintaining stable or increasingstandardsforresidents.
2.21 Figure2.6showsverymodestchangeinthescoreandrankforSouthSomersetbetween2013and2016. SouthSomersetisranked230thofthe379districtandunitaryauthorityareasinEnglandwithascorebelow100,suggestingtheareaislesscompetitivethantheaverage.ItisrankedinthemiddleofthedistrictswithinSomerset.
Figure2.6UKCompetitivenessIndexScoreandRankArea 2013 2016 Change Score Rank Score Rank Score RankMendip 89.9 198 91.3 176 1.4 22Sedgemoor 84.7 278 83.6 301 -1.1 -23SouthSomerset 87.9 229 88.1 230 0.2 -1TauntonDeane 91.0 178 92.9 164 1.9 14WestSomerset 82.7 305 84.0 292 1.3 13HOSW 88.5 33 88.7 33 0.2 0Source:HJAadaptedfromUKCompetitivenessIndex2016
BaselineSummary
2.22 TheSouthSomerseteconomyisdominatedbythemanufacturingsector,particularlyrelatedtorotocraftandtheassociatedsupplychain. However, theeconomyhasnotseenanyrealgrowthinjobsinrecentyears.Thisisnotnecessarilyamajorproblematthecurrenttimeaslabour market participation is high and unemployment low, but could be an issue in thefuture.Also,theareadoesnotperformstronglyintheUKCompetitivenessIndex.
9
2.23 Thereisarelativeunder-representationofofficebasedactivitiesandtheoccupational,skillsandearningsprofileshowashortageofopportunitiesinhigherwage,higherskilledjobs.Inadditiontonotaddingjobs,thelocaleconomyhasseenmuchslowergrowthin itsbusinessbasethancomparatorareas,althoughtherearepositiveindicatorsintermsofthesurvivalofthose businesses which do form. As with the UK economy generally, micro business areincrediblyimportanttothearea.
10
3 EconomicGrowthForecastsandScenarios
3.1 ThischapterconsidersthepotentialeconomicfuturesforSouthSomerset.
‘BusinessasUsual’Forecasts
3.2 Economic forecasts have been purchased from two leading forecasters, Oxford Economics(OE)andExperian.TheOEdatahasbeenutilisedpreviouslyforotherresearchincludingtheSHMAandwaspreparedbeforetheUKvotedtoleavetheEU.TheExperiandatawasnewlypurchased for this study and is a more recent economic forecast prepared after the EUreferendum.Experianindicatedthatitsforecastwaspreparedanticipatinga‘soft’Brexit8.Itisevidentwhencomparingthetwoforecasts(ascanbeseeninfollowingsections)thatthereis some suggestion of a short term slow down related to uncertainty before the economyreturnstosomethingsimilartopreviously forecast longtermgrowthrates. Theforecastersprovidedbothhistoricandforecastdatafromtheirforecastingmodels.
3.3 More than one economic forecast is used to ensure a broader perspective on potentialeconomicchanges.Aswasevidentfromthebaselineanalysispresentedpreviously,therearevarioushistoricdatasets.Thewayinwhichtheseareinterpretedcanvaryfromforecastertoforecaster. To illustrate this figure 3.1 shows the historic analysis of South Somerset totalemploymentfromthetwoforecasters,theseareoverlayedwithtwopotentialsourcesofONSemployment data from the Census and Jobs Density datasets. This shows how even inmodelling historic statistics there is room for variation, and as this is a component of theforecastingmodelitcreatesscopefordifferencesinforecastingresults.
Figure3.1HistoricEmploymentData
Source:HJAbasedonOE,ExperianandONS
8AssumingtheUKremainswithintheSingleMarket.
50,000
55,000
60,000
65,000
70,000
75,000
80,000
85,000
90,000
Experian OE JobsDensity Census
11
3.4 TherewillalsobedifferingviewsofthefuturepotentialoftheUKeconomyasawholeanditsconstituent sectors and localities. Forecasting is an imprecise science and therefore it isappropriatenottorelysolelyonasingleprovider.
3.5 There isalsooftendiscussionaboutwhether forecastsshouldbe termed ‘policyon’, ‘policyoff’, ‘baseline’ or ‘business as usual’. Each of these terms has helpful and unhelpfulconnotations. Nevertheless, there is a need to use some form of terminology within thisreport.Wethereforeclarifythefollowing:
• Theforecastsas initiallyprovidedbytheforecastersarereferredtointhisreportasbaselineforecasts. This enablesa contrastbetween theoriginal forecast scenarios andanyadjustedscenariosthatmightbeconsidered.
• However, the forecasters’ ‘baselines’drawonhistoriceconomicperformanceof theareaasone of the determining factors. They also draw on detailed analysis of national economicpotential. The forecasts are not therefore developed assuming a policy vacuumor absence.Whilsttheyarenotdevelopedwithexplicitreferencetofuturelocalpolicy,thehistoricperiodon which they draw also included efforts from national, regional and local economicdevelopmentstakeholderstodeliveraprosperouseconomy.Alevelofeconomicdevelopmentactionisthereforeinherentwithintheforecasts.Forthisreason,theterm‘businessasusual’canappearmorehelpful.However,thisimpliesnoconsiderationistakenofwidereconomicfactors,whichwill determine theeconomicprospectsof theUKeconomy. Thiswouldbeamisinterpretation.
3.6 Inordertovalidatethebaselineforecaststheyhavebeentestedagainst:
• Historiceconomicperformanceofthearea• Existingpolicyandstrategyambition• Localintelligenceoneconomicdriversandsectoralprospects• Demographic analysis undertaken as part of the SHMA as ameasure of labour supply and
employmentneed.
BrexitandtheUncertainEconomicClimate3.7 Thisreportandtheresearchwithinithavebeenundertakenapproximately9-12monthsafter
the UK voted to leave the EU. Article 50 has been triggered but the potential economicimplicationsremainhotlydebatedanddisputed.Thereisconsiderableuncertaintyastotheexact timing and nature of the terms onwhich the UKwill leave the EU. Commentatorsconflict in their views of both the opportunities and threats posed to the economy. Thiscreates substantial uncertainty for economic forecasters when assessing future growthtrajectories.Asnotedabove,theOEforecastwaspreparedaheadoftheEUReferendumandassumed the UK remained in the EU, the Experian forecasts were prepared after thereferendumbutassumedasoftBrexit.
3.8 Since the preparation of both forecasts there has been a further General Election creatingadditionaluncertaintyintheUKpoliticalandeconomiclandscape.Inflationhasrisenastheeffectsofthedevaluationofsterlingstarttotakeeffect.LevelsofgrowthintheUKeconomyarealsonowreportedasthelowestoftheG7economiesintheyear(2017)todate.
12
3.9 Asaresultoftheabove,theperformanceoftheUKandlocaleconomyshouldbekeptunderreview.Asgreaterclarityemergesitmaybeappropriatetorevisittheanalysis.
GVA3.10 Figure 3.2 illustrates the forecast change in Gross Value Added (GVA), a measure of the
outputoftheeconomy.Thechartshowstheforecastfortheperiod2014-34,aswellasthehistorictrendfromtheExperianmodeltoprovidesomehistoriccontext.
3.11 OE forecast a higher level of GVA growth over the forecast period, with average annualgrowthof 2.2%. This compares to their historic assessmentofGVAgrowthover theperiod2000-14of1.9%perannum.Ascanbeclearlyseenonthechart,theyellowOEforecastlineisfairlylinearthroughouttheentireforecastperiod.ThisisincontrasttotheExperian(green)line, which has a period of slower growth in the short term before increasing towards asimilar growth rate to OE. This is most likely to reflect the expectations of uncertaintyaffectingtheeconomyinthewakeofBrexitnegotiations.ExperianforecastsaverageannualGVAgrowthof 2.0%per annumover the forecast period. This contrasts to its viewof the2000-14periodwhentheeconomygrewat1.7%perannum.
3.12 BothforecastersarethereforeforecastingaverageannualGVAgrowthovertheperiod2014-34abovethatoftheperiod2000-14by0.3%pointsbuttheExperianforecastincludesaloweroverallgrowthrate,atleastinpartbecauseofBrexituncertainty.
Figure3.2ForecastGVAChange2014-34
Source:HJAbasedonOEandExperian
TotalEmployment3.13 Figure 3.3 illustrates the forecast changes in employment over the Plan period. Of note,
ExperianforecastsahigherrateofgrowthinemploymentthanOE.Thetwoforecasterstrackquite closelyuntil around2020when theExperian line increases farmore rapidly,whereas
60
70
80
90
100
110
120
130
140
150
160
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
GVA(In
dex2014=100)
Historic(Experian)
Experian
OE
13
the OE line is fairly flat. This may in part result from the differing views of historicemploymentchangeinthedistrictasshownatfigure3.1above.Therateofhistoricgrowthin employmentwas far higher in theExperianmodel, albeit froma lower startingposition.This may well be carried forward into expectations for future growth. This differencesbetween the two forecasters must relate to anticipated productivity changes. OE isforecastinghigherGVAgrowthandloweremploymentgrowth,whichmeansitisanticipatingfargreaterproductivitygainstosupportthehighergrowthinGVAthanExperian.
3.14 OE forecastsemploymentgrowthof0.4%perannum.This compareswith0.6%perannumover the period 2000-14. Experian forecasts employment growth of 0.6% per annum,compared to historic growth of 1.0% per annum. For employment, both forecasters areanticipatingloweraverageemploymentgrowththanoverthehistoricperiod.Thisislikelytoreflectthefactthatthelabourmarketismuchtighternowthanintheearly2000s,withhigheconomic activity and low unemployment, as well as an ageing population leading to asubstantial proportion of the current workforce moving into retirement in the forecastperiod. There is therefore less scope for rapid employment growth, particularly withuncertaintiesastothelevelofinternationalinwardmigrationtotheUKinthefuture.
Figure3.3ForecastEmploymentChange2014-34
Source:HJAbasedonOEandExperian
3.15 In absolute termsOE is forecasting employment growthof around6,000 jobs compared to
Experian’s10,700.Thisisanotabledivergenceandshowsthevariationsinforecastresults.
SectoralEmployment3.16 Figure 3.4 shows the forecast change in employment by sector over the Plan period. This
further highlights the variation between the two forecasting houses. For example, OEforecasts a loss of approximately 3,000 jobs in the manufacturing sector compared to nochangeforecastbyExperian.Thevariationscanlookparticularlylargewhenconsideredout
80
85
90
95
100
105
110
115
120
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
TotalEmploymen
t(Inde
x2014=100)
Historic(Experian)
Experian
OE
14
of context. Figure3.5shows the forecast levelofemployment foreachsector in2014and2034,whilst it remains clear therearemarkeddifferencesofopinionoverparticular sectorprospectsthesearegenerallylessextremethantheymightappearinfigure3.4.
Figure3.4ForecastSectoralEmploymentChange2014-34
Source:HJAbasedonOEandExperianFigure3.5ForecastSectoralEmployment2014and2034
Source:HJAbasedonOEandExperian
(4,000)
(3,000)
(2,000)
(1,000)
-
1,000
2,000
3,000
4,000
5,000Prim
aryIndu
stry
Manufacturin
g
U=li=es
Construc=o
n
Who
lesale&Retail
Transporta=o
n&Storage
Accommod
a=on
&Foo
dServices
Inform
a=on
&Com
mun
ica=
on
Financial&
Insurance
Professio
nalServices
Busin
essS
ervices
PublicServices
Educa=
on
Health
OtherServices
Experian
OE
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
PrimaryIndustry
Manufacturing
U;li;es
Construc;on
Wholesale&Retail
Transporta;on&
Storage
Accommoda;on&FoodServices
Informa;on&Communica;on
Financial&Insurance
ProfessionalServices
BusinessServices
PublicServices
Educa;on
Health
OtherServices
2014Experian 2034Experian
2014OE 2034OE
15
ModeratedBaseline
3.17 HJA,inliaisonwithSouthSomersetDistrictCouncil,hasconsideredthetwosetsofforecastsin detail. This included a sector by sector reviewof forecastswhere therewas substantialvariationbetweentheforecasters.ForeachsectortheOE,Experianandahybrid(midpoint)scenariowereconsidered. Basedonlocalunderstandingofeachsector, intermsofhistoricperformance and known local strengths,weaknesses, opportunities and threats a series ofscenariosweredeveloped.Thedecisionmakingissummarisedinthetablebelow.Ascanbeseen,asageneralruleapositiveviewofeconomicpotentialwastakenforeachsector.
Sector CommentaryPrimaryIndustries ExperianforecastssomeemploymentgrowthforthesectorwhereasOE
forecastsdecline.Inabsolutetermsthevariationsarerelativelysmall.Itisanticipatedthatwhilstthesectorwillcontinuetobeimportantitwillbeproductivitygains thatwillbe theprimarydriverofoutputgrowth.The nature of agriculture in the area is not highly labour intensivehorticulture, which would be fuelled by increased labour demand.Thereforemarginal reductions in employment over the long term areanticipated. Onbalanceeither thehybrid (midpoint)orOE forecast isdeemedappropriate.
Manufacturing Thehistoric trendhasbeenforasteadydecline inemploymentwithinmanufacturing, although there has been some slowing of the rate ofdecline.Experianforecastsbroadlynochangeinemploymentovertheforecast period, with OE forecasting a decline of approximately 3,000jobs.Thereisanecdotalevidenceofbothpositivesandnegativesacrossthe sector, as well as substantial uncertainty as to the future of theAerospace industry in the district, which is the primary core of thesector. It was deemed unlikely that employment would not declinefurther without a substantial change in fortunes that is not presentlyevident.Onbalancethehybrid(midpoint)isdeemedappropriate.
Utilities This isarelativelysmallsectorwithmodestvariationbetweenthetwoforecasters.Thehybrid(midpoint)isthereforeadopted.
Construction Employmentgrewsteadily in the sectorup to2006/07beforea sharpdecline with the recession. This has subsequently recovered to prerecessionlevelsthroughstronggrowthinrecentyears,whichwasborneout by local understanding in terms of Yeovil College and a buoyantlocal sector. Experian forecasts amodest decline in the total level ofconstruction employment whereas OE forecasts growth of more than1,500jobs.Substantialconfirmedinfrastructureimprovementsaswellasplannedexpansionofhousebuildingvolumesareidentifiedasdrivingfurthergrowthinthesector.However,challengesindeliveryofhousingmay mute the effects. The potential for Hinkley Point C to attractconstructionworkers away from South Somerset was also noted. Thehybrid(midpoint)isthereforeadopted.
16
Sector CommentaryWholesale&Retail
Thewholesaleandretailsectorhasexperiencedemploymentdeclineinrecent years however, both forecasters are indicating employmentgrowththroughthePlanperiod. Experianforecastthegreater levelofgrowth, with employment returning to the pre-recession level by theendoftheperiod.Thereareclearpolicyambitionstoregeneratetowncentres including the Yeovil Urban Regeneration Framework, ChardRegenerationandforecastsforagrowingpopulation.Atthesametimethere are trends towards automation in retail and growth in onlineshopping. There are therefore competing trends but with somestronglyperformingcentresandacleardesireoftheDistrictCounciltoseegrowthinretailtheExperianforecastisadopted.
Transport&Storage
Transport and storage employment is at a similar level in 2014 to thebeginning of the 2000s although there have been rises and falls overthatperiod. Both forecasters anticipatemodest growthover thePlanperiod, with Experian being the more bullish of the two. However,Experian data included a rapid growth in the period 2014-15 whichcreated an exceptional differencebetween the two forecasters. Afterchecking the available ONS employment data this appears to be astrangeanomalyandhasbeenadjusted.Intermsofthesectorlocally,large-scale distribution has generally located close to theM5 outsidethe district. Improvements in the A303/A358 may improve theattractivenessof the area. Businesses from thearea thathave grownand needed larger distribution premises have generally lookedelsewhere (e.g. Screwfix locating in Staffordshire). There has beeninterest from lastmiledistributioncompanies (i.e. localdistribution tohomesandbusinesses),which is expected todrive somegrowth. Thehybrid(midpoint)isthereforeused,afteradjustingtheExperianfigure.
Accommodation&FoodService
Employmentinthissectorhasbeenincreasingsteadilyinrecenthistory.Both forecasters anticipate continued growth, with ExperiananticipatingmuchstrongergrowththanOE.Localintelligenceindicatescontinuedgrowthpotentialasaresultoftowncentreinvestment,newhoteldevelopmentandchanginghabitsofresidentcommunitiesaswellas the potential for increased domestic tourism following Brexit andwith weaker sterling. The focus was therefore towards the highergrowth options of Experian and the hybrid (midpoint) rather than thelowerOEforecast.
Information&Communications
Historicallyemploymenthas fluctuatedovertheperiod2000-14. Bothforecasters anticipate growth in employment in the sector over theperiod 2014-34, with OE more bullish than Experian. However, inabsolute terms the differences are small. With lots of anecdotalevidenceofsmallbusinessgrowthinthissector,includingtheincreasingattractiveness of the area for high value lifestyle/home basedbusinesses it was determined to focus towards the higher growthoptionsofOEandthehybrid(midpoint).
17
Sector CommentaryFinancial&Insurance
Employment in this sectorhasbeen fallingandoverall it isnota largesector for the district. OE forecasts a continued, but very modestdecline in employmentover the2014-34period. Experian forecasts agrowth but not large in absolute terms. There are competing trends,withbanksclosingbranchesand increasinglyusingautomation. Thereare also examples of growing insurance businesses with plans foradditional staff. It was determined that the higher growth Experianoptionwasmostsuitable.
ProfessionalServices
This sector has seen strong employment growth over the 2000-14period.Whilstbothforecastersanticipatecontinuedgrowththerateofgrowth is more muted than historically. Consultation work did notidentifyhugepotentialforthissector,withthemajorityofprofessionalservicefirmslocatingclosertotheM5orinlargerurbanareastoserviceawidehinterland.Thehybrid(midpoint)hasthereforebeenadopted.
BusinessServices Afteraperiodofrapidgrowththroughtheearly2000semployment inthe sector in South Somerset has seen modest decline and thenrecovery since the financial crisis and ensuing recession. Theforecasters take differing views of the future prospects of the sector,withOEforecastingstronggrowthandExperianvirtuallynogrowthoverthePlanperiod.Withanticipationofcontinuedoutsourcingandmovestoamoreagileeconomythenogrowthoptiondoesnotlooklikelyandthehybridisthereforeadopted.
PublicAdministration
Employmenthasbeenfallinginthissector.Bothforecastersanticipatea decline in the short term before levelling off from around 2020onwards. In absolute terms the forecasters provide almost identicalassessmentsandthereforethehybrid(midpoint)isadopted.
Education Therewasstrongemploymentgrowth inthissectorthroughthe2000-12 period before some evidence of declines. Experian forecastscontinuedstronggrowthwithOEtakingadifferingviewofmoremutedgrowth.WithcontinuedgrowthplannedintermsofnewschoolsandatYeovil College there is reason to anticipate growth. The hybrid(midpoint)appearsthemostreasonablebasedoncurrentknownplans.
Health There has been strong growth in health employment in the district.Experianforecaststhis tocontinue.OEanticipatemoremutedgrowth.This is an important sector for the local economy and the two localhospitalshavegrowthplans. Theageingpopulation isalsoanticipatedto drive strong growth in employment in this sector. The degree towhichtelecareadvancesmightimpactisasyetuncertain.OnthisbasisthehighergrowthoptionsofExperianandthehybrid(midpoint)appearmorerealistic.
OtherServices Employmentovertheperiod2000-14hasrisenalthoughnotinanevenmanner.OEforecastscontinuedstronggrowthinthesector,withExperianindicatingmuchmoremutedgrowth.Whilstthereisawarenessofvariousplansforleisuresectorimprovementsthejobgrowthassociatedwiththisisfairlymodest.Thehybrid(midpoint)isthereforedeemedthemostsuitableoption.
18
3.18 Onthebasisofthescenarioworkshopanddeskbasedanalysisatotaloffivescenarioswereprepared:
• OxfordEconomics• Experian• Hybrid(midpoint)• Alternative1-basedonthesectormoderationabove,takingthehigheroptionwherearange
wasidentified• Alternative2-basedonthesectormoderationabove,takingtheloweroptionwherearange
wasidentified.
3.19 Figure3.6 illustrates theemployment trajectoriesof these scenarios. TheExperianandOEbaselineforecastscreatetheupperandlowerlimits.TheAlternative1scenarioisclosetotheExperian forecast. The hybrid (midpoint) and Alternative 2 scenario are very close to oneanother in terms of overall employment growth, but have some differences in terms ofsectoralmix.
Figure3.6EmploymentGrowthForecastScenarios2014-34
Source:HJA,OEandExperian
BalancingLabourDemandandSupply
3.20 The analysis set out above was undertaken with no direct consideration of labour supply.However,itshouldbenotedthattheOEandExperianmodelsaredevelopedonaninternallyconsistent basis to ensure that at the UK level there is a matching of labour supply anddemand.Atthelocalleveltheremaybesomeassumptionofchangestocommutingpatternstobalancelocallabourmarkets.
85
90
95
100
105
110
115
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
2022
2024
2026
2028
2030
2032
2034
TotalEmploymen
t(Inde
x2014=100)
Historic(Experian) Experian OE Hybrid Alt1 Alt2
19
3.21 Detailed local demographic analysis has been undertaken as part of the Strategic HousingMarketAssessment9.ThisisacorepartoftheLocalPlanReviewevidencebaseandincludessubstantiallymore detailed consideration of local demographic and housingmarket trendsthanisundertakenbytheeconometricforecastinghouses.AspartoftheSHMAwork,theOEforecastswereutilisedtoconsiderthebalanceofjobsandhomes.
3.22 Figure3.7setsoutthe jobschangeperannumforeachofthefivescenarios,aswellas theSHMAObjectivelyAssessedNeed (OAN) figure. Italsoshows the indicativeannualhousingrequirementassociatedwitheachoftheselevelsofgrowthprovidedbyJGConsulting.Thisidentifies that the levelsofhousing requiredarehigher than theSHMAOANforallbut thelowest scenario (OE). This results from a shortage of working age population within thedemographicmodellingworktomeettheneedsoftheeconomicforecasts.
3.23 Inprovidingobjectiveassessmenttheevidencesuggeststhefollowing:
• The labour demand based approaches are suggesting greater levels of employment growththancanbesupportedbyprojecteddemographicchange.
• Asaresultthepotentialadjustingfactorsare:• Increasingtheprovisionofhousingtoattractadditionalin-migrationofworkingagepersons• AnadjustmenttothelevelsofinandoutcommutingtoandfromSouthSomersettobringthe
labourmarketintobalance• Ahigher thananticipated increase in theeconomicactivityandemployment ratewithin the
localpopulationtosupportahigherlevelofemployment• Aconstraintonthenumberofnewjobswhichcanbefilled.
Figure3.7AligningJobsandHomesScenario Jobsperannum HomesExperian 550 738OxfordEconomics 303 569Hybrid 419 648Alternative1 532 726Alternative2 426 653SHMAOAN 359 607
3.24 It was agreed that Alternative 2 should be adopted as the preferred scenario to be takenforwardforfurtherdetailedconsideration.
HigherGrowthScenarios
3.25 Thedemographicanalysismeanstheconsiderationof furtherhighergrowthscenariosmustbetreatedverycautiously.AswasnotedinChapter1ofthisreport,theNPPFrequiresplanmakerstobeaspirationalandrealistic.Thelevelofgrowthidentifiedthroughthemoderated‘business as usual’ scenarios already comfortably exceeds the projected workforce growthundertakenaspartoftheSHMA.Ifhighergrowthscenariosareconsideredthereisnobasison which to anticipate a suitable labour supply to support this growth. If there was a
9 J G Consulting (2016) Mendip, Sedgemoor, South Somerset and Taunton Deane, Strategic Housing MarketAssessment,FinalReport
20
situation whereby the labour supply exceeded the labour demand there would be a clearrationaletoconsiderroutestoboostthescaleofjobcreationinordertomeettheneedsoftheresidentworkforce.Quitethereverseistrueinthisinstance.TheHybridandAlternative2 scenarios should already be considered as aspirational relative to the labour supplyposition. The Experian andAlternative 1 scenarioswould appear highly aspirational in thelight of available labour supply. As noted earlier in the report, stronger levels of historicemployment growth were enabled through slack in the labour market. With an ageingpopulation and highworkforce participation rates this slack is no longer available andwilllimitthescopeforemploymentgrowth.Togofurtherrunstheriskoflackingrealism.
3.26 Thefocusfordeliveringadditionalgrowthwillneedtoswitchtoproductivityfuelledgrowth,rather than employment fuelled growth. It was previously noted that the OE forecastsalready allow for much greater productivity growth than is inherent within the Experianmodel. The Somerset Growth Plan has recently been revised10 accepting the countywideissues of future labour supply constraint and focusing efforts on delivering productivitygrowthratherthanpurelydrivingemployment.ThisisparticularlybroughtintofocusbythedevelopmentofHinkleyPointCnewnuclearpowerstation.Thisiscreatinghugedemandsonthelabourmarketoverthenext10yearsandshouldbetakenintoaccountwhenconsideringthescaleofpotentialgrowthtobeachievedinSouthSomersetandthewidercounty.Itmayinfactlimitthescopeforthedistricteconomytocreatethelevelofemploymentforecastinthemoderatedbaselinescenarios. TheLocalEnterprisePartnership(LEP) isalsorevising itsstrategic documentation through the preparation of a ‘productivity plan’, which furtherreinforces theneed to focusonproductivity fuelledgrowth rather than jobsbasedgrowth.There is no South Somerset specific economic development strategy to consider at thecurrenttime.
3.27 In addition, discussions with SSDC officers have highlighted challenges in delivering therequiredvolumesofhousinggrowthwithinthecurrentadoptedLocalPlan.Assuch,apolicytoboostthesupplyofhousingwithaviewtoboostingthelaboursupplyisfarfromcertaintosucceed.ItisimportantthattherevisedLocalPlanisinternallycoherentbutalsodeliverable.
3.28 Onthisbasisnohigheremploymentgrowthscenarioshavebeenconsidered.TheAlternative2moderatedbaselinescenarioisretainedasthepreferredscenario.Inadditiontotheissuesoutlined above, no strong demand side drivers were identified on which a realistic highergrowthscenariocouldorshouldbedeveloped.
Summary
3.29 Two sets of econometrics forecasts have been reviewed to ensure a rounded view ofpotential future growth prospects ismade. The two sets of forecasts show differences inoutlookintermsofGVA,employmentandproductivitygrowthinSouthSomerset.However,bothforecastersagreethatthelevelofemploymentgrowthoverthePlanperiodis likelytobe lowerthanthehistoricrate. This isconsistentwith labourmarketanalysis,whichshows
10Thedocumentwasnotpublishedattimeofwritingbutadraftdocumenthadbeenreviewed.
21
limitedslackinthelabourmarketcurrentlyandrelativelyslowforecastgrowthinworkforceasaresultoftheageingpopulation.
3.30 HJAinconjunctionwithSSDCandotherstakeholders,soughttotestthroughlocalknowledgethetwosetsofforecastsonasectorbysectorbasis.Thishasenabledthedevelopmentofamoderated baseline position. After consideration of the balance of labour supply anddemand, there is no evidential basis to develop higher growth scenarios in terms ofemployment,withthefocusneedingtobeonproductivity.Thisisparticularlyrelevantwithmajor labour demands arising from the Hinkley Point C new nuclear power stationconstruction,whichwill impact throughout theSomersetandwidereconomy,exacerbatingpotentiallabourshortages.
3.31 Figure 3.8 shows the preferred scenario arising from the moderation process (referred toabove as Alternative 2). This anticipates future employment growth of around 8,500 jobsover the Plan period. This is within the centre of a range of 6,000 – 10,700 which wasidentified.
Figure3.8Preferred(Alternative2)Scenario–EmploymentChangebySector2014-34
Source:HJAbasedonOEandExperian
(576)(1,530) 9
655
2,000
447
1,132
275100
1,552
716
(302)
590
2,671
790
(2,000)
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
3,000
Prim
aryIndu
stry
Manufacturin
g
U@li@es
Construc@o
n
Who
lesale&Retail
Transporta@o
n&Storage
Accommod
a@on
&Foo
dServices
Inform
a@on
&Com
mun
ica@
on
Financial&
Insurance
Professio
nalServices
Busin
essS
ervices
PublicServices
Educa@
on
Health
OtherServices
Chan
geinEmploymen
t2014-34
22
4 FutureEmploymentSitesandPremisesRequirements
4.1 Thepreceding chapter consideredpotential economicandemployment scenarios for SouthSomerset. This chapter sets out analysis of the associatedemployment sites andpremisesrequirementarisingfromfuturegrowthandtoenableastronglocaleconomy.
Approach
4.2 Figure4.1providesasummarydiagramoftheapproachemployedtoassessfuturesitesandpremisesrequirements.
Figure4.1ApproachtoAssessingSitesandPremisesRequirements
4.3 Thefirstphasetakesaccountofthenetchangesintheeconomyi.e.thegrowthanddeclineofparticularsectors.ThesectoralemploymentprojectionsareconvertedtoUseClass.Thisprovides an indication of the spread of future employment change across the full range ofplanningUseClassesandnone. Fromthatpointonwardthe focus isupontheBUseClass,withotherelementsoftheevidencebasemoresuitedtoinformingthedetailedrequirementsforA,CandDUseClasses (e.g. retail studyand infrastructuredevelopmentplan). Thenetemployment changes in the B Use Class are then converted to property and landrequirementsusingemploymentanddevelopmentdensityassumptions.
4.4 Thesecondphasethenconsiderswidermarketfactors,particularlytheneedtorecognisethechurnintheeconomyandtheassociatedneedtoreplaceandupgradepropertystocks.Forexample, whilst the manufacturing sector as a whole has experienced well-documenteddeclineinitsemploymentbase,therehasbeenacontinueddemandfornewpremiseswithinwhich to operate. This demand can be driven by existing companies needing more/lessspace, a different location, or a different type of premises. It can also be driven by newcompaniesinthemarket,whichmaynotfindtherighttypeofpropertyavailableintherightlocationwithinthemarket.Asaresult,whilstoverallasectormaybeindecline(althoughthisstillappliestogrowingsectorstoo),therearechangesbeneaththesurfacethatcontinuetodrivedemand.Thiscanbeaparticularissuewhereexistingstocksareageingorwherevacantsitesareno longer in the locationsthataresuitable tomodernoccupiers.Thisalsoensuresprovisionismadeforsitesthatmightbelostfromemploymentusetootheruses.AlsowithinPhase2theassessmentbuildsinanallowanceforchoiceandflexibility.Thiselementneedstotakeaccountofofferinglocationchoiceaswellaschoiceintermsofthetypeofpropertyandsetting.
SectoralEmploymentProjec1ons
ConversiontoUseClass
ConversiontoFloorspaceandLand
AllowanceforReplacement
AllowanceforChoiceandFlexibility
TotalRequirement
Phase1
Phase2
23
4.5 Within the detailed assumptions employed as part of this model, local evidence has beenusedtoensuretheapproachisappropriatetotheSouthSomersetarea.TheseassumptionshavealsobeentestedthroughworkshopswithCouncilMembersandOfficersaswellaswithcommercialpropertymarketstakeholders.
4.6 Theresultsoftheassessmentapproacharealsovalidatedthroughareviewofhistoriclevelsof development activity as recorded through SSDC monitoring records and through thestakeholderengagementprocess.
4.7 Furtherdetailsofthemethodaresetoutwithintheremainderofthechapterandsupportingappendices.Foreaseofreadingallfiguresareroundedthroughoutthischapter.Asaresultsometablesmaynotsum.
Phase1–NetAdditionalChanges
EmploymentChangebyUseClass4.8 EmploymentchangebysectorisconvertedtoUseClassusingtheconversionmatrixsetoutat
Appendix 1 to this report. Thismatrix has been tailored to the South Somerset economyusingfine-grainedemploymentdatafromtheONSBRESdataset.AheadlinescheduleofuseclassesissetoutatFigure4.2forthosethatarenotfamiliarwiththeterminology.
Figure4.2UseClassesSummaryUseClass DescriptionA1 RetailA2 FinancialandProfessionalServicesA3 RestaurantsandCafesA4 DrinkingEstablishmentsA5 HotFoodTakeawaysB1a Offices(otherthanthosewithinA2)B1b ResearchandDevelopmentB1c LightIndustrialB2 GeneralIndustryB8 StorageandDistributionC1 HotelsC2 ResidentialInstitutionsC3 DwellingsD1 NonResidentialInstitutionsD2 AssemblyandLeisureSuiGeneris Useswhichdonotfallintheabove
4.9 Figure 4.3 illustrates the employment change by Use Class across the plan period. This ishelpful to understand a number of key points. Firstly, employment is spread across UseClassesandnone. Employment isnot confined to theBUseClass. Thegreatest growth isforecastinthe‘noneandhomeworking’category.Thisincludesnotonlyhomebasedworkers
24
but also those such as cleaners thatwork in theworkplace of others, or itinerantworkerssuchasmanyintheconstructionindustry.
4.10 Around2,000jobsareforecastintheAUseClass.Thisincludesretail,restaurantsandcafesand someofficebasedactivities. These areprimarily town centreor retail parkuses. Theprimary consideration for the scale of sites and premises requirements will be via retailassessmentandothertowncentreresearch.
4.11 Anet changeof around1,000 jobs is forecast in theBUseClass. This includes substantialforecastgrowthintheB1aofficeUseClass,moremodestgrowthinB1b,B1candB8usesandasubstantiallossofB2manufacturingemployment.
4.12 Some1,700 jobsare forecast in theCUseClassand1,400 in theDUseClass.This includeshealth, education and leisure activities. Many of the sites and premises requirements forthese uses will emerge through infrastructure planning as a result of demographic andhousingchangesthroughthedistrict.
Figure4.3EmploymentChangebyUseClass2014-34
Source:HJA
NetBUseClassFloorspaceChanges4.13 TheanalysispresentedprovidesbriefheadlinesbyUseClass.Alltotalsarereportedasgross
externalarea(GEA).ThedetailbehindtheassumptionsissetoutinAppendix1.
4.14 The analysis assumes a direct link between employment and floorspace required. It isappropriate to caveat this approachwith two important points. Firstly, if there is capacitywithin the existing stock of premises therewill be the opportunity to accommodate someemployment increases without the need for new space. Secondly, if there are changingworkingpracticestheratiobetweenworkersandfloorspacecouldchangeovertime.Thefirst
1,216
129
679
1,596
65 31
(1,213)
553
188
1,491
1
1,213
208439
1,931
(1,500)
(1,000)
(500)
-
500
1,000
1,500
2,000
2,500
3,000
A1
A2
A3-5
B1a
B1b
B1c B2
B8
C1
C2
C3
D1
D2
SG
Non
e&Hom
eworking
ForecastEmploymen
tCha
nge2014-34(Alt2)
25
of these issues is dealt with via consideration of vacancy and under-utilisation, which hasbeen tested through consultations. No specific evidence relating to under-utilisation hasbeencited inour research. It is thereforeassumed thatwhilst someoccupiersmaywellbeunder-utilisingtheircurrentfacilitiesothersmaywellbeoperatingabovecapacity.Overthecourse of the plan period there is an opportunity for adjustment. We are not aware ofparticularlyhighvacancyratesatthecurrenttime,sothereisnosubstantialcapacitywithintheexistingstocktoaccommodatefuturegrowth.Africtionalvacancyrateof5-10%istypicalto enable the efficient workings of the market. There is also the fact that some stock isunsuitable.Secondly,theissueofchangingworkingpracticesisconsideredatAppendix1.Insummarythisconcludesthatwhilstwithintheofficesectortherehasbeenatrendtowardsoccupationatincreasingdensity,thereissomeevidencethatthistrendhasnowlevelledoff.ItwascitedthatinSouthSomersettheremaybefurtherscopeforincreasingthedensityofoccupationwithin offices, as a result the figures quotedmight reasonably be considered atop-sideestimate.
B1aOffices4.15 Approximately1,600netadditionalofficebasedjobsareestimatedwithintheforecast.This
equates to1,000netadditional full timeequivalent jobs (FTE).Bestpracticeguidance11hasinformedtheassumptionof13.2sqm(GEA)perFTEworker.Onthisbasisitisestimatedthat13,100sqmofnetadditionalofficespacewillberequiredacrossthedistricttoaccommodatethisgrowth.
B1bResearch&Development4.16 The economic forecast model estimates an increase of approximately 65 jobs within B1b
accommodation.Thisequatesto45FTEs,andatadensityof60sqmperFTEarequirementforaround2,600sqmofpremisestoaccommodatethesejobs.
B1cLightIndustrial4.17 Approximately30additional jobsare forecastwithinB1cLight Industrialpremises,equating
to15FTEs.Atadensityof56.4sqmperFTEthisgeneratesarequirementforapproximately900sqmofnetadditionalpremises.
B2GeneralIndustry4.18 EmploymentwithinB2premises is forecasttodeclinebyapproximately1,200 jobsoverthe
Planperiod.Thisequatestoalossof1,300FTEs12.Thishasthepotentialtoreducethetotalrequirementforsuchspacebyapproximately49,500sqmat37.8sqmperFTE.
B8Storage&Distribution4.19 Anadditional550jobsareforecastinB8premisesovertheperiod2014-34,490FTEs.Based
onadensityof80 sqmper FTE thiswill generateanadditionaldemand forapproximately39,200sqmofstorageanddistributionwarehousing.11HCA(2015)EmploymentDensityGuide,3rdeditionistheprimarysource.Appendix1setsoutfurtherdetailsoftheapproachtaken.12ThefactthatFTEdeclineisgreaterthanjobsdeclineisnotatypographicalerror.AnumberofsectorscontributeemploymenttoB2uses.Somesectorswithgreaterratesofparttimeworkingareforecasttogrow,whilstotherswithlowlevelsofparttimeworkingareforecasttodecline.TheoffsettingadjustmentisagreaterlevelofdeclineinFTEtermsthaninjobsterms.
26
Summary4.20 Figure4.4summarises theemploymentand floorspacechangesarising fromnetchanges in
theeconomy.
Figure4.4ForecastNetChangesinBUseClassEmploymentandFloorspace2014-34UseClass ForecastEmployment
Change(Jobs)ForecastEmployment
Change(FTEs)EstimatedFloorspace
Change(sqm)B1a 1,600 1,000 13,100B1b 65 45 2,600B1c 30 15 900B2 -1,200 -1,300 -49,500B8 550 500 39,200Total 1,000 230 6,300Source:HJA(figuresmaynotsumduetorounding).
Phase2–Replacement,Churn,Flexibility
4.21 Phase1consideredonlythenetchangesintheeconomytoensureallBUseClassactivitycanbe accommodatedwithin the district. Phase 2 dealswith the need to ensure the existingeconomy, and the on-going changes within it are supported through the provision ofsufficientemploymentstocks.
4.22 Themethodologyemployedforestimatingthelevelofreplacementdemandassumesthataproportionofthetotalexistingstockofemploymentpropertyneedstobereplacedeachyearto ensure the overall stock of premises is sufficient and appropriate to modern needs, intermsof bothbuildingquality and site characteristics. This is particularly important for themanufacturingsectorwhereon-goingdevelopmentofindustrialpremiseshasbeenobserved,despiteadeclineinemploymentinthesectorovermanyyears.
4.23 With Permitted Development Rights (PDR) now in place there is increasing pressure forredevelopmentofofficestockstootheruses.Laterin2017thisrightwillbeextendedtolightindustrial premises. There are also losses of employment property for other reasons,whether occupation by non-employment users (e.g. the growth in leisure occupiers) orredevelopment for non-employment uses. It is important that any potential losses ofcommercial employment stocks do not hamper the growth of the economy. EnergyPerformanceCertificate(EPC)legislationisalsocomingintoforcelaterin2017forcommercialemploymentproperty,whichwillfurtherdrivetheneedtoupgradepremisestoensuretheyarefitforpurpose.
4.24 HJAestimatesareplacementrequirementequivalentto1-2%ofstockperannum13.Dataoncommercialpropertystocks isavailableupto2012. This indicated108,000sqmofofficesand988,000sqmof industrialpremises in thedistrictat201214. Commercial stockdata isonly split by office and industrial (including B1c, B2 and B8), and does not therefore allowfine-grained analysis byUse Class. This estimate of commercial stocks is used to calculate
13SeeAppendix1fordetails.142012dataisusedasthebestavailablesource
27
replacementandupgradingrequirementsinthefuture.Figure5.5setsouttheresultsoftheanalysis
Figure5.5ForecastReplacement&ChurnRequirement2014-34(sqm)Use TotalStock(2012) AnnualReplacement 20YearPlanPeriodTotalOffice(1%pa) 108,000 1,100 21,600Industrial(1-2%pa) 988,000 9,900–19,800 197,600–395,200Total 1,096,000 11,000–20,800 219,200–416,800Source:HJAbasedonVOA(figuresmaynotsumduetorounding).
ReuseofEmploymentSites
4.25 The analyses of both net additional and replacement requirements set out above do notconsider whether the development activity takes place on existing employment sites(replacingorsubstantiallyrefurbishingonebuildingwithanotheronthesameplotofland)orwhether currently unoccupied landneeds to bemade available. The evidence andmarketobservationsuggesttherewillbeelementsofboth,particularlyassomeformeremploymentsitesarelosttoalternativeusese.g.toresidentialusesthroughPDRs.
4.26 HJA has interrogated district level monitoring data for the period 2006-15 to identify thedegreetowhichBUseClasscompletionshavebeenachievedonpreviouslydevelopedBUseClass land. For the purposes of this analysis we assume that 20% of gross employmentdevelopment activity can be achieved through reuse of previously developed B Use Classsites. This assumption is also consistentwith findings ofHJA analysis in other parts of theSouthWest15.Thecorollaryofthisisaneedfortheremaining80%ofgrossrequirementstobe provided for through new development land (this can include previously or existingallocatedbutnotyettakenupemploymentsites)
DevelopmentDensity4.27 Adevelopmentdensityof40%isassumedforindustrialpremisesdevelopment.Forofficesa
range isusedtoaddress thedifferingnatureofdevelopmentat ‘in-town’and ‘out-of-town’locations. A figureof40% isused forout-of-townandbusinesspark typedevelopment. Afigure of 100% is used to capture the higher densities achieved in town. If high-risedevelopmentisaccommodatedthiscanleadtoevenhigherdensitiesbeingachieved16.Asaresultthelandrequirementrangefortheofficesectoriswideandthefloorspacefiguremaybeamoresuitablemetric.
Choice&Flexibility4.28 Apercentageupliftofthecombinedrequirementfornetadditionalandchurn/replacementis
appliedtoensureanallowanceforrangeandchoiceisincorporated.Thisupliftalsobuildsinsomeadditionalflexibilitytoallowthenormalfrictionalmovementinthemarket.Assuch,inlinewithindustrystandards,anupliftof10%hasbeenapplied.
15PreviousHJAanalysisinHampshire,WiltshireandDevonhasidentifiedareplacementrateofaround20%onBUseClasssites.AvailabledataforSouthSomersetindicatesafigureintheregionof17%.Howevertherearesomeuncertaintiesinthedatawhichmaysuppressthisfigure.16 These assumptions drawon evidence cited inODPM (2004) Employment LandReviews–GuidanceNote andYorkshireForward(2010)PlanningforEmploymentLand(RogerTym&Partners)
28
TotalRequirement
4.29 Figure5.6bringstogetherthevariouselementswithintheanalysistobuildapictureoffuturerequirements, split by office and industrial. This sets out an estimated gross level ofdevelopment of approximately 35,000 sq m of offices and 190,000 – 390,000 sq m ofindustrial over the 20 year Planperiod. After discounting for developmentwhichwill takeplaceonpreviouslydevelopedemploymentsites,andallowingfortheflexibilityallowanceatotalrequirement,requiringlandprovisionisestimatedat30,500sqmofofficesand168,000–342,000sqmofindustrial.Inlandtermsthisisestimatedat3-8hectaresforofficesand42-85hectaresforindustrialdevelopment.
Figure5.6TotalEstimatedFutureSitesandPremisesRequirements(sqmunlessstated) Office IndustrialReplacementProvision(A) 21,600 197,600-395,200NetAdditionalRequirement(B) 13,100 -6,800GrossRequirement(C=A+B) 34,700 190,800-388,400DeliveredonExistingEmploymentSites(D) 6,940 38,160-77,680NetRequirement(E=C-D) 27,760 152,640-310,720FlexibilityAllowance(F) 2,780 15,260-31,070TotalRequirement(G=E+F) 30,540 167,900-341,790AverageAnnualRequirement 1,530 8,400-17,090TotalLandRequirement 3–8ha 42-85haAverageAnnualLandRequirement 0.2-0.4ha 2.1-4.3haSource:HJA(figuresmaynotsumduetorounding).
Validation
4.30 Thefiguressetoutabovearelargelydrawnfromdeskbasedanalysis,butwithtestingatkeypointsfromlocalstakeholders.TheresultshavethereforebeenvalidatedthroughanalysisofhistoricdevelopmentactivityandthroughfurtherstakeholderengagementfrombothCouncilMembersandOfficersandlocalcommercialpropertymarketstakeholders.
HistoricCompletions4.31 SSDC has compiled detailedmonitoring records of historic development activity across the
district. Figure5.7showsthegrossandnetlevelsofdevelopmentofBUseClassfloorspaceovertheperiod2006-2015.Theterm‘net’herereferstoBUseClassdevelopmentnetofanylosses incurredasaresultofnewBUseClasspremisescomingforward. ThisdoesnottakeaccountofallBUsestootherUseClasses.Thisistoaidcomparisonwiththefiguressetoutatfigure5.6above.
4.32 Unfortunatelythewaythedataiscodeddoesnotallowanaccuratedisaggregationbetweenofficeandindustrialdevelopments. However,fromthosedevelopmentswhicharecodedindetailitisevidentthatthevastmajorityofdevelopmentsareforindustrialfloorspace.
4.33 Toaidcomparisonwithforecastanalysisallfiguresarereportedonanaverageannualbasis.However,asisclearlyevidentfromthechart,thereisnotanevenannualspreadofactivity.Thedata iswhatmight reasonablydescribedas ‘lumpy’,withmajordevelopments in someyearsandalmostnothinginothers.Thisisatypicalfeatureofthedevelopmentindustryand
29
means caution needs to be used when analysing data, as the inclusion or exclusion ofdatapointscanhavesubstantialimpactontheaveragescalculated.
4.34 Overthe10yearsforwhichdatahasbeenmadeavailableaverageannualgrossBUseClasscompletionsareestimatedat19,400sqmperannum. Afterdeductingany lossesofBUseClassfloorspaceaspartofthesedevelopmentsthenetfigureis16,600sqmperannum.
4.35 Figure5.8comparestheseannualaveragefigureswiththeequivalentannualisedfiguresfromtheforecastanalysis(RowsCandEfromfigure5.6).Thissuggestshistoricdevelopmentlevelshave been towards the higher end of the range forecast. This may suggest levels ofreplacementactivityhavebeenclosertothe2%endoftheassumptionrangethanthe1%.
Figure5.7HistoricBUseClassFloorspaceCompletions(sqm)
Source:HJAbasedonSSDC
Figure5.8ComparisonofHistoricandForecastBUseClassDevelopmentActivity(sqm) Historic Forecast17GrossRequirement(C) 19,400 11,300-21,200NetRequirement(E) 16,600 9,000-16,900
ConsultationWorkshops4.36 Theworkshop held on 4thMay 2017 discussed the emerging analysis. A number of points
weremadebystakeholders:
• Thereisalotofolderstock,andwiththeadventofEPClegislationthereisagreaterdrivetosee replacement activity. However, it was noted that some of this achievement would be
17Basedoncombiningofficeandindustrialfiguresfromfigure5.6
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
GAINS LOSSES NETB
30
achieved through putting new roofs on properties 25-30 years of age rather than totalredevelopment.
• SouthSomerset isnotperceivedasanoffice locationandtheofficemarket iscurrentlyveryweakwithpublicsector retrenchmentandavery limitedprivatesector foranythingbeyondmicro businesses. The office floorspace forecasts18 therefore look ambitious. It may bepossiblethatreplacementfor losseswillnotbedirectly inthedistrictbutwillbeat locationsclosertotheM5corridor(e.g.Taunton)orevenintolargerregionalcentressuchasExeterandBristol. These larger centresoffermoreattractiveoffers forworkersandhence the labourmarketprofilethatoccupiersrequire.Theforecastofficefloorspacefigures15thereforeappearveryambitious.
• There is potential scope for increasing density of occupation. Examples were cited ofmanufacturingandofficeoccupiersabletoconsolidateoperationsfromotherpartsoftheUKintotheirexistingSouthSomersetaccommodationwithoutarequirementforadditionalspace.Thefocusoncostsinthecurrenteconomicclimateareleadingoccupierstoseektoenhancespaceutilisationwhereverpossibletodrivecostsdown.
• Increased car use across the population since many older industrial areas were developedmeanstheopportunitiesforintensificationofdevelopmentareverylimited.Thereisalreadyashortageofparkingspacesandintensificationwillonlyexacerbatethis.
• Gross industrialdevelopmentof approximately10,000 sqmperannumdoesn’t soundhigh.Figures closer to 15,000 – 20,000don’t seem totally unreasonable. It is importantwe ‘backourselves’asanarea.Iftheallocationsarenotintheplanitwillbeshortsighted.
• SiteallocationsneedtobecognisantoftheduallingoftheA303.• Thechallenge isdelivery.Viabilityofdevelopment isamajorchallengeasrentsarenothigh
enoughinthearea.Itismoreexpensivetobuildofficesthanhousingyetthereturnsarelower.Henceaneedtoseekroutestoreducebuildcostsandincreasevaluese.g.modularbuildings.
4.37 Thecommercialmarketstakeholderworkshopconfirmedmanyofthefindingsfromthedeskreview. That industrial developmentwould likely predominate and the figures towards thetop of the forecast range would not be unreasonable. However, for offices there wassubstantiallylessconfidence,particularlyintermsoflargerscaleofficerequirements.
SummaryandConclusions
4.38 This chapter considers both the requirements for B Use Class sites and premises toaccommodatethenetchangesintheeconomy,butalsotoensureasufficientlyhighqualityongoingstocktomeettheneedsoftheexistingeconomyandtheperpetualchangesthataregoingonwithinit.
4.39 Changes inemploymentwillbespreadacrossawiderangeofUseClassesandnone. Morethan 1,900 of the 8,500 net additional jobs will not require sites and premises provision,either as a result of home working, peripatetic working or accommodation within theworkplacesofothers. Substantialnetadditional jobcreationwill fallwithin theA,CandDUseClasses. There isamixedpicturewithin theBUseClasswith forecast losses inB2Use
18 It should be noted that the office floorspace forecasts presented at the workshop were approximately 25%higherthanassetoutinfigure5.6.
31
activities,butgainsinB1andB8activities.Innettermsaround1,000additionalBUseClassjobsareforecast,equivalenttoaround230FTEposts.
4.40 Netchangesintheeconomywillrequireanadditional13,000sqmofB1aoffices,3,500sqmofB1b/cUses,apotentialnetreductionof49,500sqmofB2premisesandgrowthof39,200sqmofB8 floorspace. Inadditiona further22,000sqmofoffice floorspaceand200,000–400,000sqmofindustrialfloorspacewillneedtobedeliveredtoreplacelost,dilapidatedorunsuitablepremiseswithintheexistingportfolio.
4.41 It is estimated that approximately 20% of the total gross requirement can be achieved onpreviouslydevelopedBUseClasssites.However,theremainder,andasuitableflexibilityandchoice buffer will need to be provided for through the site allocations process. This isestimated at 3-8 hectares for office development and 42-85 hectares for industrialdevelopment.
4.42 The forecast figures have been validated through comparison with historic levels ofdevelopment activity and consultationwith commercialmarket stakeholders. This showedhistoriclevelsofactivitytowardstheupperendoftheforecastranges,withthevastmajorityindustrialdevelopment.Theconsultationworkshopfurthervalidatedthe industrial forecast,towardsthetopoftherangebutexpressedcautionregardingtheofficerequirement,givenveryweakinterestinthearea.
32
5 Conclusions
5.1 This report set out to consider the long-term economic forecasts for the district of SouthSomerset and their implications for future employment (B Use Class) sites and premisesrequirementsovertheperiod2014-34.
5.2 A reviewof the currentand recentperformanceof theSouthSomerseteconomy identifiesbroadly positive labour market metrics, including high levels of participation and lowunemployment. However, the area has lower than average wage levels and anunderrepresentationofpersonswiththehighestlevelofqualificationsorinthehighestorderoccupations. The sectoral employment profile of the area bears this out, with an under-representationinhighvalueofficebasedactivitiessuchasprofessionalservices.
5.3 The economy is dominated by manufacturing activities, which are substantially overrepresentedcomparedtobenchmarkareas.Thisisprimarilydrivenbythehistoricstrengthinthe aerospace (rotocraft) manufacturing sector and its supply chain. There is currentuncertaintyastohowthiswillfareinthefuturewithnocurrentordersforthedevelopmentofnewaircraft.Threeofthefoursectors,whichshowover-representationinSouthSomerset,have experienced employment decline in recent years. This is a potential risk factor ifemploymentcontinuestodeclineinareasofstrengthwithoutbeingreplacedinothergrowthsectors.
5.4 Overall,totalemploymentlevelshavebeenfairlystatic inthelastfiveyears.OverthesameperiodtheGBeconomyhasaddednetnewjobs.Duetopositivelabourmarketindicatorsthisis not a major cause for concern yet, but it is important to ensure the South Somerseteconomyremainscompetitive. Businessstatisticsshowthatbusinessgrowthhasalsobeenslower than nationally in recent years, although data on the survival of newly formedbusinessesisbetterthanbenchmarkareas.TheUKCompetitivenessIndexshowsthedistrictranked230of379districtsandunitaryauthorityareasinthecountrywithnogreatchangeincompetitivenessinrecentyears.
5.5 Businessasusualeconometric forecasts indicateGVAgrowthover the2014-34Planperiodahead of the historic 2000-14 period. However, it is important to note there is muchuncertaintyastothepotential impactofBrexitontheUKeconomy.Employmentgrowthisforecast tobe slower than thehistoricperiod,partlyasa resultofa tighter labourmarket.ThepotentialimplicationsofBrexitarenotfullyunderstoodoraccountedforintheforecastsand therefore it will be necessary to keep the performance of the local economy underreview.
5.6 To take account of variation between the two sets of forecasts amoderation exercisewasundertaken, ensuring local intelligence was factored in. This led to a moderated baselinepositionor ‘preferred scenario’. Thispreferred scenarioestimates8,500net additional jobsover thePlanperiod. This levelof employment is above the levelutilisedwithin the SHMAand the potential labour supply available to the local economy. On this basis it is notappropriatetoconsiderhighergrowthscenarios,butrathertoensurefocus ison improving
33
productivityintheeconomy.ThisisinkeepingwitheconomicdevelopmenteffortsatCountyandLEPlevel.
5.7 ChangesinemploymentwillbespreadacrossthePlanningUseClassesOrderwithsubstantialjobcreationnotrequiringanydirectprovisionofsiteandpremises. WithintheBUseClassthere is anticipated growth in the requirement for B1a office space, B1b/c R&D and lightindustrial space and B8 storage and distribution space. There is a forecast net decline inemployment within the B2 general industry Use Class as a result of forecast decline inmanufacturingemployment.
5.8 Inadditiontoaccommodatingthenetchangesintheeconomyitwillbenecessarytoensuretheexisting stockofpremises ismaintained in the faceof changingoccupier requirements,dilapidationandlossestootheruses.Provisionismadetoreplace1-2%oftotalstockseachyear(onaverage).Accountistakenintheforecastingofthepotentialtore-providesomeofthe B Use Class development on sites that have previously accommodated B Use Classpremises,thereisalsoanallowancetoensureflexibilityandchoiceinthemarket.
5.9 Figure 6.1 sets out the final conclusions of the analysis, including the estimated total landrequirement for BUseClasses for theperiod. Thesehavenot been adjusted forwhat hasalready been delivered within the analysis period. They should not be considered as anadditiontothatwhichhasalreadybeendeliveredorisidentifiedassupplywithintheexistingLocalPlan(PolicySS3).
Figure6.1TotalEstimatedFutureSitesandPremisesRequirements(sqmunlessstated) Office Industrial
ReplacementProvision(A) 21,600 197,600-395,200NetAdditionalRequirement(B) 13,100 -6,800GrossRequirement(C=A+B) 34,700 190,800-388,400DeliveredonExistingEmploymentSites(D) 6,940 38,160-77,680NetRequirement(E=C-D) 27,760 152,640-310,720FlexibilityAllowance(F) 2,780 15,260-31,070TotalRequirement(G=E+F) 30,540 167,900-341,790AverageAnnualRequirement 1,530 8,400-17,090TotalLandRequirement 3–8ha 42-85haAverageAnnualLandRequirement 0.2-0.4ha 2.1-4.3haSource:HJA
5.10 The range displayed for office development arises solely from the alternative developmenttypes,withexclusivelytowncentre,higherdensitydevelopmentformingthelowerendoftherangeandoutof town,businesspark lowerdensitydevelopment formingtheupperendofthe range. Thepotential options for accommodating anddeliveringoffice floorspacewillinformwhereintherangeitisappropriatetosettle.
5.11 Therangedisplayedforindustrialdevelopmentarisesfromtheadoptionofalternativelevelsofreplacementactivity(1%or2%perannum).
5.12 The quantitative conclusions were validated through cross-referencing historic levels ofdevelopmentactivityandwithcommercialmarketstakeholders.Thesebothindicatedfigures
34
towards the upper end of the range of industrial floorspace were achievable and indeeddesirable to ensure the local economy remains competitive. However, there was somecaution relating to the potential for office sector development with very low occupierdemandatpresent.
35
Appendix1:MethodologyDetails
SICUseClassMatrix
i. The proportion of employment in each category in this matrix is based upon the share ofreportedemploymentasrecordedbytheBusinessRegisterandEmploymentSurvey(BRES)indifferent activities. This approach was applied to each of the sub-sectors in turn and withanalysisgoingdownto4digitSICcodes.ThematrixthereforereflectsthecurrentstructureoftheSouthSomerseteconomyindetail.
A1
A2
A3-5
B1a
B1b
B1c
B2
B8
C1
C2
C3
D1
D2
SG
Non
e&
Homew
orking
PrimaryIndustry 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%
Manufacturing 0% 0% 0% 0% 0% 1% 92% 0% 0% 0% 0% 0% 0% 1% 7%
Utilities 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 55% 45%
Construction 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 100%
Wholesale&Retail 52% 0% 0% 1% 0% 0% 4% 24% 0% 0% 0% 0% 0% 9% 11%
Transport&Storage 0% 0% 0% 4% 0% 0% 0% 13% 0% 0% 0% 0% 0% 2% 81%
Accommodation&FoodServices 0% 0% 59% 0% 0% 2% 0% 0% 16% 0% 0% 0% 0% 0% 23%
Information&Communications 0% 0% 0% 57% 4% 0% 0% 0% 0% 0% 0% 0% 0% 0% 39%
Finance&Insurance 0% 48% 0% 35% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 17%
ProfessionalServices 0% 5% 0% 63% 2% 0% 0% 0% 0% 0% 0% 0% 0% 4% 26%
BusinessServices 6% 0% 2% 27% 0% 0% 16% 3% 1% 5% 0% 6% 0% 6% 27%
PublicAdmin 0% 2% 0% 36% 0% 0% 0% 0% 0% 0% 0% 22% 0% 0% 40%
Education 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 91% 0% 0% 9%
Health 0% 0% 0% 9% 1% 0% 0% 0% 0% 55% 0% 24% 0% 2% 10%
OtherServices 17% 1% 0% 10% 0% 2% 0% 0% 0% 0% 0% 9% 26% 9% 26%
Homeworking
ii. Itisimportanttoconsidertheeffectsofhomeworking.2011CensusofPopulationdatashowsusthathomeworkingaccountsforsome14%ofallworkers.
iii. Dataonhomeworkingbysectorisrelativelylimitedandcrudebecauseoftheaggregationofbroadsectors.Agricultureandothersisthesectorwiththehighestreportedhomeworking.
iv. In some sectors, homeworkingmaybe a reflectionof home-basedbusinesses,whichmightinclude some itinerantworking, e.g. the construction sector. The level of detail in the datadoesnotallowclearconclusionstobedrawn.
v. The SIC/Use Class matrix used for assessing employment by Use Class already makesallowance foremployment thatdoesnot require land. Thiscould includesomewhoreportbeing home-based, or itinerant workers. It could also include those with home-based
36
businesses in awide range of sectors. It would not therefore be appropriate to apply thefiguresfromtheCensusasstandardiseddeductionsbysector.However,itshouldbeutilised.Thedataclearlysuggests:
• Aproportionofmanufacturingbasedemploymentishomebased.• Homeworkinginofficebasedsectorsisimportantinthearea.• Aproportionofpublicadministrationemploymentishomebased.• Otherservicesincludesasubstantialelementofhomebasedactivity.
SouthSomersetAllcategories:Industry 14%A,B,D,EAgriculture,energyandwater 45%CManufacturing 7%FConstruction 19%GWholesaleandretailtrade;repairofmotorvehiclesandmotorcycles 9%HTransportandstorage 11%IAccommodationandfoodserviceactivities 18%JInformationandcommunication 33%KFinancialandinsuranceactivities 17%LRealestateactivities 16%MProfessional,scientificandtechnicalactivities 28%NAdministrativeandsupportserviceactivities 17%OPublicadministrationanddefence;compulsorysocialsecurity 7%PEducation 9%QHumanhealthandsocialworkactivities 8%R,S,T,UOther 22%
FloorspacePerWorkerAssumptions
vi. Bestpracticeguidance19onemploymentdensitiesusesamixofnetinternalarea(NIA),grossinternal area (GIA) and gross external area (GEA). To convert to GEA an uplift is provided,+20%toconvertNIAtoGEAand+5%toconvertGIAtoGEA.
vii. Thetablebelowsetsoutfurtherdetailsonassumptionsinrespectofaveragefloorspaceperworker.
UseClass AssumptionB1aOffices TheEmploymentDensitiesGuide(2015)providesestimatesfor
a range of office functions ranging from 8 – 13 sqm per FTE(Net Internal Area). The higher end of this range relates toCorporate HQ and the lower end relates to call centres.Financial Services, Public Sector and Professional Services fallwithin the 10-12 sq m range. The Occupier Density Study(2013)indicatesanaveragedensityof10.9sqmfortheUK.On
19HomesandCommunitiesAgency,EmploymentDensityGuide3rdEdition,November2015.
37
this basis, an assumption of 11 sqm per employee has beenadopted, with a 20% uplift to provide Gross External Area(GEA).Theutilisedassumptionistherefore13.2sqmperFTE.
B1bR&D Themostrecent(2015)bestpracticeguidancesetsoutarangeof40-60sqm(NIA)forR&DB1bpremises.Themidpointofthisrange has been adopted, and uplifted by 20% to convert toGEA. A figure of 60 sq m per FTE has been used within theanalysis.
B1cLightIndustry Themostrecent(2015)bestpracticeguidanceindicatesafigureforB1(c)lightindustryat47sqmperFTE(NIA).AllowancesaremadetoaligntoGEA(+20%)withafinalassumptionof56.4sqmperFTE(GEA).
B2GeneralIndustry B2General is estimated at 36 sqmper FTE (GIA). AllowancesaremadetoaligntoGEA(+5%)withafinalassumptionof37.8sqmperFTE(GEA).
B8Storage&Distribution Latestavailableestimatessuggestarangeof70–95sqmperFTE. 70 sq m per employee (GEA) for ‘final mile’ distributioncentres and 95 sq m per employee (GEA) for nationaldistribution centres. There is the potential for amix of bothand80sqmperFTEhasbeenadoptedforthisanalysis.
ChangingEmploymentDensities
viii. Research publications setting out employment densities have indicated a trend towardsincreasingdensityofoccupationofofficespace(i.e.reducedspaceperworker)overthelast20years.Guidancepublishedin2001indicatedgeneralofficedensityof19sqmperworker(GIA)which had reduced to 13.8 sqm perworker (GIA)within the 2010 2nd edition of theguidance and a range of 9.2 – 15.0 sqm perworker in the 2015 guidance. As a result ofincreasingdensityofoccupationacrossthewholeofficestock itwaspossibleforsubstantialincreases in employment to be accommodated within existing stocks through thereconfigurationandmodernisationofspace.
ix. However, the September 2013 Occupier Density Study published by the British Council forOfficessuggeststhistrendmightbelevellingoff,forvariousreasons.Thisisinkeepingwiththefindingsofthe2012and2015guidancedocuments.Forthepurposesofthequantitativeassessment in this report it is assumed that there is no further substantive increase in thedensity of office occupation so as not to artificially restrict the provision of office space.However, when interpreting the results it should be considered that if the recent historictrenddidcontinuetheremaybescopefora lowerrequirementfornewofficedevelopmentthansetoutwithinthisanalysis. Particularly ifthere isahighproportionofcallcentretypeoccupiers.
38
ReplacementAllowances
x. Anallowanceforreplacementhasbeenincludedwithinthemethodologytoencapsulatethewider changes in the economy not picked up in the employment projections. Workingpractices change, new technologies are adopted, and the sites and premises used by firmsneed to adapt to these new ways of working. There are also losses to other uses eitherthrough sales and lettings or redevelopment. As a result, there will be a need for someexisting employment stocks to be replaced. There will also be instances where existingbuildingsaresodilapidatedthattheyrequirecompletereconstruction.
xi. Developing a methodology to estimate the scale of replacement activity is notstraightforward. As a result, the team at Hardisty Jones Associates, drawing on ourexperience of working with clients over a number of years, has developed a methodologywhich is robust in terms of its underpinning logic and the evidence used to deriveassumptions.
xii. Typicallywithinthepropertysector,developmentappraisalsonnewbuildingsconsidera25-35yeartimehorizon.Asaresult,onemayexpectthatafterthisperiod,abuildingwouldberipe for replacement. However, data on the age of commercial employment buildingsindicatesaverydifferentpicture.
xiii. Data from 2004 (nomore recent data has been published) for the South Somerset District(shown in the tablebelow) indicates thatanotableproportionof theexisting20 stockswerebuiltpre1940andaround50%pre1970.Thisimpliesthattheusefullifespanofsomestocksisconsiderableandbeyondthe35yeardevelopmentappraisalperiod.
AgeofCommercialStocksinSouthSomerset
%builtPre1940 %built1940-1970 TotalPre1970Retail 46% 8% 55%Office 42% 17% 59%Factory 17% 35% 51%Warehouse 15% 24% 39%Total 24% 26% 49%Source:DepartmentforCommunitiesandLocalGovernment(CLG)archive. TotalfloorspacebyLADandage.2004.
xiv. If buildings were replaced every 30 years, one would expect around 3% of all commercialemploymentpropertystockstobereplacedeachyear.Duetotheexistenceofasubstantialstock of property aged pre 1970 (48% for office, factory and warehouse stocks) thisassumptionisnotsupportedbytheevidenceandistoostrong.Arangeofassumptionsweretestedatastakeholderworkshop.Thisproposedoptionsrangingfrom0.5%perannumto1%perannumandupto2%perannum,withaconsensusthatafigurearound1-2%perannumwasasensibleworkingassumptionforindustrialpremisesand1%foroffices.Thiseffectively20Thisdataisindicativegivenitisnow12yearsoutofdate,butisusedtoindicatethepointthatmuchofthedatahasalongereconomiclifethanmaybeimaginedattimeofconstruction.
39
equates to a replacement of the entire commercial employment stock every 50-100 years(clearlytherewillbesomepropertywhichisnotreplacedandotherbuildingswhichcouldbereplacedmorethanonce).ItwasnotedattheworkshopthatnewerstocksdonothavethesamelifeasVictorianbuildingswhichhavelastedverywell.
xv. For completeness, the available CLG data (as per the preceding table) indicates that 5% ofoffice, factory andwarehouse stocks are of uncertain age, 36% is 1971-1990 and 11%post1990(asat2004).
References
ArupforEnglishPartnerships(2001)EmploymentDensities:AFullGuide
Drivers Jonas Deloitte for OffPAT and Homes & Communities Agency (2010) EmploymentDensitiesGuide,2ndEdition
Homes&CommunitiesAgency(2015)EmploymentDensityGuide,3rdEdition
OccupierDensityStudy,2013,BritishCouncilforOffices
40
Appendix2:Consultees
i. HJA and SSDC are grateful to the following consultees that participated in the commercialmarketstakeholderworkshop:
• AndrewMaynard(AlderKing)• DavidFoot(ChestersCommercial)• JohnTimmis(AbbeyManorGroup)• MattFrost(BoonBrown)• NigelTimmis(AbbeyManorGroup)• ShaunTravers(BoonBrown)• TonyCanvin
