Coventry and Warwickshire
Economic Review – Strand 1:
Employment and GVA
projections
A report to Coventry and Warwickshire Local
Enterprise Partnership
August 2013
Coventry and Warwickshire Economic Review – Strand 1: Employment and GVA projections
A report to Coventry and Warwickshire Local Enterprise Partnership
Contents
1. Introduction .......................................................................................................................... 1
2. Analysis of projections ....................................................................................................... 3
3. Analysis of projections for the AME sector only ............................................................ 17
4. Growth scenario testing .................................................................................................... 23
5. Summary and conclusions ............................................................................................... 26
Contact:
Rebecca Pates
Tel:
Approved by:
Christine Doel
Date:
0161 475 2112
email:
rpates@sqw.co.uk
23/08/13
Director
www.sqw.co.uk
Coventry and Warwickshire Economic Review – Strand 1: Employment and GVA projections
A report to Coventry and Warwickshire Local Enterprise Partnership
1. Introduction
1.1
This paper – prepared by SQW – presents an analysis of projections provided by Cambridge
Econometrics (CE) through its Local Economy Forecasting Model (LEFM). It is one of a
series of outputs from a study commissioned by Coventry and Warwickshire Local
Enterprise Partnership (CWLEP) and completed by SQW. The wider study is concerned with
the LEP’s economic evidence base and the priorities for additional evidence gathering that
ought to be defined going forward.
Overview of LEFM
1.2
LEFM has been developed by Cambridge Econometrics in collaboration with the Institute for
Employment Research (IER) at the University of Warwick. The model has been designed to
project economic indicators for a local area by explaining the output of local industries
through expenditure flows in that area and their links with the world outside the local area.
LEFM provides a database of economic, labour market and demographic data, including
projections for 45 sectors.
1.3
The baseline LEFM projections are based on historical growth in the local area relative to the
region or UK (depending on which area it has the strongest relationship with), on an
industry-by-industry basis. Thus, if an industry in the local area outperformed the industry
in the region (or UK) as a whole in the past, then it will be assumed to do so in the future.
Similarly, if it underperformed the region (or UK) in the past then it will be assumed to
underperform the region (or UK) in the future.
1.4
The forecasts for the region and UK come from CE's Regional Multi-sectoral Dynamic Model
(MDM) of the UK economy. The projections for Coventry and Warwickshire reported in this
paper are consistent with the forecasts for the region and UK published by CE in May 2013.
The GVA and productivity data throughout this paper are in 2009 constant prices.
Structure of this paper
1.5
Based on data from LEFM, this paper analyses the following indicators across the economy
as a whole:

Population

Gross Value Added (GVA)

GVA per head

Employment

Sector prospects analysis – “expanders”, “shrinkers” and “adjusters”

Productivity

Occupations.
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1.6
In addition, it presents a bespoke analysis of the Advanced Manufacturing and Engineering
(AME) sector which has been identified as a priority locally.
1.7
The analysis is presented for the following geographies:

Coventry and Warwickshire (CWLEP area) – defined as the local authority districts
of North Warwickshire, Coventry, Nuneaton and Bedworth, Stratford-on-Avon,
Rugby, and Warwick

North+ – North Warwickshire, Rugby, and Hinckley and Bosworth (the latter district
is not part of CWLEP but is part of the City Deal bid)

Central – Coventry, and Nuneaton and Bedworth

South – Stratford-on-Avon and Warwick

UK.
1.8
In the main, the projections presented here are “business as usual” baseline projections.
This means that they are “policy-on” in that they assume broad policy continuity, certainly at
a local level. The projections take account of known forthcoming policy changes at a
national level (such as the change in retirement age), but they do not take account of
planned local interventions that represent a change from “business as usual”, or their
associated impacts. The exception is for the AME sector analysis, where CE have produced
both a baseline projection for the sector and a bespoke growth scenario.
1.9
The remainder of the report is structured as follows:
1.10

Section 2 provides an analysis of baseline projections for population, GVA and GVA
per head, employment, productivity and occupations

Section 3 presents an analysis for the AME sector only, in terms of baseline
projections

Section 4 presents an analysis of a growth scenario for the AME sector, and
implications for the wider economy

Section 5 summarises the main findings and provides some short concluding
comments.
Annex
A
provides
further
details
on
the
LEFM.
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2. Analysis of the baseline projections from
LEFM
2.1
In this section we present an analysis of baseline projections for population (an input to
LEFM, based on ONS projections) and LEFM outputs relating to GVA and GVA per head,
employment, productivity and occupations
Population
2.2
Historical data show that between 2000 and 2012, the population of Coventry and
Warwickshire grew by 0.7% pa – a rate that matched the UK average – to 873,200 residents
in 2012. Within the LEP area, population growth was faster in the south (0.9% pa) and
slowest in the central area (0.5% pa).
2.3
Looking forward, CWLEP area’s population is projected to grow more quickly through
to 2015 (at a rate of 1.0% pa) than it has done in 2000-12 period. It is also projected to
grow more quickly than the UK average (by 0.3pp pa), so by 2025, Coventry and
Warwickshire’s population is expected to rise to around 993,800 residents. Within this
geography, the population of the central area is projected to grow most quickly (1.1% pa)
between 2012 and 2025.
Figure 2-1: Absolute level of population by area
Source: SQW analysis of CE projections
Table 2-1: Population growth, 2000-12 and 2012-25
Historical trends
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP area
0.7
0.0
1.0
0.3
North+
0.7
0.0
0.8
0.1
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Historical trends
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
Central
0.5
-0.1
1.1
0.4
South
0.9
0.2
0.9
0.1
UK
0.7
0.7
Source: SQW analysis of CE projections
2.4
The graphic below shows population growth in each area, indexed to 2000. Again, this
shows rapid growth in the south and slower growth in the central area over the last decade,
but the CE projections suggest that population growth across the CWLEP area and the
north+/central/south areas all exceed the UK average from around 2018 onwards.
Figure 2-2: Population growth rate (indexed 100=2000)
Source: SQW analysis of CE projections
Gross Value Added (GVA)
2.5
In 2012, CWLEP area’s GVA was around £21bn according to CE data. The central area
accounted for the largest share of GVA, followed by the south and then north+ (note again
though that north+ includes Hinckley and Bosworth which is outside of the LEP geography).
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Figure 2-3: Absolute levels of GVA in CWLEP and north, central and south areas
Source: SQW analysis of CE projections
2.6
Since 2000, GVA has increased more quickly across CWLEP area as a whole (at 1.9%
pa) than the UK average (1.8% pa). However, at a sub-LEP level, the analysis suggests
that while GVA in the north+ and south had increased more quickly than the UK (0.1pp pa
and 0.9pp pa respectively), GVA in the central area had increased at a much slower rate
(0.7pp pa behind the UK).
2.7
In future, GVA in Coventry and Warwickshire is expected to continue growing on a
similar trajectory – at 1.9% pa, slightly above the UK average (by 0.1pp pa). As before,
the south is projected to grow more quickly than the UK and the central area more slowly,
but the gap with the UK will narrow in both areas – so the south will grow 0.3pp pa quicker
than the UK (rather than the 0.9pp pa above the UK in historical trends) and the central area
will grow 0.1pp pa slower than the UK (rather than 0.7pp pa slower, as seen between 2000
and 2012).
Table 2-2: GVA growth, 2000-12 and 2012-25
Historical trends
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP area
1.9
0.1
1.9
0.1
North+
1.9
0.1
1.8
0.0
Central
1.1
-0.7
1.8
-0.1
South
2.6
0.9
2.1
0.3
UK
1.8
1.8
Source: SQW analysis of CE projections
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Figure 2-4: GVA growth (Indexed to 2000)
Source: SQW analysis of CE projections
GVA per head
2.8
Historically, GVA per head has tended to be below the UK average across the CWLEP area,
largely due to under-performance in the central area. In 2012, GVA per head was £18,906
based on CE’s data, compared to £20,111 for the UK. At the sub-LEP level, GVA per head
ranged from £16,281 in the central area, through to £19,312 in north+ (including Hinckley
and Bosworth) and £22,099 in the south.
2.9
In future, GVA per head is expected to remain below the UK average for the LEP area as a
whole, so by 2025, GVA per head in Coventry and Warwickshire will be £21,352 compared
to £23,106 for the UK. However, GVA per head in both the north+ and south areas is
expected to exceed the UK, and the central area remains below the UK.
Figure 2-5: GVA per head
Source: SQW analysis of CE projections
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2.10
Historically, GVA per head has grown slightly more quickly (at 1.2% pa) across the
CWLEP area than the UK average (1.1% pa) between 2000 and 2012. This suggests that
some progress – albeit small – was made in closing the GVA gap over this period. However,
this masks much faster GVA per head growth in the north+ and south (0.8% pa and 0.6% pa
respectively), but much slower growth in the central area (0.6% pa). The inference might be
that while Coventry and Warwickshire as a whole is closing the gap with the national
average, differences within the LEP area are increasing.
2.11
In future, CE’s projections suggest that GVA per head in the CWLEP area will grow at a
rate of 0.9% pa, 0.1pp pa more slowly than the UK average. Therefore the gap in GVA
per head will open up again. Whilst the projected growth rates for Coventry and
Warwickshire’s population and GVA are both expected to exceed the UK average between
2015 and 2025, the rate of population growth is much higher than at the national level
(0.3pp pa higher) compared to GVA growth (0.1pp pa higher than the UK) – this deflates the
relative growth in GVA per head compared to the UK. GVA per head in the north+ and south
areas is expected to grow more quickly than the UK, and the central area more slowly.
Table 2-3: GVA per head growth, 2000-12 and 2012-25
Historical trends
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP area
1.2
0.1
0.9
-0.1
North+
1.9
0.8
1.8
0.7
Central
0.6
-0.5
0.6
-0.4
South
1.7
0.6
1.3
0.2
UK
1.1
1.1
Source: SQW analysis of CE projections
Figure 2-6: GVA per head growth rate, Indexed 100=2000
Source: SQW analysis of CE projections
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Employment
2.12
According to CE data, CWLEP area was home to 462,000 jobs in 20121, up from 352,000 in
2000. By 2015, the number of jobs is expected to rise to 511,000.
Figure 2-7: Absolute levels of employment (jobs) in CWLEP and north, central and south areas
Source: SQW analysis of CE projections
2.13
Between 2000 and 2012, job growth across Coventry and Warwickshire, at 1.1% pa,
outpaced the UK average by 0.4pp pa, largely due to rapid growth in the south over this
period (of 1.7% pa). Looking forward, jobs will continue to grow more quickly in the
CWLEP area than the UK through to 2025, but the rate of growth will slow to 0.8% pa
(0.2pp pa above the UK). All three sub-areas are expected to observe faster growth in jobs
than the UK average.
Table 2-4: Employment growth, 2000-12 and 2012-25
Historical trends
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP
1.1
0.4
0.8
0.2
North
1.0
0.4
0.8
0.3
Central
0.4
-0.2
0.6
0.1
South
1.7
1.0
0.8
0.3
UK
0.6
0.5
Source: SQW analysis of CE projections
This compares to 410,000 in 2010 in Coventry and Warwickshire in the Local Economic Assessment published in 2011
(also based on Cambridge Econometrics modelling).
1
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Figure 2-8: Employment growth (Indexed to 2000)
Source: SQW analysis of CE projections
Sectoral change: “Expanders”, “shrinkers” and “adjusters”
2.14
2.15
In the table below we have categorised Coventry and Warwickshire’s sectors according to
their projected performance:

(a) expanders: sectors with projected growth in GVA and employment (2012-2025)

(b) adjusters: projected growth in GVA and decline in employment (2012-2025)

(c) shrinkers: sectors with projected decline in GVA and employment (2012-2025).
Some of Coventry and Warwickshire’s major sectors in terms of their current GVA
contribution are expected to be “expanders” over the next 13 years, such as finance and
insurance, IT services, construction, business support services, retail trade and health. The
education sector, another major GVA contributor, is expected to be an “adjuster” (although
the expected decline in employment is negligible). Three sectors are projected to ‘shrink’ in
terms of GVA and jobs – although at present they make a relatively small contribution to
overall GVA.
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Table 2-5: Expanders, shrinkers and adjusters in CWLEP (2012-25)
Expanders
% change % change GVA in
in GVA
in empl.
2012 (£)
Adjusters
% change
in GVA
% change
in empl.
GVA in
2012 (£)
32 Financial &
insurance
35%
4%
1,158
40 Education
14%
-4%
1,291
31 IT services
74%
27%
1,124
39 Public Admin. &
Def.
15%
-5%
524
20 Construction
35%
25%
1,057
21 Motor vehicles
trade
12%
-1%
506
38 Business
support services
22%
20%
1,014
15 Motor vehicles
etc
84%
-4%
345
23 Retail trade
20%
7%
935
14 Machinery etc
1%
-15%
340
41 Health
33%
26%
812
24 Land transport
13%
-3%
263
27 Warehousing &
postal
12%
19%
632
3 Food drink &
tobacco
36%
-11%
215
22 Wholesale trade 6%
5%
595
10 Non-metallic
min. prods
6%
-3%
143
42 Residential &
social
17%
576
2 Mining &
quarrying
50%
-22%
114
36 Archit. & engin.
33%
services
1%
567
30 Media
9%
-2%
76
45 Other services
1%
428
12 Electronics
33%
-20%
59
11 Metals & metal
prods.
6%
15%
354
8 Chemicals etc
39%
-8%
50
29 Food &
beverage services 33%
29%
349
25 Water transport
58%
-20%
8
33 Real estate
56%
261
9 Pharmaceuticals
15%
-11%
3
19 Water sewerage
& waste
12%
22%
235
Shrinkers
% change
in GVA
% change
in empl.
GVA in
2012
35 Head offices &
manag. cons.
17%
15%
224
16 Other trans.
Equipment
-4%
-27%
193
34 Legal &
accounting
24%
16%
192
6 Printing &
recording
-19%
-51%
42
21%
10%
185
4 Textiles etc
-9%
-35%
27
25%
16%
159
23%
17%
148
12%
11%
15%
7%
28%
1%
101
86
66
73%
0%
53%
55%
3%
39%
65
26
6
28 Accommodation
44 Recreational
services
37 Other prof.
services
13 Elect.
equipment
43 Arts
1 Agriculture etc
17 Other manuf. &
repair
5 Wood & paper
26 Air transport
2.16
25%
11%
125%
The diagram below shows the expanders, shrinkers and adjusters graphically, with
percentage change (2012-2025) in GVA on the x-axis, percentage change (2012-2025) in
employment on the x-axis, and the size of the bubble representing GVA values in 2012.
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Figure 2-9: Expanders, shrinkers and adjusters (2012-2025)
Source: SQW analysis of CE data. Notes: size of bubble indicates GVA in 2012
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Productivity
2.17
In 2000, productivity (proxied as GVA per job) was £32.6k across Coventry and
Warwickshire. This had increased to £35.7k in 2012. By 2025, it is expected to rise to
£41.5k. Productivity across the CWLEP area, and the three sub-areas, has continually
tracked below the UK average. The north+ area has historically performed better than
elsewhere in the LEP area, but this advantage is gradually being eroded. Since 2000, the gap
between productivity in the CWLEP area as a whole and the UK has widened and this
trend is projected to continue: GVA per job was 92% of the UK average in 2000; 89% in
2012; and it is projected to be 87% of the UK figure in 2025.
Figure 2-10: GVA per job, £k
Source: SQW analysis of CE projections
2.18
As shown in the table below, growth in productivity in Coventry and Warwickshire (of 0.8%
pa) and all the sub-areas, was slower than the UK average (1.1% pa) between 2000 and
2012. In future, productivity will continue to grow more slowly in the LEP area than
across the UK, but the gap will narrow from -0.3pp pa (2000-12) behind the UK to -0.1pp pa
(2012-25). The south is expected to perform best in terms of future productivity growth - at
1.3% pa, it will match the UK growth rate.
Table 2-6: Productivity growth, 2000-12 and 2012-25
Historical trends
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP area
0.8
-0.3
1.2
-0.1
North+
0.8
-0.3
1.0
-0.3
Central
0.6
-0.5
1.1
-0.1
South
1.0
-0.1
1.3
0.0
UK
1.1
1.3
Source: SQW analysis of CE projections
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Figure 2-11: Productivity growth (Indexed to 2000)
Source: SQW analysis of CE projections
Occupations
2.19
CE’s projections include a demand-side assessment of occupations, i.e. a projection that the
economy is likely to generate demand for particular numbers of jobs in certain occupations.
LEFM assumes that these jobs will be filled – although in practice there may be issues
around effective labour supply and/or skills shortages.
2.20
For the purposes of this paper, the occupational projections produced by CE have been
grouped into five broad categories, as illustrated below. Managerial/professional/associate
professional occupations accounted for the greatest share of jobs in 2012 (38%, 176,000
jobs), followed by plant, operatives, elementary trades (21%, 96,000 jobs).
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Figure 2-12: Absolute levels of employment by occupational groups in CWLEP
SQW analysis of CE projections
2.21
Since 2000, the number of managerial/professional/associate professional occupations in
Coventry and Warwickshire has risen quickly – at 3.2% pa (0.9pp higher than the UK), and
employment in care, sales, customer services also grew rapidly (2.6% pa, 1.0pp faster than
the UK). Employment in plant, operatives, elementary trades remained static, but this
compared to a national average decline of 0.8% pa in these occupations. The number of
skilled trades occupations fell dramatically (at -3.3% pa), and more quickly than the UK
average.
2.22
Looking forward, occupational projections are expected to be as follows:

the number of jobs in managerial/professional/associate professional
occupations in Coventry and Warwickshire is expected to increase (at a rate of
1.5% pa) through to 2025, but only slightly quicker than the UK average

employment in care, sales, customer services is also expected to rise (at a rate
of 1.3% pa), but again the gap with the UK growth rate will narrow

skilled trades will continue to decline by 1.2% pa – and do so more quickly than
the UK average – and the number of plant, operatives, elementary trades will
also begin to fall by 0.4% pa.
Table 2-7: Employment by occupation growth in CWLEP compared to the UK, 2000-12 and 201225
Historical trends
2000-2012
(CAGR % pa)
Future projections
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with the
UK (pp)
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Historical trends
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with the
UK (pp)
Managers, professionals &
assoc. professionals
3.2
0.9
1.5
0.1
Admin, secretarial, culture,
bus/public services
-0.3
-0.2
0.6
0.9
Skilled trades
-3.3
-2.1
-1.2
-0.8
Care, sales, customer
services
2.6
1.0
1.3
0.3
Plant, operatives, elementary
trades
0.0
0.9
-0.4
0.1
Source: SQW analysis of CE projections
2.23
The graphics below compare projected growth in each broad occupational group in
Coventry and Warwickshire (in the top graph) to the UK average (bottom graph), both
indexed to 2000. Overall, these data suggest growth among higher and lower level
occupational jobs, but some “hollowing out” in the middle.
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Figure 2-13: Employment by occupation growth in Coventry and Warwickshire compared to the
UK, 2000-12 and 2012-25
Coventry and Warwickshire
UK
Source: SQW analysis of CE projections
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3. Analysis of baseline projections for the AME
sector
3.1
In this section we present an analysis of CE’s baseline projections for the Advanced
Manufacturing and Engineering (AME) sector only.
3.2
The Analytics Team at CWLEP selected seven of CE’s 41 sectors as a ‘best-fit’ set of sectors to
represent AME. These are:
3.3

12 Electronics

13 Electrical equipment

14 Machinery etc

15 Motor vehicles etc

16 Other transport equipment

17 Other manufacturing & repair

36 Architectural and engineering services
All references to AME in the section below refer to these seven sectors in aggregate.
Baseline projections for the AME sector
GVA in the AME sector
3.4
In 2012, the AME sector generated £1.67bn in GVA in Coventry and Warwickshire, which
represented 10% of the total GVA (down from 13% of total GVA in 2000). By 2025, the
AME sector is expected to generate around £2.2bn in GVA, which will still account for
10% of the area’s total GVA2.
Table 3-1: GVA in the AME sector – levels and shares of employment
2000
2012
2025
GVA generated by the AME sector
CWLEP area
1,770
1,670
2,220
North+
613
609
745
Central
967
740
969
South
419
621
849
UK
64,428
71,431
93,112
GVA for the north, central and south do not sum to the LEP total as the north includes Hinckley and Bosworth (which
lies outside of the CWLEP area). This explains why the proportion of GVA generated by the AME sector for the LEP area
as a whole in 2025 (10%) is lower than the proportion of GVA generated by the AME sector in each sub-area.
2
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2000
2012
2025
Share of total GVA generated by the AME sector
CWLEP area
13%
10%
10%
North+
15%
12%
11%
Central
15%
10%
11%
South
10%
11%
11%
UK
6%
6%
6%
Source: SQW analysis of CE projections
3.5
Overall, over the period from 2000 to 2012, GVA generated by the AME sector
declined in real terms by 0.5% pa compared to growth of 0.9% pa in the UK. However,
the picture varied considerably at the sub-LEP level – the north+ and central areas saw a
fall in GVA generated by the AME sector (of -0.1% pa and -2.2% pa respectively) whereas the
baseline projections suggest that the south saw substantial growth of 3.3% pa.
3.6
Looking forward to 2025, GVA generated by the AME sector across Coventry and
Warwickshire is projected to increase by 2.2% pa, slightly above the UK average. All
sub-areas are projected to observe growth in AME GVA, but performance is diverging: the
north+ will continue to grow more slowly than the UK (by -0.5pp pa); the south will grow
more quickly than the UK (by 0.4pp); and growth in the central area will match the UK
average.
Table 3-2: GVA growth in the AME sector in CWLEP compared to the UK, 2000-12 and 2012-25
Historical performance
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP area
-0.5
-1.3
2.2
0.2
North+
-0.1
-0.9
1.6
-0.5
Central
-2.2
-3.1
2.1
0.0
South
3.3
2.5
2.4
0.4
UK
0.9
2.1
Source: SQW analysis of CE projections
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Figure 3-1: GVA in AME sector growth (Indexed to 2000)
Source: SQW analysis of CE projections
Employment in the AME sector
3.7
According to CE data, the AME sector accounted for 7% of employment across Coventry and
Warwickshire in 2012 (34,000 jobs) compared to 10% of GVA. Over time, the proportion
of jobs in the sector has declined, from 14% in 2000 to 7% in 2012. It is projected to
continue to decline but much more slowly – to 6% in 2025.
Table 3-3: Employment in the AME sector – levels and shares of employment
2000
2012
2025
Employment in the AME sector (000s)
CWLEP area
59
34
33
North+
21
12
11
Central
30
15
15
South
14
12
12
UK
1,919
1,484
1,445
Share of employment in the AME sector
CWLEP area
14%
7%
6%
North+
16%
8%
7%
Central
16%
8%
7%
South
11%
8%
7%
UK
7%
5%
4%
Source: SQW analysis of CE projections
3.8
Between 2000 and 2012, CE’s data suggest that employment in the AME sector fell by 4.6%
pa, much more quickly than the UK average for this sector (-2.1% pa). All of the sub-areas
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saw a fall in employment – in the north+ and central areas, the decline was greater than the
UK average, but the pace of decline was slower in the south.
3.9
In future, employment in the AME sector is projected to fall at -0.2% pa, the same rate
as the UK. The north+ and central areas are expected to see a decline in AME employment,
but levels in the south are projected to remain static.
Table 3-4: Employment growth in the AME sector in Coventry and Warwickshire compared to the
UK, 2000-12 and 2012-25
Historical performance
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP area
-4.6
-2.4
-0.2
0.0
North+
-4.6
-2.5
-0.3
-0.1
Central
-5.4
-3.3
-0.4
-0.2
South
-1.2
0.9
0.0
0.2
UK
-2.1
0.0
-0.2
0.0
Source: SQW analysis of CE projections
Figure 3-2: Employment in AME sector growth (Indexed to 2000)
Source: SQW analysis of CE projections
Expanders, adjusters and shrinkers in the AME sector
3.10
As in section 2, we have mapped “expanders, shrinkers and adjusters” (2015-2025) for the
AME sectors across Coventry and Warwickshire. In summary, the “expanders” are expected
to be architecture and engineering services (a sector which accounted for a large share of
AME GVA in 2012, as illustrated by the large bubble), electrical equipment and other
manufacturing and repairs. Motor vehicles, machinery and electronics are “adjusters”, so
GVA is projected to increase but employment will fall. And finally, other transport
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equipment is classed as a “shrinker”, where both employment and GVA are projected to
decline.
Figure 3-3: Expanders, shrinkers and adjusters (2012-2025) in the AME sub-sectors across
Coventry and Warwickshire
Source: SQW analysis of CE projections. Notes: size of bubble indicates GVA in 2012
Productivity
3.11
The modelling completed by CE suggests that productivity (GVA per job) for the AME
sector in 2012, at £50k per job, is slightly above the UK average. However, this varies
within the LEP geography, from £48k per job in the central area up to £50k and £52k in the
south and north+ respectively. CE’s data suggest that over time, CWLEP’s AME sector has
improved its productivity position from 90% of the UK average in 2000, to 103% in 2012
and up to 105% in 2025.
Table 3-5: Productivity in the AME sector (£k per job)
2000
2012
2025
CWLEP area
30
50
68
North+
30
52
66
Central
32
48
67
South
29
50
68
UK
34
48
64
Source: SQW analysis of CE projections
3.12
Since 2000, productivity in the AME sector in Coventry and Warwickshire and all three subregions has improved, and has done so at a faster rate than the UK average (thereby closing
the gap, as noted above). In future, the area’s productivity in the AME sector is projected
to increase by 2.4% pa (2012-25) – this is much slower than the rate of improvement seen
in the past (4.3% pa, 2000-12) but is still above the UK growth rate. However, at the sub21
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LEP area level, there is a mixed picture – in the north+, productivity improvements are
projected to lag behind the UK, whereas in the central and south areas productivity
improvements will outpace the UK.
Table 3-6: Productivity change in the AME sector in Coventry and Warwickshire compared to the
UK, 2000-12 and 2012-25
Historical performance
Future projections
2000-2012
(CAGR % pa)
Difference with
the UK (pp)
2012-2025
(CAGR % pa)
Difference with
the UK (pp)
CWLEP area
4.3
1.2
2.4
0.1
North+
4.8
1.7
1.9
-0.4
Central
3.4
0.4
2.5
0.3
South
4.6
1.5
2.4
0.2
UK
3.0
2.3
Source: SQW analysis of CE projections
Figure 3-4: Productivity change in AME sector (Indexed to 2000)
Source: SQW analysis of CE projections
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4. Growth scenario testing
4.1
CE was asked by the Analytics Team to model the impact of a 20% increase in GVA in the
AME sector3 on the CWLEP economy as a whole. In this section we present the findings from
this scenario modelling, and compare the GVA and employment impacts of the scenario to
the baseline “business as usual” projection, both for the AME sector and wider economy.
Consequences for GVA
4.2
As shown in Table 4-1, according to CE’s model, a 20% uplift in GVA in the AME sector
translates into an additional £459m generated by the AME sector alone each year. Due
to the multiplier effects of this uplift on other sectors, the additional impact on Coventry
and Warwickshire’s economy as a whole would be an additional £653m pa – the
economy would be 3% bigger in 2025 than under the “business as usual” baseline
projection. The analysis suggests that under the growth scenario, GVA generated in nonAME sectors would increase by £194m pa, and the sectors benefiting most – in absolute
terms – from the uplift in AME would be finance and insurance (an uplift of £27m in GVA pa),
business support services and wholesale trade (both up £20m pa), IT services (up £18m pa).
The warehousing and postal, education and construction sectors also benefit to a lesser
extent.
Table 4-1: GVA growth across Coventry and Warwickshire and the sub-areas - baseline
projections and growth scenario
2012 GVA £m
2025 GVA Baseline
projection £m
2025 GVA Growth
scenario £m
GVA difference £m
CWLEP area
1,670
2,220
2,679
+459
North+
609
745
907
+162
Central
740
969
1,163
+194
South
621
849
1,023
+174
CWLEP area
16,508
21,219
21,872
+653 (459 due to AME, 194 due
to multipliers)
North+
5,214
6,594
6,819
+225 (162 due to AME, 63 due to
multipliers)
Central
7,304
9,164
9,439
+276 (194 due to AME, 82 due to
multipliers)
South
5,760
7,574
7,819
+244 (174 due to AME, 71 due to
multipliers)
AME sector only
Whole economy
Source: SQW analysis of CE data
The 20% increase has been applied to the seven AME sectors only, and builds up from 2014 and remains constant from
2020
3
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Figure 4-1: GVA change in Coventry and Warwickshire, 2012-2025, comparing baseline
projection to growth scenario
AME sector only
Whole economy
Source: SQW analysis of CE data
Consequences for employment
4.3
As shown in Table 4-2, under the growth scenario, employment in the AME sector is
projected to increase by around 7,000 jobs by 2025 across Coventry and
Warwickshire. Due to the multiplier effects of this uplift on other sectors, the additional
impact on employment across the economy as a whole would be around 12,000 jobs,
2% higher in 2025 than under the “business as usual” baseline projection. Therefore, the
growth scenario would generate around 5,000 additional jobs in non-AME sectors due to the
multiplier effect, particularly in business support services (c.800 of these jobs) and
wholesale trade (600 jobs).
Table 4-2: Employment growth in CWLEP and the sub-areas - baseline projections and growth
scenario
2012
Employment
000s
2025
Employment
000s - Baseline
projection
2025
Employment
000s - Growth
scenario
Employment difference 000s
CWLEP area
34
33
40
+7
North+
12
11
14
+2
Central
15
15
17
+3
South
12
12
15
+3
CWLEP area
462
511
523
+12 (7 due to AME, 5 due to
multipliers)
North+
143
159
163
+4 (2 due to AME, 2 due to
multipliers)
Central
204
221
226
+5 (3 due to AME, 2 due to
multipliers)
South
161
180
185
+5 (3 due to AME, 2 due to
multipliers)
AME sector only
Whole economy
Source: SQW analysis of CE data
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Figure 4-2: Employment change in Coventry and Warwickshire, 2012-2025, comparing baseline
projection to growth scenario
AME sector only
Whole economy
Source: SQW analysis of CE data
4.4
An analysis of productivity for the AME sector and wider economy shows that there is very
little difference in productivity between the baseline projection and growth scenario. The
only exception to this is the central area, where productivity in the AME sector expected to
improve.
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5. Summary and conclusions
Summary
Baseline projections for the economy as a whole
5.1
The table overleaf summaries projected growth rates for population, GVA and GVA per head,
employment and productivity, and compares Coventry and Warwickshire and the three subareas to expectations for the UK.
5.2
From the baseline projections, there are a number of key messages for the future growth
prospects of the Coventry and Warwickshire economy:
5.3

Population is expected to grow more quickly than in the past, and more quickly
than the UK average (historically since 2000, population growth matched the UK)

GVA will continue to grow at the same rate as during the 2000-12 period, slightly
above the UK average

Between 2000 and 2012, GVA per head grew more quickly than the UK, closing the
GVA per head gap, but projections to 2025 suggest growth will lag behind the UK so
the gap will re-open

Jobs are expected to grow more slowly than in the past. The growth rate will still
exceed the UK average, but by a smaller margin in future.

Productivity improvements will continue to lag behind the UK average, although
the gap with the UK is expected to close slightly

In terms of occupations, the number of managerial/professional/associate
professional and care/sales/customer services occupations are expected to increase,
more quickly than the UK average. Skilled trades will continue to decline (at a faster
rate than the UK), and the number of plant/operatives/elementary trades will fall.
At a sub-LEP level projections through to 2025 suggest that:

in the North+4, population is expected to grow slightly slower than for Coventry and
Warwickshire (but still slightly quicker than the UK) and GVA growth will match the
UK rate. Overall GVA per head will grow more slowly than the UK, so the gap will
widen. The rate of growth in jobs will exceed the UK average, but productivity
performance will lag behind the UK considerably, so the productivity gap will also
continue to widen.

in the central area, population is expected to grow more quickly than the UK, but
GVA and GVA per head are expected to grow more slowly than the UK, so the GVA
per head gap will widen. Growth in jobs will be slightly quicker than the UK average,
but productivity performance will lag behind the UK, so the productivity gap will
also continue to widen.
4
Please note, the north includes Hinckley and Bosworth
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
In the south, the picture is somewhat different – population, GVA and GVA per head,
and jobs are all expected to grow more quickly than the UK. Productivity
improvements
will
match
the
UK
average.
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Table 5-1: Baseline projections – comparing past trends to future projections, and the differential
in growth with the UK
CWLEP
North
Central
South
UK
2000-2012
(CAGR % pa)
0.7
0.7
0.5
0.9
0.7
pp diff with UK
0.0
0.0
-0.1
0.2
2012-2025
1.0
0.8
1.1
0.9
0.3
0.1
0.4
0.1
1.9
1.9
1.1
2.6
pp diff with UK
0.1
0.1
-0.7
0.9
2012-2025
1.9
1.8
1.8
2.1
0.1
0.0
-0.1
0.3
1.2
1.2
0.6
1.7
pp diff with UK
0.1
0.1
-0.5
0.6
2012-2025
0.9
1.0
0.6
1.3
-0.1
-0.1
-0.4
0.2
1.1
1.0
0.4
1.7
pp diff with UK
0.4
0.4
-0.2
1.0
2012-2025
0.8
0.8
0.6
0.8
0.2
0.3
0.1
0.3
0.8
0.8
0.6
1.0
1.1
pp diff with UK
-0.3
-0.3
-0.5
-0.1
0.0
2012-2025
1.2
1.0
1.1
1.3
1.3
-0.1
-0.3
-0.1
0.0
0.0
Population
0.7
(CAGR % pa)
pp diff with UK
GVA
2000-2012
1.8
(CAGR % pa)
1.8
(CAGR % pa)
pp diff with UK
GVA per head
2000-2012
1.1
(CAGR % pa)
1.1
(CAGR % pa)
pp diff with UK
Jobs
2000-2012
0.6
(CAGR % pa)
0.5
(CAGR % pa)
pp diff with UK
Productivity
2000-2012
(CAGR % pa)
(CAGR % pa)
pp diff with UK
Source: SQW analysis of CE projections
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Baseline projections and growth scenario for the AME sector
5.4
5.5
Under the baseline “business as usual” projections, the key messages for the AME sector are
as follows:

The share of GVA generated by the AME sector is not expected to change: it
represented 10% of GVA in 2012 and is projected still to account for 10% of total
GVA in 2025. However, the share of jobs in the AME sector will fall from 7% in 2012
to 6% in 2025.

GVA generated by the AME sector in Coventry and Warwickshire is expected to
increase to 2025, at a slightly faster rate than the UK average (compared to a decline
in GVA generated by the AME sector between 2000 and 2012). However,
employment in the AME sector is expected to fall at the same rate as the UK.
Productivity will therefore improve relative to the UK, shifting from below the UK in
2000 to above it in 2012 and 2025.

Growth projections vary across the sub-areas: in terms of GVA generated by the
AME sector, the north+ will continue to grow more slowly than the UK to 2025 and
the south will grow more quickly (in the central area growth will match the UK); in
terms of employment, the north and central areas are expected to observe a fall in
AME employment, whereas in the south, employment will remain static.
The growth scenario, of a 20% uplift to GVA generated by the AME sector by 2025, is
projected to lead to an additional £459m generated by the AME sector alone each year, and
around 7,000 jobs by 2025 across Coventry and Warwickshire. The additional impact on
CWLEP area’s economy as a whole is £653m pa due to the multiplier effects of this AME
uplift on other sectors (the economy would be 3% higher in 2025 than under the baseline
projection) and around 12,000 jobs (2% higher in 2025 than the baseline projection). The
sectors benefiting most from the uplift in AME would be finance and insurance (an uplift of
£27m in GVA pa), business support services (up £20m pa in GVA and c.800 jobs), wholesale
trade (up £20m pa in GVA and c.600 jobs), and IT services (up £18m pa).
Conclusions
5.6
The projections presented in this paper should be treated with caution. They are projections
– not a calibrated forecast. They have been produced through a model based on a “business
as usual”, policy-on context, and there are many reasons why the outcomes in Coventry and
Warwickshire might be different from the modelled projections.
5.7
The projections from LEFM do, nonetheless, provide a useful perspective on the potential
growth trajectory in Coventry and Warwickshire if nothing changes. Critically, the GVA per
head and productivity gaps with the UK will continue to widen overall. Within this picture,
there are key sub-area variations: on most indicators, the projections for the south are more
bullish than those for the north+ and, particularly, the central area. The challenge for the
LEP is that whereas the south appears to be growing more quickly than the national average,
the areas further north seem to be slipping backwards, creating tensions and challenges
within the LEP geography. An important additional observation relates to the “hourglass”
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that appears to be emerging in relation to the occupational profile – with growth among
higher and lower level occupations and contraction within the skilled trades.
5.8
In relation to AME, the projections suggest that the sector is expected to see “jobless growth”
in future. However within this, there are again some important intra-area contrasts. The
south appears really quite buoyant with growth projected particularly in the service-related
elements of the AME sector. The multipliers linked to this are significant in the south.
Growth prospects – in absolute and relative terms – are weaker further north. Hence both
spatial and sectoral restructuring appear – on the face of it – to be underway.
5.9
All of these issues raise important questions for the forthcoming Growth Strategy and its
priorities. CWLEP will also need to think through what might need to change in order to
achieve anything like the magnitude of change modelled through the growth scenario – of
7,000 AME jobs in order to generate an additional £459m in GVA from that sector – and,
indeed, whether this is achievable. Specifically, consideration will need to be given to
whether the proposals developed through the City Deal will – in fact – have an impact of that
scale; and if not, how they might be developed and/or supplemented. In a sector that is
integrated with the wider economy, there is substantial scope for knock-on benefits in
sectors such as finance and insurance, business support services, wholesale trade and IT
services.
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Annex A: LEFM overview
A.1
LEFM has been developed by Cambridge Econometrics Ltd in collaboration with the
Institute for Employment Research (IER) at the University of Warwick.
A.2
LEFM has been designed to project economic indicators for a local area by explaining the
output of local industries through an explicit representation of expenditure flows in that
area, and their links with the world outside the local area. In this, it differs from other
methods of local economy modelling which typically link local output or employment (by
sector) directly to national or regional output or employment. Such methods include shiftshare or econometrically estimated equations. While these methods allow a user to derive
projections for local output or employment growth from national or regional projections,
they offer little scope for introducing an explanation of local performance relative to these
higher levels, and they are typically not suitable for analysing the indirect effects on the local
economy arising from the opening of a new enterprise or the closure of an existing one.
A.3
LEFM is also distinguished from other modelling approaches by its sectoral detail. It
identifies 45 sectors (defined on SIC2007), allowing (for example) electronics to be
distinguished from electrical engineering & instruments, and computing from other business
services. Detailed disaggregation by sector is usually valuable because different sectors
have different prospects (e.g. technological change is driving much faster growth in
electronics and computing than in the other sectors with which they are commonly
combined), because they have different employment characteristics, and also because it
allows local knowledge about specific firms to be more easily factored in to the forecast.
There is, however, a cost to working in such detail: most variables in the model have to be
disaggregated by sector (or a similar classification: see below for more details).
A.4
The main input assumptions used in LEFM are forecasts for the UK and region in which the
local economy lies for selected variables, including:

the components of domestic final expenditure, disaggregated into spending by
function as published in the UK National Accounts

components of personal incomes

gross output, value-added and employment by 45 sectors

matrices to convert the components of domestic final expenditure into commodity
demand for 45 sectors

input-output coefficients and projected changes

projected changes in occupational structure and gender forecasts for the local
economy

population by 5-year age band and gender

participation rate by gender for a constant level of unemployment (these are then
adjusted by the model in response to actual changes in unemployment).
A-1