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Neil Gibson Director of Regional Services Oxford Economics June 2009 The recession, the recovery and the response.

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Presentation on theme: "Neil Gibson Director of Regional Services Oxford Economics June 2009 The recession, the recovery and the response."— Presentation transcript:

1 Neil Gibson Director of Regional Services Oxford Economics June 2009 The recession, the recovery and the response

2 2 Forecasters – not their finest hour! The depth of the global recession has been a shock to almost all - including forecasters Should we have seen it coming? In some areas yes – over-valued house prices, over reliance on construction and retail sectors, exchange rate, tax revenue / government spend over-dependence on construction, exposure to global demand and FDI Why did models not fully warn us? Hidden / lacking data and limited knowledge of banking problems, globally and nationally Extent to which debt underpinned growth was not fully explored – e.g. in construction and retail Uncertainty over the timing and scale of asset price changes – e.g. house prices Confidence and sentiment are hard to predict but have an excessively large impact The scale of fiscal and monetary interventions would have been expected, all other things being equal, to have had some effect by now (they may yet)

3 3 Overview The recession – the regional impact The recovery – where and when? The response – government approach Summary – questions from an economist

4 The recession – the regional impact

5 5 All the world affected

6 6 Recessions have many impacts… Consumers Finances Spenders and savers Leavers from education Job loss Recession Governments Spending Strategy Financing projects Governance BusinessesSociety Start - up Advertising / marketing Downsizing / layoffs Closing Environment CrimeHousing PressBenefits Psychology Image & physical space

7 7 What caused it? In summary Debt Confidence Complacency Essentially the rapid escalation of financial sector debt (and personal sector debt in some countries) unwound when uncertainty over the asset values arose Spectacular collapse in confidence, liquidity and valuations (plus the Lehmans collapse) left financial world close to collapse World bail out (largely) to avoid deep recession and stabilise spending Now a legacy of scarred consumers, nervous business and indebted governments (in West) makes outlook fragile

8 8 Overview of the regional impacts Growth Jobs Workless Migrants Spending / prices

9 9 London and industrial Midlands hit hardest GVA growth by region

10 10 Job loss for all Employment change by region, 2008-10 Source: Oxford Economics

11 11 A fall in migration expected Total migration by region, 2007- 09

12 12 Long term population below official outlooks Population projections, 2018 Source: Oxford Economics / GAD

13 13 Unemployment rising in all 434 LAs Source: NOMIS / Oxford Economics

14 14 Highest rise in weakest labour markets Source: NOMIS / Oxford Economics

15 15 Huge variation in export concentrations Top and bottom 10 LAs for exporting jobs, 2007

16 16 A decade for some to return to job and house price peaks Returning to regional peaks

17 17 Employment remarkable in NI

18 18 Improved participation everywhere

19 19 Unemployment – a lasting legacy

20 The recovery – where and when?

21 21 Where will lead the recovery? UK employment change by sector and by region, 2010 - 20

22 22 And so to green? Green jobs touted as key What market? What type of jobs? Displacement (building green not grey houses) Lifestyle sectors vulnerable or now key? Is the financial and professional services sector broken (no – but different) Could on-shoring of industrial jobs occur (unlikely to great extent – but possible with sharp oil price rises) Jobs related to care for the elderly likely Advanced skilled jobs (STEM, arts and design etc.) as harder to replace Could there be a re-birth in academia? Tourism (relations with emerging nations important)

23 The response – government approach

24 24 Still an era of debt (from consumers to govt) ROI and UK public finances outlook Note no NI budget – a telling difference In some ways, hands are tied

25 25 Devolved governments (NI) Disconnect with the balance sheet of recession Benefits, social security not a true cost in NI – a big problem Lack of tax controls In principle closer to personal impact and thus potentially quicker to respond In practice (NI) acting departmentally but political decisions limited (Invest NI initiatives, DEL schemes – there are things happening) The recession will necessitate hard choices (water charges, rates) So far, appetite limited Longer recession tail through PE squeeze – could this bring about a desired change though? A real test for coalition government

26 26 The key recession risks… Leavers from education: lost generation? Laid off workers (skills mismatch) A new era of decay (especially cities)? Job loss Benefit locked migrants property locked migrants Crime Incomplete regeneration Disused sites Unfinished buildings, developments, housing estates No longer viable cultural and leisure activities PPP, funding etc. Housing offer Limited new build Price falls welcome, but could rise sharply and become unaffordable again Skills and young people crisis – what jobs? Will the sectors of recent growth return? Cycle of fear and retraction Impact on pension pots and retirement The biggest costs are personal – they can last a lifetime

27 27 Short and Long term implications Short term Significant job loss painful Personal costs high Limited opportunities for education leavers Availability of finance at a premium No area / sector / class excluded Front page news (good and bad!) Impact on government, business, consumers alike – a change in behaviour Resource pressures (and public scrutiny) on public sector Targets missed Strategies redundant (?) Wage inflation stifled (certainly in private sector) Long term Saving patterns Unemployment higher Migrant flows Natural increase rates (?) House price Public finances Rates Prices down (for how long?) Psychology Regulation, bust / boom monitoring Exchange rates will rise again Oil prices will rise again

28 Summary – Questions from an economist

29 29 Questions to consider Is the Northern Ireland data telling us the recession is worse than models suggest? What can be done for current school / education leavers? What can those laid off be retrained in? Do we really understand the costs of benefits? Do we really know what the so called professional services sector does? Is our economic strategy (?) appropriate in this environment? Do we have a plan for real cuts in PE? Do we know what powers we should appeal for in a devolved government?

30 Any questions?

31 31 Contact: Neil Gibson Director Regional Services, Oxford Economics Tel: 028 9266 0669 Mob: 07803728994 Email:

32 Annex A: Detailed regional forecasts

33 33 Employment by regional group - South

34 34 Employment by regional group – Midlands and North

35 35 Unemployment - South

36 36 Unemployment – North and Midlands

37 37 Resident employment rate - South

38 38 Resident employment rate – Midlands and North

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