BU's emeritus Professor Nigel Jump writes the next in his series of blogs looking at the Dorset economy.
Since 2019, the local economy has faced a series of major challenges: 1) Covid-19 changing work patterns; 2) higher energy prices and interest rates increasing the cost of living; and
3) tougher trade and migration barriers reducing the scope of key markets. The subsequent recovery has been tepid. The bounce in productivity – the fundamental driver of well-being – has been disappointing. Importantly, the UK now trails most of its main competitors in the productivity league tables.
The latest ONS statistics show UK output per hour worked was just 2.1 per cent above its 2019 average in the final quarter of 2022, leaving the overall weakness observed since 2008 intact. Inadequate investment and innovation and a failure to “clear out the zombies” have yet to work in favour of better productivity. In recent years, the state’s rescue policies for business limited “creative destruction”. The positive adjustments made by some firms have yet to show up in the weak aggregates of the base data.
The main issue remains capacity gaps, including a preponderance of activity in low productivity sectors. This means there was, and is, a pre-existing UK vulnerability to “shocks” such as pandemic, war and Brexit. In response, we need 1) stronger incentives to invest; 2) better planning and working practices; and 3) improved terms of trade. This will require policy support (fiscal, monetary and strategic) at national and local levels: support that drives more capital intensity - physical and human.
The extant “BCP Futures – Economic Development Strategy: Unleashing our potential” uses many of the right words and identifies many of the areas in need of attention for local future economic development. It intends to promote productivity through support for priority sectors and clusters, creating “the best conditions” and an “outstanding” development service. Given recent shocks and other local issues, however, the strategy has yet to register much impact.
The recent local election results in the main Dorset conurbation (BCP), have changed the political balance of power. It will be interesting to see if/how the new leadership takes the low productivity issue on board. A key element of this would be in filling skills shortages, including those for supply chain experts, experienced hospitality and agricultural workers, and IT/AI professionals. Local authorities, educationalists (schools, colleges, universities), and other ‘trainers’ all have a role in closing the skills gaps and smoothing skills mismatches.
Other areas for increased economic emphasis will include technological and infrastructure innovation and market access. For example, the Talbot Trust has a vision for an Innovation Quarter next to Bournemouth University, including building and research for private health. It talks about being a catalyst for high-skilled, knowledge-based growth, reflecting the potential of local digital/high tech businesses and the workforce.
This may be the sort of initiative that supports growth and environment, and individual, corporate and community well-being. An Innovation Quarter may be an example of the kind of economic development BCP’s new ‘no overall control’ balance of local politicians – “The Three Towns Alliance” – needs for better and higher productivity.
It is not yet clear what development strategy the new BCP Council will adopt. Still, the basic truths hold. The productivity puzzle will have to be resolved within a clear framework: 1) the level and growth of productivity drives profitability, living standards and well-being; 2) skills and innovation investments (building new infrastructure and closing knowledge/skills gaps), raise productive performance; and 3) incentives for entrepreneurship and competitiveness support higher and faster productive potential.
The new BCP leader, Vikki Slade, has said, “there is so much that needs to be done so that people and communities realise (their) potential.” She has talked of rebuilding reputation, recognising financial constraints, adopting a pragmatic approach, offering compassion, care, and support to the most vulnerable. She suggests that the Council will be “making our town and local centres inviting so that everyone feels welcome, safe and wants to spend time there, …. putting sustainability at the heart of what we do so that we can improve your lives now, and in the future.” For the economy, this overall context needs to be backed up with something that business can work with. Hopefully, a more detailed approach to local economic development will emerge: one that begins to address the productivity puzzle.