Encouraging inward investment in your region · 2016-08-30 · Encouraging inward investment in your region with labour market information | 3. Foreword. More than four in five multinational

Encouraging inward investment in your region with labour market information

2 | Encouraging inward investment in your region with labour market information

Contents

3 Foreword

4 Granular Detail & Unique Selling Points

6 Playing to Your Strengths

8 Identifying Niche Industries

11 Identifying Niche Skills

14 Case Study: Thames Valley Berkshire LEP

About Emsi

Economic Modelling Specialists International (Emsi) creates tools and services that help organisations better understand the connection between economies, people and work. Through our unparalleled local and granular economic data, we are now working with more than 100 colleges, universities and LEPs across the country, giving them the understanding they need in order to close skills gaps, drive growth, and increase productivity in their local economy.

Encouraging inward investment in your region with labour market information | 3

Foreword

More than four in five multinational employers see a skilled workforce as an important factor in investment decisions. The same employers rate the UK’s workforce pretty highly – second out of seven countries, behind Germany. British workers are rated highly for our communication skills and our commercial awareness – yet on job-critical technical skills, we’re seen as being some way behind. [1]

Broad-brush views like these are the starting points for many inward investment decisions. They may or may not be accurate nationally, but they’re wrong about many of Britain’s local labour markets. Reflecting existing industries and shifting populations, many parts of the UK have deep reserves of skilled labour, specialised around particular industries – many of them exactly the kind of technically-able workers that investors are looking for.

The challenge for economic developers seeking to engage and attract new investors is: how do we get from the broad-brush perceptions of the UK to the finer details of our local workforce? There’s always the option of spending more on a marketing blitz – but what are the messages? If your area’s argument is that it has a good skills base, then you’ll find there aren’t many other areas claiming that they don’t.

Whatever the plan for promotion, any such messages need to be concrete: not “good skills” but highlighting hard numbers with specific skills which are hard to come by. Those are the messages which will gain attention, and they rely on fresh, robust labour market intelligence. This Emsi report explains how economic developers can set about that journey, drawing on the best available data to understand a region’s deeper strengths, and how to present that to engage with prospective investors.

Duncan BrownSenior Consultant, Emsi

[1] Tindle, A et al (2014). Multinational employers’ perceptions of the UK workforce. BIS Research Paper No.170. London: Department of Business, Innovation and Skills.



Granular detail & unique selling points

The Institute of Economic Development Conference last November included a number of very interesting presentations, and among those that really stood out was one by Marian Sudbury of UK Trade and Investment (UKTI). Her presentation — Increasing Inward Investment — was a clear challenge to her audience, made up mainly of LEPs, Local Authorities and economic developers, to think in new ways about how they can increase investment in their area.

According to Ms Sudbury, there are two ways of attracting investment. The first is by working with existing investors, and she stressed in her presentation that it is vitally important for economic developers to ensure they are looking after these organisations, not least because it is less risky and requires fewer resources than going after new markets.

However, she then went on to say that for any area to really develop and grow, it also needs to seek to attract new investors, whether from another part of the country, or from overseas. How can this be done? Part of her answer was to emphasise the importance of thinking about what new investors are looking for:

“You can attract investors by identifying the market need in your area. One simple but powerful way to do this is to survey local businesses on their supply chain needs. Government did this in the automotive sector, by working with industry councils and a university. Together, they identified £4bn worth of opportunity. Now that is attractive. Such market research is resource intensive, but the automotive research shows that by combining resources we can create new opportunity.”

She then moved on to criticise the kind of approach that seeks to attract investors with what amounts to generic promotion or, to put it another way, Unique Selling Points (USPs) that are not actually particularly unique. To illustrate the point, she showed the audience a couple of extracts taken from the skills marketing of two European cities:

1. A city with a highly educated workforce, qualified personnel and research2. A highly educated, flexible and motivated workforce with language skills

Which cities are they? The answers are Stockholm and Amsterdam respectively, yet the descriptions are so similar that they could be describing any major European city. Not only this, but as Ms Sudbury pointed out, far too many sales pitches are essentially the same, using clichés about good infrastructure, world-class universities, etc. etc.


However, what investors really want to know about an area is what marks it out and what makes it special. In other words, they aren’t looking for one-size-fits-all USPs, but “a tailored offer that will be lucrative for the investors to whom you are pitching.” Most crucially, investors want granular detail on the facilities that will make their business viable and profitable.

One of the most important issues where granular detail is vitally important is that of skills supply. Quite simply, any investor looking to invest in a new area is going to want to know what skill supply already exists in the area that matches the kinds of skills they will be looking for. This being the case, it is vitally important for economic developers to understand what their regional industry and skills strengths actually are, so that they can understand what kind of investors they should be seeking to attract.

This does raise an important question. How exactly can economic developers identify their region’s industry and skills strengths? One method that is often used is to survey local businesses about their their supply chain needs, in order to identify market need. However, this is a highly resource intensive approach. We want to suggest another solution, which is far less resource intensive, but highly effective: the use of highly granular and detailed local and regional labour market data.


Playing to your strengths

What’s the first thing you do when making a cake? You might begin by looking for a recipe, but very soon after this you will need to go and check what ingredients you have. Let’s say you’ve found a recipe for banana cake, but when you go over to the fruit rack you find it full of apples, with not a banana in sight. What would you do? Carry on trying to make a banana cake? Not the best idea. Chances are you would ditch your original plan, and instead start looking at recipes for apple cake.

What’s the point of this illustration? It is that familiarising yourself with what you’ve got to work with — playing to your strengths — is vital to a successful outcome. We could think of a number of scenarios where this is true. For example, a military strategist needs to know where his army’s strengths are before committing a battle plan. A football manager needs to assess where his team’s major assets lie before he can come up with team tactics. A board of directors needs to analyse what strengths the organisation has before committing to a business strategy. All this is to say that a general principal of success is that you work with what you’ve got, not with what you haven’t got.

The point of playing to existing strengths being vital to a successful outcome can be extended to the task of attracting inward investment. For example, let’s say that a region has a particularly strong building of ships and floating structures industry, but a tiny digital technology sector. Which industry would it make more sense to base an inward investment strategy on: digital technology or building of ships and floating structures?

In one sense the answer to that question seems obvious: both digital technology companies and shipbuilders are clearly more likely to relocate to areas where there is already a high proportion of the industry in the area. However, this is admittedly a somewhat simplistic approach and there may of course be numerous reasons why seeking more investment in a specific industry is not viable, even if your region happens to be particularly strong in that sector. What then?

Actually the need for uncovering the strengths of the local economy remains exactly the same, but the question of what those strengths actually are needs fine tuning a little. We would argue that in modern economies, the primary strength any area possesses is not so much in its existing industries, nor in its infrastructure, its raw materials, or its supply chain etc, important as these all are. Rather, we would argue that the principal strength of a region lies in its people and their skills. If this is true, what it means is that any economic developer that can understand where the skills strengths in its region are, is in a position not just to attract inward investment into existing industries in the region, but also from other industries that require similar skills.


A great example of this can be seen in the city of Detroit. If you were asked to name a couple of things about the Detroit economy, you might well mention the car industry and general economic decline. But although these answers are both right, they’re by no means the end of the story. In recent years, the city’s developers have been attempting to reverse the region’s decline, and one way they have attempted to do this is by unpicking the city’s skills strengths.

What they have found is that although the car industry has indeed been in decline, the people within that industry and those who lost their jobs possess a wealth of skills, some of which can transfer reasonably well to other industries. Two such industries are the aerospace and defense industries, and the last few years has seen big investment from these sectors, with 33% of the global top 100 aerospace companies now having a presence in the Detroit region, and over $4.7 billion in defense contracts being awarded to the region’s defense-related businesses in 2012.

All of the above leads to a couple of questions. Firstly, how can economic developers go about uncovering their region’s industrial strengths? Secondly, how can they then uncover their region’s skillset? We believe that the most effective way of doing this is by using granular local industry and occupation data, and in the next two chapters will be demonstrating how this can be done, firstly looking at how local and regional data can be used to establish a region’s niche industries, and in the subsequent chapter looking at how data can be used to uncover a region’s niche skills.


Identifying niche industries

In one sense, it’s not hard to get some idea of the key industries in a region. For example, an economic development organisation in an area with a large number of companies in the financial service activities sector will obviously be well aware of this fact, and this might play an important part in how they go about attracting new investment into the area. However, much as some of a region’s strengths might be fairly transparent, many are not. How can a LEP, for example, dig deeper to uncover the strengths that lie under the surface?

The simplest solution, we believe, is the use of granular data; that is, data which does not just deal in headline sectors, but which drills right down to the most specific level of industry data (4-digit SIC). With such data, there are a number of ways of identifying the key industries in a region. Perhaps the most obvious is to look at the largest employing industries in an area. The following graph, with data for the Cumbria LEP region, shows the top 10 industries at the 4-digit level in that area:

However, although this tells us which are the biggest employing industries in the region, it doesn’t actually tell us what makes the region unique. For instance, we could repeat the exercise for a number of other LEP regions in the country, and we would undoubtedly find that they too have large numbers of people employed in industries such as Public Administration and Defence, and Hospital Activities.

INDUSTRY 2015 JOBS 2020 JOBS

Public administration and defence; compulsory social security 10,149

Hospital activities 9,77610,399

Retail sale in non-specialised stores with food, beverages or tobacco

predominating

9,5539,748

9,0348,634Processing of nuclear fuel

8,3227,519

Hotels and similar accommodation

Growing of crops; market gardening; horticulture; farming of animals

8,3198,780

Primary education8,185

8,622

Restaurants and mobile food service activities

7,3797,567

General secondary education6,0156,100

Building of ships and floating structures

5,4735,243

10,315


In order to identify regional strengths, what we really need to do is to measure the proportion of people employed in a specific industry in a region, and then compare this with the proportion of people employed in the same industry throughout the country. If we could do this, we could determine which industries make a regional economy really unique. But can this be done?

The answer is that it can. Housed in our data tool, Analyst, is an important function known as Location Quotient. This is a statistical measure of industry (or occupation) concentration in an area in comparison to the rest of the country. It works on a benchmark basis with 1.0 indicating the national average, and therefore industries with a score of more than 1.0 have an employment profile in that industry that is greater than the national average.

Using Cumbria once again, we can run a table showing the Top 10 industries at the 4-digit SIC level, in terms of Location Quotient:

It will come as no surprise that Cumbria has a high concentration in the Processing of nuclear fuel sector, but there are no doubt other industries in the list that may not have come to mind quite so readily. Of course some of these sectors might be tiny, which is why it’s important to look at the job numbers as well (which can easily be done using Analyst). However, the fact that this sort of data can begin to unpick what it is that makes a region really unique, is in turn something which can be used to help economic developers understand where they might be wisest to attempt attracting inward investment.

OCCUPATION 2015 LQ 2020 LQ

Processing of nuclear fuel 102.11 104.46

Manufacture of homogenised food preparations and dietetic food 54.32 55.09

Building of ships and floating structures 31.03 32.99

Manufacture of rubber tyres and tubes; retreading and rebuilding of rubber tyres 21.41 22.86

Support activities for other mining and quarrying 18.96 22.69

Manufacture of footwear 14.70 17.72

Manufacture of non-wovens and articles made from non-wovens, except apparel 13.57 14.46

Agents involved in the sale of agricultural raw materials, live animals, textile raw materials and semi-finished goods 12.55 13.88

Manufacture of paper and paperboard 11.01 9.82

Sawmilling and planing of wood 9.27 10.41


Location Quotient is by no means the only way of measuring regional uniqueness though. Whereas Location Quotient does this in terms of actual numbers employed, a similar function in Analyst called Shift Share measures uniqueness in terms of job growth. The resulting figure — Competitive Effect — explains how much of the change in a given industry or occupation in a region is due to some unique competitive advantage that the region possesses.

Once again using data from Cumbria LEP, the graph below shows the Top 10 industries in terms of Competitive Effect. Positive numbers denote a positive Competitive Effect, and so the larger the number, the greater the Competitive Effect:

Once again, although the figures uncovered here would need to be taken along with actual job numbers, it is clear that such data could become an invaluable aid for economic developers that are seeking to identify what makes their region unique. However, where things become really interesting is where we begin to unpick not just the industry strengths, but also the niche skills that exist within a region.

Primary education 651

Other residential care activities 402

Construction of residential and non-residential buildings 302

Temporary employment agency activities 263

Other specialised construction activities n.e.c. 261

Hotels and similar accommodation 252

Public administration and defence; compulsory social security 231

Building of ships and floating structures 218

Residential nursing care activities 195

Combined facilities support activities 156

INDUSTRY COMPETITIVE EFFECT


Identifying niche skills

One of the ways an economic developer might begin to approach the question of identifying skills is to simply look at current employment, either in terms of numbers employed, or expected growth over the next few years. Sticking with the Cumbria LEP region, which we used as an example in the previous chapter, the following table shows the Top 10 occupations in the region in terms of forecasted growth over the next few years:

Although this type of information is clearly useful, it doesn’t quite get to the heart of what makes a region special. In order to dig a bit deeper to identify the region’s niche occupations, and therefore the skillset that really makes it unique, we once again turn to the Location Quotient function, which can be run for occupations as well as industries.

As a reminder, Location Quotient works on a benchmark basis with 1.0 indicating the national average. Occupations with a score of more than 1.0 therefore have an employment profile that is greater than the national average. The following table shows the Top 10 niche occupations at the 4-digit SOC level in the Cumbria region:

OCCUPATION CHANGE IN JOBS (2015-2020) % CHANGE

Care workers and home carers 570 8%

Nurses 307 6%

Primary and nursery education teaching professionals 263 9%

Teaching assistants 231 9%

Property, housing and estate managers 190 9%

Nursing auxiliaries and assistants 169 7%

Secondary education teaching professionals 156 5%

Cleaners and domestics 147 3%

Receptionists 146 5%

Book-keepers, payroll managers and wages clerks 129 4%


As we pointed out when we looked at niche industries, it will be the case that some of these occupations might only employ a few people, and so although they are niche occupations, they are not necessarily of huge significance in the region. Any economic developer using the Location Quotient function would therefore need to take into account actual job numbers as well. It is also worth noting that as with the industry data, a region’s occupational uniqueness can also be measured in terms of job growth using the Shift Share function which we wrote about on page 10.

So far we have shown methods of identifying both niche industries and niche occupations, but in terms of using information to attract inward investment, wouldn’t the gold standard be to connect the two — that is, to take an industry and to then establish where its skills lie? By using another function built into Analyst — Staffing Patterns — we can indeed do this. This function allows us to pick any industry, even at the 4-digit SIC level, and identify which occupations are employed within the sector.

Let’s take an example. In the previous chapter, we identified Processing of Nuclear Fuel as Cumbria’s most niche industry, with a Location Quotient of 102.11 in 2015, set to grow to 104.46 by 2020. But what occupations does it employ? The table below shows this, with the Top 10 in terms of employment numbers listed, along with predicted growth, the proportion of the industry that each occupation makes up, wages, and educational levels:

OCCUPATION 2015 LQ 2020 LQ

Rubber process operatives 6.65 7.08

Metal plate workers, and riveters 5.01 5.04

Boat and ship builders and repairers 4.8 4.72

Farmers 4.43 4.4

Precision instrument makers and repairers 4.34 4.45

Chemical and related process operatives 4.16 4.18

Footwear and leather working trades 3.8 4.06

Crane drivers 3.6 3.53

Hotel and accommodation managers and proprietors 3.44 3.48

Electronics engineers 3.09 2.87


This process of identifying which occupations an industry employs can also be done in reverse — that is, an Inverse Staffing Pattern can be run on any occupation, right down to the 4-digit SOC level, to show which industries employ people in this occupation. So for instance, the Occupation Location Quotient table on page 12 showed that the most niche occupation in the Cumbria LEP region is Rubber Process Operatives. By running an Inverse Staffing Pattern we find that of the 301 people employed in this occupation in 2014, 241 were employed in the Manufacture of rubber tyres and tubes; re-treading and rebuilding of rubber tyres sector, 51 in the Manufacture of other rubber products, and the remaining nine in sectors such as the Manufacture of other plastic products.

Having shown a number of different ways of identifying niche industries, niche skills, and how those industries and occupations relate to each other, this still raises the question of how can this sort of information be used to attract inward investment? In the final section of this report, we’ll be showing how one LEP — Thames Valley Berkshire — has been using Labour Market Intelligence, amongst other data, to produce a series of sector reports which they are using to promote the idea of investing in the region.

DESCRIPTIONEMPLOYED

IN INDUSTRY (2015)

EMPLOYED IN INDUSTRY

(2020)

CHANGE (2015-2020)

% CHANGE (2015-2020)

% OF TOTAL

JOBS IN INDUSTRY

(2015)

MEDIAN HOURLY

EARNINGS

EDUCATION LEVEL

Electricians and electrical fitters 1,887 1,776 -111 -6% 20.9% £13.42

A Levels; Level 3 NVQ;

BTEC Level 3

Metal working production and maintenance fitters 1,242 1,174 -68 -5% 13.8% £12.45

A Levels; Level 3 NVQ;

BTEC Level 3

Engineering technicians 996 948 -48 -5% 11.0% £16.21 A Levels;

Level 3 NVQ; BTEC Level 3

Chemical and related process operatives 965 935 -30 -3% 10.7% £13.50

GCSE at grades A*-C; Level 2 NVQ;

BTEC Level 2

Business and financial project management professionals

818 777 -41 -5% 9.1% £21.37 Honours,

Bachelor's degree; BTEC Level 6

Electronics engineers 717 671 -46 -6% 7.9% £19.01 Honours,

Bachelor's degree; BTEC Level 6

Precision instrument makers and repairers 531 536 5 1% 5.9% £10.48 A Levels; Level 3

NVQ; BTEC Level 3

Research and development managers 425 407 -18 -4% 4.7% £19.14

Honours, Bachelor's degree;

BTEC Level 6

Human resources and industrial relations officers 381 375 -6 -2% 4.2% £13.72


BTEC Level 6

Engineering professionals n.e.c. 292 278 -14 -5% 3.2% £20.69


BTEC Level 6


Case study: Thames Valley Berkshire LEP

What makes our local economy unique? Where are its strengths? Where does it have a competitive advantage over other areas? These are some of the questions that Thames Valley Berkshire Local Enterprise Partnership (TVB LEP) have recently been asking, and having identified the answers, they have released a series of innovative Sector Propositions, each one focusing on an area of competitive strength in the Berkshire area.

The resulting reports are essentially inward investment portfolios, demonstrating the competitive advantage the area has over other locations in a particular sector, and intended to attract companies — particularly international organisations — to invest in the sub-region.

S E C T O R P R O P O S I T I O N : D I G I T A L T E C H N O L O G I E S

For the first of these reports, TVB LEP chose to focus on the digital technologies sector, since it holds a dominant position in the Berkshire economy. According to the report:

• There are over 6,300 tech companies based in the TVB LEP region

• There has been a 23% increase in tech businesses over the last five years

• 14% of the local workforce work in the sector, compared to a UK average of 4%

The report includes a wealth of details aimed at showcasing the sub-region as a great place for digital tech companies to invest or relocate, including:

Who’s Here — snapshot of some of the digital tech companies that are currently in the areaSpecialisms — a look at some of the tech specialisms in the area, such as Software and IT Services, Telecommunications, Big Data, and Cyber SecurityRelocation Support and Infrastructure Development — information on how companies can get help to relocate to the area and what kind of new infrastructure developments are in the pipeline

According to Peter Read, Chairman for TVB LEP:

“The document is filled with nuggets of insight about the sub region’s leadership position in the digital technologies space along with the opportunities for corporates, SMEs and start-ups choosing to locate here. We want to make sure that all our technological strengths within Berkshire are acknowledged, in order for us to continue to grow and develop our reputation.”


G R A N U L A R D E T A I L T H R O U G H A N A L Y S T

One of the greatest strengths a region has is its workforce, and an important question for any company thinking of investing in or relocating to a particular area is “What is the pool of available talent like in the area?” TVB LEP wanted to better understand their talent pool themselves, and to showcase its strengths in their Sector Proposition. To achieve this, they turned to Emsi’s granular Labour Market Intelligence.

Emsi data provides granular detail data on occupations and industries, down to the most specific industry and occupation levels (4-digit SIC and SOC codes), and to the most specific sub-geographies. This was of great value in giving them a detailed breakdown of workforce numbers, and in particular a breakdown of key occupations within tech specialist areas. Amongst other things, they found that within the region there are:

• 11,700 Programmers and software development professionals

• 4,100 IT Business analysts, architects and system designers

• 51,000 people employed in roles that can be defined as tech specialists

Drilling right down to the most specific occupations to uncover the sector skills make up threw out some surprising results. According to Caroline Perkins, TVB LEP’s Economic Research Analyst, this is where much of the value of granular data lies — in challenging assumptions about the labour market, and in uncovering strengths that they weren’t necessarily aware of:

“We knew we had a large number of global digital technology companies located in Berkshire. The assumption was however that most of the sector’s workforce were employed in sales and marketing rather than tech specialist roles. Using Emsi data we discovered that actually the majority of the workforce are in fact working in highly skilled tech roles. We were then able to showcase this important talent pool within our Proposition.”

Since producing the digital technology report, TVB LEP have released a second Sector Proposition on Life Sciences and Healthcare, which again includes Emsi data. You can download a copy of these reports at http://thamesvalleyberkshire.co.uk.

To find out more about how Emsi can help your organisation build a better regional economy, contact

Martyn Gerard:

Email: [email protected] Phone: 07753 365 530

Web: www.economicmodelling.co.uk Blog: www.economicmodelling.co.uk/blog

Twitter: @Emsi_UK

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Encouraging inward investment in your region · 2016-08-30 · Encouraging inward investment in your region with labour market information | 3. Foreword. More than four in five multinational