Presentation by Nigel Jump at South West Stakeholders meeting held on 9th November 2010.

1. www.southwestrda.org.uk
SW economic prospects after
“fiscal withdrawal”
Let’s hear it for the South West,
Exeter, 9th
November 2010
Nigel F Jump
Chief Economist
South West RDA

2. Introduction
World economy: stumbling into 2011?
- one leg trying to run, one in a liquidity-debt trap
UK & SW economy : rebalancing
- all together now
Policy background : fiscal correction
- sub-regional growth & CSR

3. UK recessions compared
92
94
96
98
100
102
104
106
108
Quarters Output 1980 Output 1990 Output 2008, latest actual = q3 2010 = 10
92
94
96
98
100
102
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Number of quarters
Quarters Workers 1980 Workers 1990 Workers 2008, latest = q2 2010 = 9

4. SW PMI: output & employment ratios
PMI Output Index - Latest Month
35
40
45
50
55
60
65
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
July
Sep
2006 2007 2008 2009 2010
SW UK +/- balance
PMI Employment Index - Latest Month
35
40
45
50
55
60
65
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
Jul
Sep
Nov
Jan
Mar
May
July
Sep
2006 2007 2008 2009 2010
SW UK +/- balance

5. CSR+: UK impacts
ST: weaker growth, lower employment, higher inflation
LT: Salt or Fresh water economics?
CUTS: spending down from 47.5% to 41% GDP
aggregate: £216bn spending + £102bn tax
- over 4 fiscal years = 13% of “might have been”
RGDP growth below trend for years
= falling real incomes & rising unemployment
Offsets – interest rates, £, rebalancing – I & X… strength?

6. CSR+ : SW jobs impacts
updating after CSR but (OBR, PWC, RDA, CIPD)
 gross jobs 490k direct => 600k public + 500k
private => 1.6mn total
 SW: 60k => 85k => 115k depending on
how/when axe falls
 12% => 14% => 10% of total
 net ?? – anywhere from zero to two-thirds

7. SW : Businesses v Households
 companies better off than people
 domestic demand (Y&E)
 procurement – crowding in or out?
 interest & exchange rates
 profitability, debt & liquidity
 financial logjams : liquidity-debt trap
 confidence on I & E & X? = rebalancing?

8. SW : rebalancing story
Characteristics
 unemployment & under/hidden employment
 small/micro business, part-time workers
 northern wages with southern prices/costs
 low investment & trade engagement - access & aspiration
 dependence on domestic demand:
private consumption & government
Challenges
 need for investment & exports
- HV products & services v HJ sectors
 all trying to be ants rather than grasshoppers
 plus insect squashers - climate & demography & technology

9. LEPs
Not covered
71% SW
businesses
(147k)
68% SW
employees
(1.65mn)
Does it matter?

10. LEPs
Not covered
71% SW
businesses
(147k)
68% SW
employees
(1.65mn)
Does it matter?