Neil Gibson

1
Reaching for recovery what can we expect, what
can we do?

• Neil Gibson
• Director of Regional Services
• Oxford Economics
• June 2009

2
Overview

• Recession painful and possibly prolonged
• End of golden era
• How has Lisburn performed?
• What has changed updated forecasts for Lisburn
• Risks and opportunities facing Lisburn
• Reaching for recovery how and when?
• Reacting to recessions and recovery role of
  policy

3
Recession painful and possibly prolonged?
4
Most severe peace time recession since 1930s
5
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

6
All major economies feeling the strain
Acute where combination of house price crash and
trade exposure
But
Trade most acute
7
The unsustainable construction boom
8
Recessions have many impacts
Leavers from education
Job loss
Finances
Spenders and savers
Consumers
Crime
Housing
Start - up
Closing
Environment
Recession
Businesses
Society
Psychology
Image physical space
Advertising / marketing
Downsizing / layoffs
Press
Benefits
Governments
Spending
Governance
Strategy
Financing projects
9
End of golden era
10
End of an era for all
Year when employment reaches 2007/2008 peak
11
A wide reach sectorally
NI quarterly change in employee jobs
Source DETI Note Blue shading refers to
employee job change greater than or equal to
1000 red shading refers to employee job
change less than or equal to -1000
12
And for the short term
Employment forecast, 2008 2010, Northern Ireland
13
Unemployment a concern now and in the future
Total claimant unemployment in NI
Claimant count April 2009 46,800 Oxford
Economics forecast 2010 60,500
Source NOMIS
14
Unemployment - everywhere affected
Unemployment change, April 2008 April 2009
NI change 22,000 / 89 Lisburn change 1,300 /
100
15
House price correction severe
16
How has Lisburn performed?
17
Last decade characterised by strong employment
growth low unemployment
Total employment
Total unemployment
Source NOMIS
Source DETI, Oxford Economics
18
Population led by migrants recently
Migration and Natural Change, Lisburn
19
Public sector growth greater than NI
Sectoral job change over the last decade
Source DETI Census of Employment, Oxford
Economics
Note Blue shading refers to job growth higher
than NI red shading refers to job growth less
than NI
20
Jobs city centre, outer urban, rural
Total employee jobs (2005-07)
Distribution of sector jobs by area (2005)
Source DETI Census of Employment, Oxford
Economics
21
What has changed updated forecasts for Lisburn
22
Reassessing our forecasts 2 year on

• Clearly too optimistic!
• Warnings on house prices, construction and retail
  provided
• Warning over considering all developments
  together even more important now
• No progress on major construction we had expected
• Did not see the global collapse coming and this
  has triggered the recession
• The public sector squeeze resulting from the
  collapse in tax revenues extending the length of
  the recession
• Perhaps 2007 forecasts are more of an
  aspiration now, though sectors need to be
  different
• Think more carefully about balance between
  export, local demand, local services (at NI level
  at least)

23
Change in outlook from 2007
Source Oxford Economics
24
Strong demographics despite tail off in migration
Total population and natural increase
Net migration
Source NISRA, Oxford Economics
Source NISRA, Oxford Economics
25
Job loss across all sectors lower value of
Sterling expected to help agriculture
Total employment
Agriculture employment
Source DETI, Oxford Economics
Source DETI, Oxford Economics
26
Significant revision for construction, retail and
hotel outlooks
Construction employment
Retailing and hotels employment
Source DETI, Oxford Economics
Source DETI, Oxford Economics
27
Aspired to model not broken but different
Professional services employment
Health and education employment
Source DETI, Oxford Economics
Source DETI, Oxford Economics
28
Lower employment higher unemployment rates
Resident employment rate
Unemployment rate
Source Census, LFS, Oxford Economics
Source Census, LFS, Oxford Economics
29
GVA - significant downward revision
Source Oxford Economics
30
Risks and opportunities facing Lisburn
31
Risks for Lisburn to face and opportunities to
embrace
32
Reaching for recovery how and when?
33
What will bring recovery?

• The impact of the significant policy stimuli
• The end of de-stocking across production
  sectors
• A pick up in global demand and world trade
• A return of confidence to both consumers and
  lenders
• Tempering of costs and wage brokering
• Fiscal stability and the write off debt
• Increased liquidity and ultimately lending
  (though watch the assessment of risk some bad
  bets around)
• Housing market stability improved transactions
  and ultimately prices
• Signs (although tentitive) of many of these
  coming through

34
Could it stall?

• Unfortunately yes very possibly
• EU exporters (Germany esp.) could see significant
  defaults and closures
• Financial lending to Eastern Europe etc. could
  default more significantly
• Protectionism could de-rail world trade growth
• Commodity prices could rise again (esp. oil)
• Possibility of global conflict escalating
  (related to economics or not)

35
Oil prices likely to rise
Value today 72 per barrel
36
Euro likely to fall (rather than Sterling rise!)
Value today Euro / 1.17 US / 1.64
37
Services still key to job creation (really?)
38
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)

39
Reacting to recessions and recovery role of
policy
40
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
41
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 potential of Laganbank Quarter
  and Maze not fully realised
• Unfinished buildings, developments, housing
  estates
• No longer viable cultural and leisure activities
• PPP, funding etc.
• Housing offer
• Limited new build no further development of
  Ballantine Garden Village
• Price falls welcome, but could rise sharply and
  become unaffordable again significant
  reductions witnessed in Thaxton Village
  development
• Skills and young people crisis what jobs?
• Will the sectors of recent growth return?
  Construction and retail will remain key areas for
  future growth in Lisburn but on a much smaller
  scale
• Cycle of fear and retraction
• Impact on pension pots and retirement

The biggest costs are personal they can last a
lifetime
42
Themes of response

• Lead by example (efficiency, approach)
• Sensitive and empathetic
• Decisive and clear
• Spending government (taxpayer) money wisely
• Incentivise and support work (not workless)
• Lessons learnt?
• Manage expectation past will not return in the
  same way

43
Remember all is not lost!..

• Recessions end
• Some signs of bottoming out all is not lost!
• Not everything is declining
• Key strategic assets remain (educational
  establishments, skills, infrastructure)
• Sterling, inflation and interest rates
• Natural cleansing process
• Some bloat in certain sectors
• Kick back on wage levels will improve
  competitiveness
• The role of govt is back centre stage, a new real
  challenge for governance and policy

44
ContactNeil GibsonDirector Regional Services,
Oxford EconomicsTel 028 9266 0669Mob
07803728994 Email ngibson_at_oxfordeconomics.com

45
Annex
46
Businesses

• Finances
• Cash-flow advice money is cheap
• Potentially trading capital support (but take
  care assessing risk not easy)
• Start-up
• Advice on recession response
• Support on premises engagement with landlords
• Closing
• Advice and support on the decision making process
  (pointing towards other options and guidance
  closing a last resort a restructuring package
  expensive though)
• Legal matters (redundancies etc.)
• Support and counselling
• Downsizing and layoffs
• Legal advice
• Potential training options (management, business
  readiness, sales skills in particular top-up
  courses) i.e. Lisburn City Councils Sustainable
  Business Development programme
• Advertising and marketing
• Pays big dividends in recovery but hard to fund
  (would help in attracting firms such John Lewis)
• Support and guidance perhaps a role of the
  university school leavers (projects and quasi
  enterprises)
• Financing projects
• Advice on the options and returns (the longer
  term picture)
• Leading the search in new lands e.g. pension
  funds, oil money

47
Governments

• Financing projects
• Bring together depts. and bodies with funding
  needs
• Leading the search in new lands e.g. pension
  funds, oil money
• Spending
• Route and branch review of spending and likely
  incomes a recession response team?
• Prioritising those most effective
• Realism over how many can be helped and the
  understanding that all will suffer (avoid a
  further benefits trap)
• Fastracking and borrowing (issuing money?
  Lending?)
• Strategy
• Review of strategy acceptance of changing times
  note streamline the process (dynamic and
  responsive quicker to market)
• Understanding of targets being missed
  prioritise people on the front line not
  rewording strategies
• Weighting priorities front-line vs. economic
  development vs. society etc.
• What are priority sectors (if they even exist)
  green, professional services, pharma,
  engineering? i.e. Lisburn City Councils
  Competitive Edge programme (SME Development
  Programme 2007-13)
• Governance
• Role of council / RDA / other bodies a chance
  to de-clutter?
• Efficiency drive and clearing the blockages and
  increasing the networking within public sector