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Policy Messages

What does the data presented on this website mean for the formulation of economic policy? Below are a number of key messages, or considerations for policy makers, based on current and emerging economic trends revealed within the data, as well as what we know about the strategic and policy context for economic development locally and nationally.

Planning for future, spatial patterns of growth. Existing evidence regarding functional economic market areas (FEMAs) and travel to work areas (TTWAs) provide some useful indication of Somerset’s existing economic geography. However, these are simplifications of an economic reality that is far more complex and do not necessarily take into consideration the expected impact of social and economic trends in the future, such as the shift to a low-carbon economy, the growth in digital ‘ways of working’, the direct impacts of climate change and requirements for adaptation, or the burgeoning significance of particular industries or sectors. Understanding and planning for future, spatial patterns of growth necessitates a broad and pragmatic approach among local authority partners and stakeholders, one with an eye to future trends, and which recognises the lack of congruence between administrative borders and actual economic activities, including the flows of people, goods and services.

Increasing productivity through innovation. Productivity is broadly the same it was 10 years ago and there remains a gap between productivity in Somerset and the national average. Boosting productivity, and with it, living standards, remains a key underlying imperative in economic development and is central to the formulation and evaluation of government policy. Innovation is a recognised driver of productivity and an area where Somerset and the broader region typically underperforms. The Heart of the South West LEP, comprising the local authority areas of Devon, Somerset, Plymouth and Torbay, ranks 32nd out of 39 LEPs in terms of both what firms spend on innovation and what they spend on research and development, and amongst the least knowledge-driven economies in the country (see Heart of the South West Productivity Strategy 2019, pp. 44-45) Somerset specifically does not have a university or a wealth of R&D institutions/assets to support a culture of innovation (see South West England and South East Wales Science and Innovation Audit, and compare with Exeter, Bristol, Bath and Cardiff) and partly related to this, Somerset has a dearth of residents in their 20s and 30s, who often leave the county for education and work opportunities (the so called ‘brain drain’).

Recognising our sectoral strengths and opportunities. We must support and build upon existing sectoral strengths (e.g. Advanced Engineering & Manufacturing, Environmental Industries), support those areas we know are going to be crucial for the future (e.g. Digital Technologies), whilst also supporting our ‘bedrock’ sectors and industries like agriculture, food and drink, and tourism, which are especially important in our rural areas. In relative terms Advanced Engineering & Manufacturing contributes significantly more to economic output and employment than is the case nationally, whilst also having higher relative productivity. Meanwhile, Digital Technologies currently contributes far less to the Somerset economy in terms of output, employment and productivity, but is recognised as an opportunity area for Somerset, with the UK Hydrographic Office as a key asset for digital, marine data. The South West England and South East Wales Science and Innovation Audit highlighted advanced engineering and digital innovation as key strengths for the region to build on. Besides digital technologies specifically, digital skills will be increasingly important across all sectors of the economy.

Somerset’s rural and dispersed population. Our rural character is one of our greatest economic and social assets, contributing to Somerset’s natural and cultural capital and making it a desirable place to live and work. However, it also creates challenges around both physical and digital connectivity, social isolation (with its health and wellbeing consequences), social immobility (with its impact on aspiration and opportunity), as well as issues around appropriate and affordable housing. The South West Rural Productivity Commission (2017) highlighted that rural productivity (GVA/workforce job) is 8% lower than urban productivity and 10% lower than the average for rural areas in England. Agriculture, food and drink, and tourism are all important ‘bedrock’ industries/sectors in rural areas, especially in Somerset. Whilst providing disproportionately high levels of economic output and employment, these are typically lower pay, lower productivity activities.

An ageing population and workforce. Higher life expectancy and lower fertility rates mean the UK’s population is ageing, and within Somerset the population is ageing even faster, compounded by the in-migration of older people and out-migration of younger people, typically in their 20s and 30s. This means progressively lower overall levels of economic activity alongside the increased costs of supporting an older population. Related to this, Somerset has an ageing workforce, with attendant challenges regarding the loss of (often higher-level) skills as people retire. Recognising both the societal challenges and market opportunities presented, the UK Industrial Strategy highlighted ‘ageing society’ as one of its four grand challenges, with the aim to ‘harness the power of innovation to help meet the needs of an ageing society’. Research undertaken on behalf of SCC and Heart of the South West LEP partners in 2019 looks at how we can support longer working lives whilst exploiting market opportunities for developing goods and services aimed at helping people remain healthy and independent.

Fostering inclusive growth and tackling deprivation. Broadly speaking, Somerset performs above average and on a par with its statistical neighbours (though a little worse than geographical neighbours Devon and Dorset) on measures of inclusive growth, ranking 74th out of 214 local authorities in the Centre for Public Policy’s 2019 Inclusive Growth Index. Moreover, Somerset performs above average with regards to overall levels of deprivation according to the ONS’ Index of Multiple Deprivation (IMD). However, at a lower level, the number of LSOAs in the 20% most deprived in England increased from 25 to 29 between 2015 and 2019, with approximately 47,000 Somerset residents now living in these areas, which are largely concentrated in the county’s main urban settlements. The domains within which Somerset performs worst are ‘Living Environment’ and ‘Barriers to Housing and Services’, with over a quarter of LSOAs within the 20% most deprived for each. This data demonstrates that pockets of deprivation can persist despite higher levels of relative prosperity, strengthening the argument for supporting inclusive growth.

Ensuring skills for the future. We need high-level skills to support a productive economy, wherein technological advancement and innovation will be key, but we also need to support attainment for all. We already know that whilst Somerset performs well on lower-level (NVQ 1-3) skills, it is behind the national average on higher-level skills attainment, and these are going to be crucial for the future. Businesses regularly tell us that skills shortages are one of the biggest challenges they currently face (e.g. UK Employer Skills Survey, Somerset Business Bulletin – forthcoming) and that there is a mismatch between employer needs and the current curriculum/provision. Besides formal qualifications and experience, this includes ‘softer’ (i.e. employability) skills, such as communication, team working and customer service.

(Last edited on 20th December 2019)