Economic outlook for Greater Manchester Anthony Light alight@oxfordeconomics.com 4th May 2016

Overview The baseline outlook for Greater Manchester Key headlines from GMFM 2015 Comparisons between GMFM 2014 and GMFM 2015 Alternative economic futures Accelerated Growth Scenarios for Greater Manchester BREXIT

Economic Outlook for Greater Manchester (GMFM 2015)

Greater Manchester growth in line with the UK

GVA growth in Devolution Deal areas

147,000 more jobs in Greater Manchester by 2035

Jobs growth supported by rising employment rate

Business services lead job creation…

…and GVA growth

Sector story helps explain local disparities

…but its not all about business services

Job creation will be centred on Manchester

Population growth fuelled by natural change

Changes between GMFM 2015 and GMFM 2014

Most revisions due to new historical data Information included in GMFM 2015 OE global, national and North West outlook November 2015 BRES (revised 2013 and new 2014 data) Mid-year population estimates (new 2014 data) Housing stock, house prices (new 2014) Earnings (revised 2013 and new 2014 data) Resident employment (new 2014 data) Unemployment (new 2014 data and 2015 estimate) Carbon emissions (new 2013 data) Regional GVA (new and revised data available to 2013, move to 2012 prices) Changes to the national/international outlook also matter

Data revisions can be sizeable

Modest downgrade to long term growth…

…fewer jobs reflects data revisions

Larger population due to higher net-migration

Alternative economic futures Accelerated growth scenarios BREXIT

An aspiration for higher growth – the AGS SNPP Greater Manchester aspires to better the baseline forecast The development of a ‘Northern Powerhouse’ - the long term economic plan - provides a helpful framework for understanding what this future might look like The accelerated growth scenario “AGS SNPP” adopts ‘long term economic plan’ growth aspirations and population growth in line with the ONS 2012 projections. These are higher than GMFM Development of the scenario was an iterative process carried out in spring/summer 2015, using GMFM 2014 as the baseline Rather than being a forecast, the AGS SNPP is an illustration of the potential scale and composition of economic growth and demographic development in a high growth scenario

AGS SNPP – key assumptions The North West grows in line with the UK average All sectors grow faster than the baseline, but private services contribute most to additional growth Greater Manchester ‘leads’ rather than ‘follows’ Sector profile of growth and Greater Manchester’s relative strength in these sectors supports above average growth Consistent with local aspirations for stronger economic development Other parts of the North are not as well placed as Greater Manchester to facilitate faster growth AGS SNPP adopts GMFM baseline sector-specific productivity assumptions

AGS SNPP – headline results, 2015-35 Greater Manchester GVA GMFM 2015 2.3% p.a. AGS SNPP 2.8% p.a. GM stronger than UK and narrows the gap with London Greater Manchester jobs GMFM 2015 0.5% p.a. AGS SNPP 0.7% p.a. AGS SNPP provides higher resident employment and increase in commuting Greater Manchester productivity GMFM 2015 1.8% p.a. AGS SNPP 2.1% p.a.

But what if future net-migration is higher? GMFM baseline forecast incorporates OE population projections AGS SNPP incorporates ONS 2012 population projections The main uncertainty regarding demographic growth is the future scale of net migration ONS / AGS SNPP assumes lower net migration to Greater Manchester in the future than has been seen over the last decade We have assessed the impact of an alternative demographic profile for:- Population Economic / employment growth Implications for local infrastructure and policy

Demographic scenario – AGS Higher An alternative population projection incorporating higher migration assumptions was developed by AGMA using POPGROUP model – ‘AGS Higher’ AGS SNPP economic forecast adjusted to account for a larger population Additional people assumed to share the same relationship with the labour market as the existing population (labour market status and sector composition of employment) Population growth 2015-35 GMFM baseline 0.4% p.a. AGS SNPP 0.5% p.a. AGS Higher 0.9% p.a.

AGS Higher – headline results, 2015-35 Greater Manchester GVA GMFM 2015 2.3% p.a. AGS SNPP 2.8% p.a. AGS Higher 3.3% p.a. In AGS Higher, GM grows faster than Greater London and well ahead of the UK average Greater Manchester jobs GMFM 2015 0.5% p.a. AGS SNPP 0.7% p.a. AGS Higher 1.1% p.a.

Implications of accelerated growth scenarios Scenarios are an illustration rather than prediction Faster economic growth, higher employment, more commuting and a larger population have infrastructure implications Transport networks, demand/supply of employment land, housing and energy Education, health, social care and leisure Accelerated growth scenarios assume the majority of additional jobs are taken by local residents who would otherwise not be participating in the labour market Need to ensure they have the relevant skills and opportunities… …if not, accelerated growth can only be accommodated through higher migration and/or commuting

BREXIT

Surveys flag a slowdown in activity… D:\NewChart\UK\Historical\PMI Chart.xls ‘PMI Chart (2)’

…services alone are supporting growth Z:\UK Team\ST_Output\Table.xls ‘Chart1a’

‘Remain’ appears to be the most likely result… Bookmakers’ odds: Remain: 2/5 Leave: 12/5 Implied probability of Brexit = 29% Source: Betfair 27 April Z:\UK Team\Brexit\Brexit Charts.xls ‘Chart6’ http://whatukthinks.org/eu/opinion-polls/poll-of-polls/

…in which case growth should recover in 2016H2

What will be the likely economic impact of BREXIT? Independent study by OE If the public vote to leave the EU, the outcome of trade negotiations and UK policy response will be decisive in determining the long economic term impact Best-case scenario: Britain enters a custom union arrangement with the EU and takes a liberal approach towards migration and business regulation. Loss of 0.1% of GDP by 2030. Worst-case scenario: Britain reverts to most-favoured nation status, aggressively clamps down on migration and undertakes little regulatory reform. Loss of 4% of GDP by 2030

Key points GMFM 2015 sees Greater Manchester growing in line with the UK average over the medium to long term Modest forecast revisions (GVA down, population up) Accelerated growth scenarios illustrate what the scale and composition of growth might look like – and what the implications might be UK growth has slowed in recent quarters – EU referendum likely to be having an impact on confidence / spending but other factors too BREXIT could have a long term economic cost depending on how the Government reacts