EY’s Region and City Economic Forecast highlighted the exciting prospects for the competitiveness of Reading and the Thames Valley. A thriving and economically prosperous region with UK-leading growth forecasts, Reading and the Thames Valley are expected to outperform the rest of the UK until 2019, writes Richard Baker, EY’s managing partner in Reading.
Reading is set to be the UK’s fastest growing city over the next three years with annual Gross Value Added (GVA) of 2.5% – growing faster than London’s 1.9% and UK average growth of 1.5%. The Thames Valley region is also expected to grow quicker at 2.1% annual GVA growth over the next three years.
EY’s forecast says Reading is set to experience relatively strong employment growth of 0.9% between 2017 and 2019 – the fastest of any UK city. This would create 3,000 additional jobs in Reading by 2019.
As the UK’s fastest-growing sector, digital accounts for 25% of Reading’s GVA, and this together with growth in key sectors such as professional, scientific and technical contributes to its strong performance. Reading has also benefited from employment growth of 2.6% in 2016 – ahead of the equivalent figures for the South East (2.1%) and the UK (1.1%) – with the professional, scientific and technical sectors driving employment in the city over the past year.
This growth is reflective of the region’s position within the M4 growth corridor, as well as its strengths in the high value-add, IP-rich sectors, such as technology, life sciences and advanced engineering, where innovation and IP creation is critical. In terms of inward investment, we all know how successful the region has been in attracting leading companies from around the world. These conditions have meant the region is able to grow quicker than the rest of the UK, and we continue to see investment that will further grow our economy.
The need for an integrated growth strategy
If we move our sphere of focus from Reading to the wider Thames Valley context, we can see a clear disjoin between a long-term track record of performing well (in terms of its competitiveness as a UK region) but having done so without a conscious plan. The Thames Valley needs an integrated growth strategy articulating the region’s priorities and plans to respond to not only macro-economic and political shifts, but also the disruption to business caused by digital and other technological and scientific developments.
It’s clear that we are living in unprecedented times, with the UK entering into Brexit negotiations and devolution deals supporting regional growth and economic rebalancing – all of which offer an unprecedented opportunity for the region to build a successful modern economy that is, and will remain, competitive on the world stage.
The region is fortunate to be in a strong position but we still face significant challenges which, if not addressed, will undoubtedly hinder future growth which will be a loss to the UK as a whole. In particular, we need to continue to invest in infrastructure, future-oriented skills and business networks to ensure connectivity both with peers and along the value chain.
What businesses are doing to prepare for change
We have spoken to numerous local businesses in the Thames Valley and more than 1,000 businesses across the UK about their future plans, in particular what they are doing to get ready for change. Three factors consistently arise: talent, STEM collaboration and international trade.
Starting with talent, we have significant skills shortages and need any new immigration ‘system’ to ensure that we can recruit the skilled labour that is needed to fuel growth. More broadly, we see an opportunity for organisations of all sizes and maturity levels to fundamentally revisit their approach to create operating models that can flex to changing market conditions.
Secondly, STEM collaboration is about ensuring our universities have sustainable funding models for research and are able to attract and retain the very best talent. We need to work closer with various bodies to ensure that future needs and opportunities are understood, planned and nurtured across our schools and colleges so that there is a clear transition from education to the workplace across the region.
And finally, international trade. We need the ability to trade competitively and easily within the EU, but also any changes to our relationship with the US could be a real boost (or detractor). We must provide a strong and consistent message to government and ensure that we sustain recent levels of collaboration across a number of governmental steering groups, even when negotiations inevitably become uncomfortable.
These are critical areas of need for the businesses based in our region; to ensure our ongoing attractiveness as a destination for overseas companies, to establish presence and to support start-ups and scale-ups to commercialise further waves of value-adding IP.
Broader challenges that need to be mitigated span ‘three C’s’ – cost, congestion and complacency. The first two are largely self-explanatory and the third is one we cannot risk as a business community or indeed the wider UK as a whole – we need a Thames Valley that continues to outperform via an underlying, integrated plan.
EY’s role in supporting that plan
EY is undertaking an initial study to understand the strengths, weaknesses and outlook of the Thames Valley across five pillars that we believe outline the region’s priorities within an integrated growth strategy: people, infrastructure, quality of living, investment and innovation, and governance.
An integrated growth strategy should be formed in partnership with government, third parties and the local business community, all of which are individually doing great things to put Reading and the Thames Valley on the map. Now is the time for local businesses to collaborate and create a unified plan in order to sustain the region’s growth and compete on the world stage.
We are keen to discuss and enhance our thinking with stakeholders across Reading and the wider Thames Valley so that your voice, energy and insights are placed at the heart of a much needed unified story and compelling investment case for the future health and success of the region.