We mentioned in our piece on the Northern Powerhouse how we have grouped industries at the 4-digit Standard Industry Classification (SIC) level together into 49 industry clusters, based on measures such as similar workforce, tendency to co-locate in the same areas, and supply chain connections. We then showed how we had split these clusters into two groups: local clusters, which are comprised of industries that tend to be spread across all areas, and which serve local residents in ways which can only be done where they live, and tradable clusters, which are made up of industries that tend to export nationally and internationally.
By going through this exercise, we can give much better insight into the make up of local economies than if we simply look at the broad SIC-1 or SIC-2 level sectors, which often tend to contain industries that are not necessarily intrinsically connected with one another. Also, by identifying tradable industry clusters, we can give a much better sense of what is driving each local economy, since it is these that tend to have a much greater connection to the national and global economy, as well as more positive “multiplier” effects, higher levels of pay, and greater productivity.
A nationwide view of the visitor economy
To demonstrate the value that this approach can have, let’s take an example of a tradable cluster — the visitor economy, which is made up of 14 SIC-4 level industries – and see what data we can identify.
To begin with here are some nationwide facts about this cluster:
- The numbers of people employed in the visitor economy across Great Britain in 2016 was 705,765
- This was a rise of 74,180 jobs (12%) since 2006
- Jobs in the visitor economy have grown faster than jobs in the economy as a whole over the last ten years. Back in 2006, it accounted for 2.32% of the national economy, whereas in 2016 it made up 2.37% of the entire workforce
- Within the visitor economy cluster, the biggest employing industry by far is hotels and similar accommodation, which employed 364,177 jobs in 2016, or 51.6% of the total
- The average wage across the cluster is fairly low at £20,474, but there are some high paying industries, such as performing arts (£38,366) and tour operator activities (£32,370)
Where is the visitor economy most crucial to the local economy?
Digging down below the national level means that we can unearth some really interesting data about where the visitor economy is most vital to local economies. We can begin by first identifying the top local authorities in terms of numbers employed in the visitor economy:
Unsurprisingly, given that it includes some of the biggest tourist attractions in Britain, Westminster is a long way ahead of any other area, with more than 41,000 jobs. Equally unsurprising is the fact that a number of other London boroughs feature in the Top 10, along with some of the nation’s biggest cities.
Yet although these areas employ large numbers of people in the visitor economy, it doesn’t necessarily follow that the visitor economy is as crucial to these areas as it is to some others. To take Westminster as an example, although over 41,000 are employed in the visitor economy cluster, when measured as a percentage of the total employment in the borough, this accounts for only 5.71%.
In order to find out where the visitor economy is even more essential to an area, what we can do is measure the number of people employed in the cluster and then calculate this as a percentage of total employment in that area. By doing this, we can see which local authority economies rely most heavily on the visitor economy, as the following graph shows (N.B. we have also included actual job numbers, as well as the percentage of total jobs this accounts for in each area):
As you can see, the visitor economy is comparatively more important to these areas than it is to Westminster, even though the actual job numbers are much smaller. So whereas visitor economy jobs account for 5.71% of all jobs in Westminster, in West Somerset; Lochaber, Skey and Lochalsh; Argyll and Bute; and South Lakeland, they account for over 10%.
Where are the actual jobs?
Since each industry cluster we have identified is made up of industries at the 4-digit SIC level, this means that we can also take a closer look within the cluster itself to find out where the jobs are. Using West Somerset as an example, of the 1,806 jobs in the visitor economy cluster in 2016, by far and away the biggest sector is the holiday and other short-stay accommodation sector with 1,154 jobs, whilst there are 438 jobs in hotels and similar accommodation, and 126 in camping grounds, recreational vehicle parks and trailer parks.
In addition to looking at the jobs spread in the actual industries, we can also run a staffing pattern to find out which actual occupations are employed in the West Somerset visitor economy. The following graph shows the top 10 according to job numbers in 2016:
Although we have majored on the visitor economy in this piece, on a more general level what we have demonstrated above is that by grouping industries into clusters, we can begin to get a really good sense of what is driving a local economy. Using this approach, we can answer a number of crucial questions for any region, including:
- Which industry clusters employ the most people in an area?
- Which have grown the most over the last few years?
- Which are set to grow over the next few years?
- Which industries are comparatively more important to a local economy than others?
- Which occupations are employed in each industry cluster?
For any local authority or LEP that is looking to establish a sound economic development strategy for their area, these are the sorts of foundational insights that could well prove to be the key to success.
To find out more about how we can give you insight on what’s driving your local economy, contact Andy Durman at firstname.lastname@example.org