Sheffield City Region: Supply Chain needs & capabilities ... · ‘High-Value Manufacturing is the...

Sheffield City Region:

Supply Chain needs & capabilities – Data Pack

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Client: SCR Combined Authority23 April 2018Steer-ED ref: 234-984-01

Overview

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Supply Chain Data Pack – Overview

Purpose

This Data Pack forms part of a project researching the supply chain needs of the Sheffield City

Region’s (SCR) Original Equipment Manufacturers (OEMs) & indigenous businesses.

The project was commissioned by SCR Combined Authority in response to the findings in SCR’s

2017 Strategic Economic Plan, which identified that supply chains were underdeveloped.

Research for this project is focussed on the High Value Manufacturing (HVM) sector & considers

Inward Investment opportunities as well as existing supply chain activity.

Specifically, this Data Pack provides contextual data on the SCR's economic performance,

analyses of firm level data, & an assessment of the role of SCR in national & global value chains

(GVCs).

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Supply Chain Data Pack - Structure

This Data Pack provides five main themes of analysis, which combined provide an overview of

the economic context of SCR, an analysis of firm level data, & an approach to framing SCR’s

position in Global Value Chains & nationally. The main themes of analysis are:

• Context – This provides an overview of key economic indicators of performance in SCR

relating to supply chain activity, including GVA, employment, productivity, & business

demography

• Analysis of business data in SCR’s HVM supply chain – analysis of firm level data &

investment into the Sheffield City Region (SCR), using data from MINT, & a bespoke list of

firms generated from sources at SCR, Experian, & the University of Sheffield

• Analysis of HVM Investment data in SCR –investment pattern data provided by the SCR

Combined Authority, including spatial analysis of where investment is coming from

• Analysis of SCR’s Global Value Chain Footprint –observations & information on the SCR’s

position in Global Value Chains (GVCs) in the HVM sector

• Exploratory analysis of local & national HVM supply chain structures – a quantitative look

at the local & national level characteristics of HVM in SCR, using Input-Output data

• Concluding thoughts – Explaining emerging trends & issues

Each of these themes is interlinked with ‘Pause for Thought’ slides, which seek to identify key

messages & implications as the reader works through the pack

4

Context

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Overview

This study is focussed on the HVM sector. In order to analyses this sector, a definition needed

to be agreed upon & then translated into Standard Industrial Classification (SIC) codes, whereby

national & local datasets could be categorised to highlight HVM businesses & data

For the purpose of analysing firm level data by sector, a definition for HVM was agreed with

SCR. The selected definition is displayed below

Definition of High-Value Manufacturing

Innovate UK defines HVM* as:

‘High-Value Manufacturing is the application of leading-edge technical knowledge &

expertise to the creation of products, production processes, & associated services

which have strong potential to bring sustainable growth & high economic value to

the UK. Activities may stretch from R&D at one end to recycling at the other’

This definition has been translated into a Standard Industrial Classification code definition,

displayed overleaf

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Definition of HVM by SIC code

Code Definition

20 Manufacture of chemicals & chemical products

21 Manufacture of basic pharmaceutical products & pharmaceutical preparations

25Manufacture of basic & fabricated metal products – [expanded scope due to increasing high value activity in this field]

26 Manufacture of computer, electronic & optical products

27 Manufacture of electrical equipment

28 Manufacture of machinery & equipment (n.e.c)

29 Manufacture of motor vehicles, trailers & semi-trailers

30.2 Manufacture of railway locomotives & rolling stock

30.3 Manufacture of air & spacecraft related machinery

30.4 Manufacture of military fighting vehicles

30.9 Manufacture of transport equipment (n.e.c)

33 Repair & installation of machinery & equipment

71.12 Engineering activities & related technical consultancy

72 Scientific Research & Development

Sourceshttps://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/362294/High_Value_Manufacturing_Strategy_2012-15.pdfhttp://www.neweconomymanchester.com/media/1212/advanced_manufacturing.docx

7

The agreed definition of HVM was converted to the following SIC codes, using existing definitions & additional codes on discussion with SCR Executive

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Data Sources

Data Source

Business Counthttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/ukbusinessactivitysizeandlocation

Business Compositionhttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/ukbusinessactivitysizeandlocation

Business birth counthttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/businessdemographyreferencetable

Business death counthttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/businessdemographyreferencetable

Business death ratehttps://www.ons.gov.uk/businessindustryandtrade/business/activitysizeandlocation/datasets/businessdemographyreferencetable

Business stock by sizehttps://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=142

Total GVAhttps://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry

Total Employmenthttps://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=189

Total Productivityhttps://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/labourproductivity/datasets/subregionalproductivitylabourproductivitygvaperhourworkedandgvaperfilledjobindicesbyuknuts2andnuts3subregions

GVA by sector

https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry

Employment by Sector

https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=189

Productivity by sector Combined from above

Foreign owned businesshttps://www.ons.gov.uk/businessindustryandtrade/business/businessservices/datasets/annualbusinesssurveyforeignownedbusinessesbusinesscountturnoverandagvabreakdown

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National-level data

To understand the baseline economic conditions & trends in SCR in context with national &

other regional areas, relevant information from national level datasets was analysed. Of key

interest for understanding the strength of place for supply chains are GVA, employment,

productivity, & business demography.

The following slides provide a contextual analysis of economic conditions in SCR relevant to key

comparators.

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0

5,000

10,000

15,000

20,000

25,000

30,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

All Industries HVM

Headline summary of SCR’s HVM economy

GV

A (£

m)

GVA growth in HVM has stagnated compared to overall GVA growth – now 11% of total (from 19% in 1999)

Ge

ne

ral t

ren

ds

19

98

/20

17

Total GVA is 2.2% of UK total & has remained fairly constant 1998-2017

Source: https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry

Total economy growth in SCR of 89%, compared to 104% for the UK

HVM (broad category) sector growth of 8% in SCR, compared with 26% growth in whole UK (20 years). 10 year comparison identifies a 16% rise in SCR & a 13% rise in the UK. The last 5 years, however, growth has slipped behind the UK, showing 11% growth compared to 14% in the UK*

*GVA data at this sub-regional level only available to broad level SIC codes (2-digit)

HV

M t

ren

ds

19

98

/20

17 GVA growth in HVM was hit harder by the

recession than the UK as a whole

GVA growth in HVM in SCR initially recovered faster than the UK from the recession but has fluctuated & lost pace recently

Analysis using ONS data is limited to broad sectors, meaning the overall HVM ‘picture’ is obscured by some non-HVM activities

10

60

70

80

90

100

110

120

130

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

UK Barnsley, Doncaster and Rotherham Sheffield SCR

HVM GVA growth (current price estimates)*

Sectoral GVA data groups Barnsley, Doncaster & Rotherham as one entity

Last 5 years – 11% growthLast 10 years – 16% growthLast 20 years – 8% growth

SCR GVA (£m - current price estimates)*

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0

500

1000

1500

2000

2500

3000

3500

4000

Sectoral GVA 2017 (£m)

Headline summary of SCR’s HVM economy

Top 10

HVM

Other

Two of the seven broad sectors comprising HVM* are in the top ten for GVA value in SCR (2017) (48 total).

The largest HVM sector in SCR encompasses some non-high value sub-sectors, so is over-represented

The large share of Human Health activities in SCR may provide opportunities for HVM – medical products & materials

GV

A (£

m)

Hig

h L

eve

l Se

cto

ral A

nal

ysis

Source: https://www.ons.gov.uk/economy/grossvalueaddedgva/datasets/nominalandrealregionalgrossvalueaddedbalancedbyindustry

*GVA data at this sub-regional level only available to broad level SIC codes – 2-digit

Bro

ad H

VM

se

cto

r G

VA

Highest sub-sectoral GVA (broad sector) in SCR has been in R&D – both in overall growth & recent (past 5 year growth)

Architectural & engineering activities rose in GVA over the whole period, but this has declined in recent years

Manufacture of metal products & machinery/transport equipment -SCR’s traditional strength - has declined in SCR over the period

Sub-sectoral GVA change (indexed to 1998)

11

40

90

140

190

240

290

340

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Manufacture of petroleum, chemicals and other minerals Manufacture of basic and fabricated metal productsManufacture of electronic, optical and electrical products Manufacture of machinery and transport equipmentOther manufacturing, repair and installation Architectural and engineering activitiesResearch and development; advertising and market research

Other manufacturing/ repair/ installation has seen a rapid recent increase

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0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1 : Agriculture, forestry & fishing(A)

2 : Mining, quarrying & utilities(B,D and E)

3 : Manufacturing (C)

4 : Construction (F)

5 : Motor trades (Part G)

6 : Wholesale (Part G)

7 : Retail (Part G)

8 : Transport & storage (inc postal)(H)

9 : Accommodation & food services(I)

10 : Information & communication(J)

11 : Financial & insurance (K)

12 : Property (L)

13 : Professional, scientific &technical (M)

14 : Business administration &support services (N)

15 : Public administration &defence (O)

16 : Education (P)

17 : Health (Q)

18 : Arts, entertainment, recreation& other services (R,S,T and U)

SCR LQ England

90

95

100

105

110

115

120

125

2009 2010 2011 2012 2013 2014 2015 2016 2017

Highest Performing (incl London) Highest Performing (excl London)

Mid Performing Sheffield City Region

Lowest Performing

SCR’s employment situation

Employment

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Growth in total employment in SCR has followed a similar profile to other LEPs/CAs, but recovery from the 2008 financial crisis has been slower, with lower relative growth.

SCR ranks 33 of 38 LEPs in terms of relative employment growth 2009-2017

Source: NOMIS, 2019

Employment in SCR is skewed towards Manufacturing & Motor trades compared to England as a whole

Location Quotient of Employment

Information & Communication (Digital) as a sector is under-represented as an employment source in SCR compared to England, along with the Professional, Scientific & Technical broad sector

Complementary sectors to HVM –Health & defence as well represented in SCR compared to England

Indexed employment growthLondon

Enterprise M3

Lancashire

Stoke on Trent

SCR

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SCR’s GVA situation

GVA

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Growth in total GVA in SCR has followed a similar profile to the UK, but as with employment, was affected more greatly by the 2008 financial crisis & has not recovered as well

Source: ONS, 2019

GVA in SCR is skewed strongly towards Manufacture of basic & fabricated metal products & Other manufacturing, repair & installation, reflecting the strong heritage of SCR in these sectors

Location Quotient of GVA

Research & development as a GVA source in SCR is below the UK average, as is the manufacture of machinery & transport equipment, indicating that activities in this sector may be in low value goods this is highlighted by the lower productivity of professional & manufacturing sectors in SCR

Indexed GVA growth (current price estimates)

Of the core SCR Local Authorities, Doncaster has experienced the largest relative growth in GVA for the period, with Sheffield the lowest. However, growth in Doncaster has fluctuated more than in the other Local Authorities

0

0.5

1

1.5

2

2.5

3

Manufacture of petroleum,chemicals and other minerals

Manufacture of basic andfabricated metal products

Manufacture of electronic,optical and electrical products

Manufacture of machinery andtransport equipment

Other manufacturing, repairand installation

Research and development;advertising and market

research

SCR LQ UK

80

100

120

140

160

180

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017



Lowest Performing

London

Enterprise M3

LancashireStoke on Trent

SCR

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SCR’s Productivity – overall

Productivity

14

Source: ONS, 2019, BRES, 2019

Productivity growth

Nominal productivity is below the median LEP productivity (33rd of 38), not far ahead of the worst performing LEP (Stoke-on-Trent & Staffordshire)

Absolute Productivity

However…The growth rate between 2009-2016 6th fastest of all 38 LEPs, & indeed ahead of London.A dip in productivity growth occurred in 2014-15, but data indicates that recovery from this has commenced

98

100

102

104

106

108

110

112

114

2009 2010 2011 2012 2013 2014 2015 2016 2017



Lowest Performing

35000

40000

45000

50000

55000

60000

65000

70000

75000

80000

85000

2009 2010 2011 2012 2013 2014 2015 2016 2017



Lowest Performing

London

Enterprise M3

Lancashire

Stoke on TrentSCR

London

Enterprise M3Lancashire

Stoke on Trent

SCR

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SCR’s Productivity – by sector

Productivity

15

Source: BRES (jobs) & ONS (GVA), 2019

Change in Productivity by broad sector 2009-2016

Productivity by broad sector 2016

Productivity by broad sector group indicates that manufacturing has increased at the same rate as England & the Northern Powerhouse, with distribution & information broad sectors exceeding the growth rate in these comparator regions

GVA per Jobs by Industry SCR NP England

Production -3% -12% 9%

Manufacturing 34% 34% 35%

Construction 37% 42% 47%

Distribution 41% 19% 22%

Information 50% 15% 8%

Finance -34% -4% -9%

Real Estate 62% 27% 30%

Professional 11% -1% 9%

Public Services 10% 10% 8%

Other Services 21% 26% 28%

TOTAL 31% 26% 28%

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

SCR England NP

Productivity in all sectors is below England levels & behind the Northern Powerhouse in most. However, manufacturing, construction, information & production all have productivities over £50,000, close to the national average Real Estate is the most productive sector, but this an outlier due to how GVA in this sector is recorded

15

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SCR’s Productivity – by Local Authority

Productivity

16

Source: BRES (jobs) & ONS (GVA), 2019

Productivity has increased in all of the core Local Authority areas but stagnated since 2008, in line with the UK as a whole.

Productivity growth has been strongest in Rotherham, & Sheffield suggesting the positive influence of international OEMs moving into these Local Authorities.

Doncaster is the worst performing Local Authority for productivity growth, although experienced a recent bounce alongside Rotherham

90

95

100

105

110

115

120

125

130

1997 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Indexed productivity by Local Authority

Sheffield City Region Barnsley Doncaster Rotherham Sheffield United Kingdom

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SCR’s Business profile

Businesses

17

Source: https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/businessbirthsdeathsandsurvivalrates

Indexed number of live enterprises

100

110

120

130

140

150

160

2012 2013 2014 2015 2016 2017

SCR Barnsley

Doncaster Rotherham

Sheffield UK

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

2.1

2.3

2012 2013 2014 2015 2016 2017

SCR Barnsley

Doncaster Rotherham

Sheffield UK

Business birth/death ratio

Constituent Local Authorities in SCR have similar birth/death ratio & indexed number of live enterprises to the UK, with the exception of Doncaster, which had a rapid growth of enterprises 2014-2016, although these new enterprises had a low survival rate

SCR has experienced proportionally more growth in enterprises than the wider UK since 2013, although this has recently seen a slow down

36.0

38.0

40.0

42.0

44.0

46.0

48.0

UK SCRBarnsley Doncaster Rotherham Sheffield

5-year business survival rate (2012-17)

SCR 5-year business survival rate is above the UK average. This is driven by Rotherham, Sheffield, & Barnsley, with Doncaster having a significantly lower survival rate since 2012

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SCR’s Business demography

Businesses

18

Source: https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/businessbirthsdeathsandsurvivalrates

Business composition in HVM – SCR vs UK

Within SCR, the demographics of the HVM sector differ to the total business profile, with a lower proportion of businesses in HVM being micro, with a larger proportion in all other business size groups

Compared to the UK, the HVM sector in SCR comprises of a lower proportion of micro businesses, but, again, has a higher proportion of businesses in the remaining business size classes

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Micro (0 to 9) Small (10 to 49) Medium-sized (50 to249)

Large (250+)

Series1 Series2SCR UK

Business composition in SCR – HVM vs total

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Micro (0 to 9) Small (10 to49)

Medium-sized(50 to 249)

Large (250+)

HVM TOTAL

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Micro (0 to 9) Small (10 to49)

Medium-sized(50 to 249)

Large (250+)

HVM TOTAL

SCR UK

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Pause for Thought

Messages

• The HVM sector in SCR (and all constituent core Local Authorities) has lagged behind the UK in

terms of GVA, employment, & productivity, ranking 33rd of the 38 LEPs in England for all three

measures. Productivity growth is more promising, ranking 6th of 38, but again, this is from a low

starting point.

• The business birth/death ratio in SCR is below the UK average, although this has followed the

same trend since 2012. Variation among the four core Local Authorities is small, with the

exception of Doncaster, which experienced a rapid growth in the number of enterprises 2012-17,

but with a low relative survival rate.

• Productivity by broad sector group indicates that Manufacturing (encompassing HVM) has

increased at the same rate as England & the Northern Powerhouse, with Distribution &

Information broad sectors exceeding the growth rate in these comparator regions.

Implications

• There is a need for greater integration of HVM OEMs into the City Region’s supply chains, which

would raise the level of higher GVA producing jobs.

• A stronger HVM supply chain would build critical mass, which would increase both the number of

enterprises, & their survival rates.

• There is an opportunity to build on these integrated sectors to drive productivity growth, as

Digital (Information) becomes increasingly aligned with HVM through the progression of Industry

4.0.19

Analysis of business data in SCR HVM supply chain

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Our Analysis

Objectives:

• Analyse current available data to identify firm-level trends of HVM in SCR & identify the

international presence in the City Region

• Identify Gaps in the data which will be filled by an online business survey

Method:

• Data for each firm (Supplied by SCR &, the University of Sheffield, & Made in Sheffield) was

collated into a single database & arranged into relevant headings to the specification

• Data gaps that will need to be filled by fieldwork were highlighted & inserted into the single

database as blank columns

• Of the available data, the number of firms by origin & the turnover of firms by origin was

analysed to:

– Understand the scale of HVM in SCR

– Gain understanding of the influence of global companies on the SCR economy to be

developed

• Assessment of large investments into the City Region in the past two years conducted to

highlight the largest contributing regions to SCR

• Subsector analysis at 2 digit & 3 digit SIC code level was undertaken to analyse the scale of

each sector in the SCR & inform identification of strengths, weaknesses, opportunities &

threats

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Headlines

• 93% of HVM firms in SCR are headquartered in the UK

• UK firms combined only account for the fourth highest turnover

• US firms have the highest combined total turnover

• Japan & China are second & third

• Turnover totals are dominated by a few very large firms – highlighting the importance of

attracting investment from these

• SCR has a smaller ratio of SMEs than the UK as a whole

• There is a lower percentage of SMEs in SCR’s HVM sector than as a whole:

SCR HVM SCR Total UK (Total)1

Number of SMEs 4,319 16,700 5,700,000

Total Firms 4,652 17,413 c. 5,750,000

Percentage of SMEs 93% 95% 99%

1. https://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf

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Source: Steer ED analysis of the SCR MINT Database

https://researchbriefings.files.parliament.uk/documents/SN06152/SN06152.pdf

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Number of HVM firms in SCR by origin

Number of firms

0

5

10

15

20

25

30

35

40

45

Nu

mb

er o

f fi

rms

UK: 4,300 (93%)

Relatively low ratio of foreign firms

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Total turnover of HVM firms in SCR by origin

0

20000

40000

60000

80000

100000

120000

140000

160000

180000

200000

Turn

ove

r (£

m)

Dominated by a small number of large firms

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Number of HVM firms by sub-sector – SCR’s Databases

• Firm level data shows the supply chain network of HVM businesses in SCR is dominated by three broad industry classes. Combined these three account for 78% of 2-digit SIC code defined HVM businesses in the SCR database. It must be noted that at 2-digit SIC code level, the top two sectors do include non-HVM activities as well

• 3 digit SIC code analysis identified that Architectural & engineering activities, Repair of machinery & equipment, & manufacture of special purpose machinery are the most prevalent

Nu

mb

er o

f fi

rms

78% of businesses

0

200

400

600

800

1000

1200

1400

1600

1800

Architecturaland engineering

activities;technical testing

and analysis

Manufacture offabricated

metal products,except

machinery andequipment

Repair andinstallation of

machinery andequipment

Manufacture ofmachinery and

equipmentn.e.c.

Manufacture ofelectrical

equipment

Manufacture ofcomputer,

electronic andoptical products

Manufacture ofother transport

equipment

Manufacture ofchemicals and

chemicalproducts

Manufacture ofmotor vehicles,

trailers andsemi-trailers

Manufacture ofbasic

pharmaceuticalproducts and

pharmaceuticalpreparations

25

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Total turnover of firms by sub-sector – SCR’s Databases

Total Turnover of Parent Companies (£m)

• The combined turnover of firms engaging in the manufacture of fabricated metal products is highest for parent companies, closelyfollowed by manufacture of machinery & equipment, & Architectural & engineering activities.

• The SCR based component of firms is skewed towards manufacture of fabricated metal products, showing a dependency on this sub-sector at a business level*.

* Company level turnover data on MINT & SCR generated databases has some data gaps

Immediate Company Turnover (£m)

Manufacture of fabricated metalproducts, except machinery andequipmentManufacture of chemicals andchemical products

Manufacture of motor vehicles,trailers and semi-trailers

Manufacture of machinery andequipment n.e.c.

Manufacture of computer, electronicand optical products

Manufacture of electrical equipment

Architectural and engineeringactivities; technical testing andanalysisRepair and installation of machineryand equipment

Manufacture of other transportequipment

Manufacture of basic pharmaceuticalproducts and pharmaceuticalpreparations

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Pause for Thought

Messages

• The percentage of SMEs as a total of HVM businesses in SCR is below the UK (7 percentage

points lower). This suggests a weaker local supply chain, where the large OEMs in the City

Region source a higher proportion of their intermediate products/parts from outside SCR.

• The vast majority of businesses in HVM in SCR are registered as UK companies (93%). However,

in terms of turnover, UK HQ’d businesses comprise only 11%. At this stage, it is not possible to

break down the percentage of firm turnover generated in SCR. The fact that US HQ’d

companies have a turnover equivalent to 44% of the total HVM business base, despite

numbering only 41 of c. 4,500 is indicative of the size of foreign-owned firms being significantly

higher.

Implications

• Attracting Large foreign owned businesses & integrating them into the local supply chain will

build critical mass & increase the growth opportunities for indigenous businesses & SCR as a

whole.

• Manufacture of fabricated metal products is the largest contributor to turnover of businesses

with locations in SCR. This is aligned with SCR’s industrial heritage in this area, & is a potential

growth area, with products from this sector feeding into Aerospace, Automotive, Defence, &

Construction industries – all growth areas under Industry 4.0. This is a differentiator for the

region and a strong starting point to build a forward looking profile/offer

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Analysis of HVM Investment data in SCR

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Our Analysis

Steer-ED was provided with investment data from SCR for 2016/17 & 2017/18. this was coded

by country & Industry Classification to enable analysis of the HVM sector.

The following charts detail the number of investments, the total value of investments, & the

number of jobs created by investments by origin.

Headline HVM Sector Messages

• The majority of investments came from the US, followed by Germany & Netherlands.

• US, Netherlands & Germany were also the top investment origins by value, but with the

Netherlands being the largest, & Germany second.

• Investments from Germany created the most jobs, more than double the next biggest

contributor, the Netherlands.

• Expansion of activities was the most common form of investment

• Acquisitions contributed over 50% of total investment value

• The value of investment was heavily influenced by a small number of large

acquisitions/expansions, highlighting the importance to Supply chains of attracting large,

influential businesses to a region

• Some investments classified as HVM don’t fall into traditional HVM SIC code categories e.g.

food & drink

29

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Number of HVM investments by origin FY 16/17 - FY 17/18

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10

15

20

25

Nu

mb

er o

f in

vest

men

ts

30

Source: Steer ED analysis of the SCR Investment data

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Value of HVM investments by origin FY 16/17 - FY 17/18

0

200

400

600

800

1000

1200

1400

1600

Val

ue

of

inve

stm

ents

(£

m)

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Jobs created in HVM by investment by origin FY 16/17 - FY 17/18

0

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2000

3000

4000

5000

6000

Tota

l Jo

bs

crea

ted

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gin

of

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stm

ent

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Pause for Thought

Messages

• The data available on investments into SCR is temporally limited. However, it does provide an

indicator as to the origin of recent large investments into the City Region. On all metrics, the

US, Germany, & Netherlands are the most important investment origins, with 87% of

investment value 2016-2018 coming from one of these sources.

• Investments are skewed highlytowards large value acquisitions, with 50% of all investments being of this nature. It will be important to expand on the number & value of investments that can be classified as New Investments, Creation of New Sites/Activities, & Expansions to maximise the supply chain benefits of investment.

Implications

• By Origin, the Netherlands, Germany, Japan, & the • US are have the largest value per investment, meaning• these countries would be good targets for • promotional activities. However, data over a longer• time period would make this analysis more robust.• Future global megatrends in industrial development • must also be considered to ensure longevity of any • investment strategy.

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Acquisition48%

Expansion21%

New Investment18%

Creation of new site or activity

13%

Retention0%

Value of Investments

Analysis of SCR’s Global Value Chain Footprint

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Overview

The following material seeks to:

• Provide a ‘top down’ context to help to understand & interpret the findings from the

‘bottom up’ SCR advanced manufacturing supply chain mapping work

• Create the potential to calibrate & adjust the ‘top down’ estimation method in the light of

findings ‘bottom up’ analysis, which could take the form of a business survey

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Extracting value by comparing ‘top down’ & ‘bottom up’ estimates of SCR supply chain structure(s)

Top down

Bottom up

REALISTIC & GLOBALLY CONNECTED SUPPLY CHAIN

PICTURE

WEAKNESS: Starts by assuming that SCR’s overall GVC participation on an industry-by-industry basis mirrors that of the UK as a whole

STRENGTH: Does not assume anything about SCR’s overall GVC participation but focuses on firms & industries

STRENGTH: Provides a global ‘systemic’ perspective to SCR supply chain connectivity

WEAKNESS: Cannot capture SCR’s broader system GVC connectivity

LONG-TERM OPPORTUNITY TO:

• ADJUST TOP DOWN PROFILE OF SCR GVC PARTICIPATION USING BOTTOM UP DATA (THUS INCREASING ACCURACY OF THE ESTIMATES OF GVC PARTICIPATION)

• AUGMENT BOTTUP UP ESTIMATES WITH ESTIMATES OF BROADER GVC PARTICIPATION)

RESULT: MORE ACCURATE & USEFUL EVIDENCE FOR THE SCR IN THE FUTURE

In order to estimate the supply chain structure in SCR, two methods exist: the ‘top down’ & ‘bottom up’ approaches. Below we identify the strengths & weaknesses of the two approaches.

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Why supply/value chains matter for SCR’s economy

Local economic impacts can be maximized by actively amplifying

multiplier effects rather than just assume they

will take place

Internationally connected supply

chains foster useful local knowledge

spillovers & attract FDI

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Global Value Chain essentials

SCR’s economy

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Different types of supply/value chain ‘actors’

SOURCE CONFLUENCE

ROUTER/PIVOT

FINA

L DEM

AN

D

INTERMEDIATE DEMAND

INTER

MED

IATE

DEM

AN

D

INTER

MED

IATE

DEM

AN

D

RES

OU

RC

E EX

TRA

CTI

ON

A sub-national region or major city can position itself in

different ways, e.g. Singapore prioritises a router/pivot role

in GVC participation – as could SCR

GVC participation ‘taps into’ GVC GVA flows using a distinctive technology/IP & functional geography ‘offer’

Convergence point of several GVCs driven by final demand

SCR Target

Resource extractor/raw material producer

e.g. USAe.g. Middle East

e.g. Singapore

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Industrial Strategy & GVC ‘router/pivot’ hubs

• As an industrial region, SCR can learn from supply chain attraction & retention strategies

work-wide – what works well & what works less well

• 80% of global GDP is generated in cities, & GVCs loop through these cities – in other words the

GVC system is largely a network of city regions adding GVA in GVCs & benefitting from GVC-

driven technology flows & knowledge spillovers

• This prominence of City Regions in GVCs gives major & unique advantages to a ‘city state’

because central government can optimize national policy settings (tax & R&D subsidies etc.) to

build a city region GVC router/pivot hub -see next slide for more detail on Singapore

• For SCR, the supply chain attraction & retention potential can still be informed by places like

Singapore – but without the same scope to use national policy settings as a city region supply

chain attractor . . . though there may be alternative solutions

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Taking a closer look at Singapore

• Explicit focus on fostering a world-class innovation ecosystem to attract inward investment &

supply chain ‘loop through’ to a city region

• Focus on HVM (plus biotech, fintech & cyber security)

• Explicit emphasis on fostering a vibrant start-up community as part of the innovation ecosystem

(in turn attracts Multinational Corporations (MNCs) … who benefit from & can buy-up start-ups as

& when necessary)

• Special & prestigious visa class to tempt talented entrepreneurs to relocate to Singapore to

start their companies

• Major advantage of setting income & corporate tax rates to facilitate supply chain attraction –

combined with ability to use generous R&D subsidies to effectively wipe out corporation tax

• e.g. Dyson’s new electric car activities in Singapore are rumoured to be receiving R&D subsidies

that will bring net corporation tax to zero

• Clever combination of loose & strict regulatory regimes to maximise supply chain attraction,

loose for industry, strictest in the world at present for banking (which attracts banking in Asia

due to lower risk exposure) & IP protection (China counter-balance…)

• Exploits the functional geography of GVCs – physical location in the GVC system matters (land, sea

air)

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Lessons for SCR from Singapore

• An innovation ecosystem focus is very useful because these synergies matter to OEMs (e.g. a

vibrant start-up sector is attractive to MNCs)

• Proximity & co-location matters – geographical closeness fosters trust & reciprocity (valuable

‘social capital) …. but this intangible asset is most valuable when the innovation ecosystem is

diverse…and includes cutting-edge professional services

• Talent attraction is of major importance, create an environment attractive for start-ups & actively

encourage global talent to re-locate to the SCR (the Peak District is a major natural asset in this

respect)

• Useful for ‘asks’ of Whitehall to mimic the optimized use of central government policy settings

available to a city state (hence the importance of devolved powers to LIS delivery)

• Exploiting the functional geography of GVCs – as supply chains loop through the network of cities

land, sea & air connectivity plays a major role in attractiveness & feasibility of supply chain

configuration – what is without effects what is done within

➢ SCR has an opportunity to strengthen supply chains by giving greater consideration to major

systems integrator OEM interest in the combination of goods & services supply chains &

innovation networks (national & global)

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Addressing the HVM Digital & Professional Services interface

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• As Industry 4.0 highlights, HVM is now heavily reliant on digital technologies & the professional

services that support digital capability

• ‘Servicisation’ of HVM has a strong digital dimension (e.g. failure mode prediction & alerts to

drive preventive maintenance interventions)

• Use of digital virtual factory ‘twins’ to reduce the time, cost & disruption risks when

balancing production processes & introducing new machines/capacity

• Use of advanced simulation models to reduce the time, cost & risk in the R&D,

demonstration & new product introduction processes (lower spending on experimental

development in particular)

• Blockchain/distributed ledger technologies in HVM supply chain logistics management &

quality assurance

• In short, digital capability is the major productivity driver in HVM

• The HVM-Digital nexus is best addressed in data by integrating available data (R&D services &

digital inputs to HVM via Input-Output data) & via the main consultations

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Estimation objectives & methods

• Objective: provide SCR with ‘best in class’ supply chain mapping that places detailed local data

firmly into the global context

• Method:

• Use a combination of OECD Trade in Value Added (TiVA) & the World Input Output Database

(WIOD) to generate UK-level profiles of Global Value Chain (GVC) participation on an industry-

by-industry basis

• Use ONS GVA by industry data at the NUTS 3 level (hence able to create an SCR profile) to

estimate key characteristics of SCR GVC participation based on the distinctive mix of industries in

the SCR

• Stage 1 estimates assume that SCR-level industry participation in GVCs mirrors national (UK level

characteristics)

• Stage 2 estimates (a potential future step), drawing upon local supply chain survey results,

provide an opportunity to update the Stage 1 via calibration using survey results

• Benefit to SCR: we are not aware of any other City Region able to access this integrated local-

international GVC participation evidence-base

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NUTS 3 regions used for these analyses

For the following analysis, Nomenclature of Territorial Units for Statistics (NUTS)NUTS 3 regions were used to determine the GVA per sector for SCR.The NUTS 3 regions selected to represent SCR are displayed in the map opposite. It must be noted that although these regions cover the majority of the SCR, differences in the boundaries of the Combined Authority & NUTS 3 regions means this is not an exact representation of the whole SCR.

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Steer ED’s data integration approach to GVC mapping

ONS has recently introduced new NUTS 3 level GVA data at a 3 digit SIC industry detail, enabling estimates of GVC participation for the SCR

OECD Trade in Value Added database

(traces full direct & indirect economic inter-dependencies

between countries)

World Input Output Database (WIOD)

(able to trace specific economic inter-dependency

pathways between countries)

Suite of ONS industry data(used to estimate regional

profiles & mesh with OECD & WIOD data)

Steer-ED Bespoke industry classification &

concordance (allows OECD, TiVA, WIOD &

ONS data to be meshed)

Steer-ED Regional

Estimates (allow global

connectivity footprints & traces for UK

regions)

‘First of a Kind’ evidence to

inform regional & national

Industrial Strategy

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The method employed by Steer-ED to mapping GVCs is outlined in the process flow below

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GVC Analysis Outputs

The following analysis shows the outputs of Steer-ED’s GVC analysis, highlighting key messages for SCR, including:• ‘Unmeasured spaces’, not covered at country level by TiVA data are becoming increasingly

important drivers of HVM GVCs• HVM in SCR is highly dependent on imports from China & Germany, but contributes less to exports

to these destinations• The US is the largest final demand destination for SCR HVM products/services, which matches the

origin profile of the number of & size of OEMs in SCR• SCR’s HVM sector is comparatively more dependent on Asian markets & the Middle East than the

UK as a whole• Increasingly, SCR is becoming more dependent on ‘far away’ destinations, with a decrease in the

importance of trade with European countries noted• Compared to other sectors, HVM in SCR is heavily dependent on the US (+1.5%) & less dependent

on the EU. It also relies on emerging ‘unmeasured spaces’, primarily in Africa & the Middle East (+13% compared to other sectors in SCR)

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Coverage of the OECD Database

China’s Belt & Road Initiative (BRI) is starting to reach the unmeasured economies as regards Global Value Chains

….this is no co-incidence

The UK’s Advanced Manufacturing supply chains are increasingly tied into what is happening in these unmeasured spaces….

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The ‘unmeasured spaces’ of the global economy are starting to matter…

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Context: SCR HVM Global Value Chain dependencies

As yet ‘unmeasured’ emerging economies: worth finding out what’s

going on here

A high dependence on imports & as a final export destination

SCR HVM has a high dependence on imports but less so as a final

export destinationSCR is dependent on some other significant EU economies

Source: Steer ED analysis of the OECD Trade in Value Added database

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Experimental estimates of the SCR’s overall ‘downstream’ Global Value Chain dependencies (all industries)


These estimates trace the Gross Value Added (GVA) that accumulates in GVCs as they loop through national economies en route to Final Demand/end-use

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SCR dependencies in relation to the UK

The SCR is more dependent than the UK as a whole on China, India, HK, & Saudi Arabia……& less dependent on Germany, Netherlands, Spain & the USA according

to this top-down data. Note: these top down data have been ‘flowed through’ GVCs, unlike the direct links captured in the bottom up data. The difference between direct & indirect ‘flow-through’ profiles is greatest when there are

exports to ‘portal/pivot’ countries that feed-in to more complex GVCs.


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Change over time in SCR’s GVC footprint

Change in the country composition of SCR GVC footprint 2011 to 2017

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The countries at the end of GVCs in which SCR participates are getting further away over time… with large increases in China & the USA

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Focusing-in on changes within Europe

Change in the country composition of SCR GVC footprint 2011 to 2017 within Europe

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Difference in SCR’s GVC footprint 2011-2015

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Experimental estimates of the SCR’s overall ‘downstream’ Global Value Chain dependencies – HVM


Unmeasured emerging countries at no. 2 is a surprise

US at no. 1 is not a surprise

SCR’s HVM downstream GVC footprint

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SCR’s HVM GVC footprint compared to SCR as a whole

The HVM GVC footprint is stronger relatively in the USA, but weaker in Germany & Spain. However, the biggest difference can’t be shown on a map. HVM is 13% more reliant on unmapped other emerging economies (grey)

Difference between SCR HVM & overall SCR GVC footprint, 2015

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SCR’s participation in GVCs

UK 2.6%

Source: Steer ED analysis of the OECD Trade in Value Added database & OECD Main Science & Technology Indicators

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There are opportunities to leverage the remaining 97.4% of global R&D performed on the rest of the world - especially if combined with international academic collaborations

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SCR GVC profile (2014 world input output structure with 2016 UK GVA data)

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INPUT & GVA STRUCTURE OUTPUT STRUCTURE

DOWNSTREAM GLOBAL VALUE CHAINS

STRAIGHT TO UK FINAL DEMAND

STRAIGHT TO OVERSEAS FINAL DEMAND

DOWNSTREAM UK VALUE CHAINS

TOTAL OUTPUT = INPUTS + GVA = SUM OF WHERE OUTPUTS GO TO

GVA ADDED TO INPUTS

UK VALUE CHAIN INPUTS

UP

STR

EAM

G

LOB

AL

VA

LUE

CH

AIN

INP

UTS

Source: Steer ED analysis of the World Input Output database & ONS Regional GVA data

Estimates still

bein

g refined

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SCR GVC profile in 2016 (cont.)

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GVA depends on domestic &

overseas inputs

GVA depends on output destinations – especially

exports

INPUT & GVA STRUCTURE OUTPUT STRUCTURE

SCR is low for GVC participation & exports direct to overseas final demand

Source: Steer ED analysis of the World Input Output database & ONS Regional GVA data

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Industry GVC profiles at the UK level differ – as is expected

59Source: Steer ED analysis of the World Input Output database

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Pause for Thought

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Messages

• Mapping GVC footprints is useful for articulating the opportunities & the challenges for supply

chain upgrading. It gives understanding of:

• The key difference between export growth linked to GVC participation, & exports going

straight to final demand

• Where the dependence on imports for GVA (hence employment) lies – ‘what you import

determines what you can export’ – especially when high-tech imports enable GVA to take

place

• The analyses provide a basis for framing supply chain upgrade & investment attraction

priorities on the attractiveness versus the feasibility of different industrial development

options

Implications

• SCR’s Advanced Manufacturing capability relies on GVC participation, consequently

opportunities & competitive threats will manifest themselves via the GVC dimension

• OEMs will consider SCR’s GVC participation when assessing investment opportunities – the

‘external’ context shapes the ‘internal’ investment case (hence the importance of SCR’s Global

Innovation Corridor’ (GIC)

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Pause for Thought (cont.)

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Implications (cont.)

• Unless SCR’s GVC participation differs from that of the UK as a whole, then an increasing

share of downstream GVC ‘action’ is in currently unmeasured emerging economies (and

HVM in particular):

• Boosting export opportunities here is potentially important to local GVA & jobs – BUT is

not ’low hanging fruit’ – the implications for investment attraction need to be thought

through

• Given export & FDI boosting attention directed at China, the Belt & Road Initiative’s focus

on what are currently unmeasured emerging economies (prominent in final demand for

high value manufacturing) deserves further investigation & strategic thinking

Exploratory analysis of local & national HVM supply chain structures

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Mapping local HVM supply chain structures by combining Input-Output & ONS Regional GVA data at the NUTS 3 level

• There is a value in producing local & national global Input-Output analysis used to trace

SCR’s HVM participation in Global Value Chains

• A recent ONS release of regional industry GVA data by broad industry allows a

geographical granularity not previously possible (these data only went down to the NUTS

2 level)

• In essence, the method employed to analyse this localises HVM supply chain

characteristics based on measured UK-level inter-industry supply chain flows – making

the defendable assumption that these supply chain flows also apply at a local level, e.g.

the steel structures fabrication industry’s requirement for steel supplies

• Data on the UK Input-Output structure from the World Input-Output Database (WIOD)

has been used to allow this localised profile to be linked to the full global GVC tracing

work

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Industry classification used for HVM

• The ONS NUTS 3 level GVA data uses a

more aggregate industry classification

than at NUTS 2 & above

• The NUTS 3 level GVA data does allow

HVM profiles to be developed – albeit

losing some granularity specifically:

• chemicals & pharma are combined

• automotive, other transport (which

includes aerospace) & other

machinery are all combined

HVM industry breakdown at the NUTS 3 level

• Manufacture of petroleum, chemicals, pharmaceuticals & other minerals

• Manufacture of basic & fabricated metal products

• Manufacture of electronic, optical & electrical products

• Manufacture of machinery & transport equipment

• Other manufacturing, repair & installation

• Architectural & engineering activities

• Research & development; advertising & market research

• Other professional, scientific & technical activities

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Review of domestic/intra regional market - Progressing localised industry structure & supply chain analysis

Highlights the importance of including the manufacture of basic & fabricated metal products in HVM definition –SCR's activities in these areas are distinctively HVM (e.g. Dreadnaught submarine nuclear reactor structures) - high precision & "must not fail" systems...

Source: Steed ED analysis of ONS NUTS 3 GVA data

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Internal SCR GVA structure (2016)

• HVM GVA pretty evenly spread across the four jurisdictions – but with different emphases

• There is a prominence of basic & fabricated metal products – historically SCR’s strongest

industry


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Analysis of industry and Local Authority level GVA is presented below, highlighting the major HVM

sectors in SCR

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SCR’s HVM profile compared to the UK

• SCR has a particularly prominent emphasis on basic & fabricated metal products – an expected

traditional strength, but of great importance to the future & research & innovation dependent for

competitiveness in high-end markets (e.g. Nuclear Systems)


SCR & UK HVM profiles compared

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Building a profile of supply chain structures at the NUTS 3 level

• National-level Input-Output data provide a first approximation for NUTS 3 level inter-industry

flows …..but this approximation can be refined

• The recent availability of industry GVA data at NUTS 3 level provides a basis for calibrating &

adjusting national-level inter-industry flows using regionalised industry GVA data

• In principle, this provides a basis for creating profiles of inter-industry flows at the NUTS 3 level

by forcing the UK-level Input-Output coefficients that reflect inter-industry flows to align with

the data on industry GVA at the NUTS 3 level

• Without this calibration & alignment, UK-level Input-Output data create estimates of industry

GVA at the NUTS 3 level that do not match – closing this gap by adjusting the local version of the

Input-Output coefficients creates a more accurate profile of a regional supply chain system

• In the case of the SCR, a technical assessment of this calibration process indicates that the HVM

supply chain system is more inter-dependent than at the UK level

• in Input-Output terms, diagonal ‘within industry’ supply chain flows are less prominent in

SCR compared to the UK as a whole

• in other words, HVM supply chains are more interdependent than at a national level -

simply because UK level data averages out these regionally specific aspect

• Although this is a highly exploratory ‘short cut’ approach to estimating industry supply chain

systems at a regional level (avoiding the need to construct full regional Input-Output tables), it

can inform local industry thinking – & is therefore a cost-effective solution

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SCR’s estimated HVM supply chain structure in Input-Output terms (full picture)

• Rows indicate where the supply chain inputs come from for each user industry (columns)

• The Importance of basic & fabricated metal products is reinforced (noting the great breadth of

petroleum, chemicals, pharmaceuticals & other minerals sector forced data data availability at the

NUTS 3 level)

• 60% of SCR’s HVM GVA inputs are from within each industry (on the diagonal), with 40% coming

from inter-industry flows

Source: Steed ED analysis of Input Output & ONS NUTS 3 GVA data

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The Input-Output tables for SCR’s HVM industry are presented below (GVA £m)

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SCR’s estimated HVM supply chain structure in Input-Output terms (full picture) – percentage view

• The pivotal role of basic & fabricated metal products is highlighted (27.5% of SCR’s HVM GVA is

dependent on these inputs)

• Services in HVM are not very prominent currently, but are likely to increase in importance in the future

as advanced simulation & R&D-driven competitiveness becomes more important (advanced

simulation reduces the likelihood of failure, & the cost of development & demonstration in innovation)


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Input-Output percentage values are presented in the table below

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Estimated SCR HVM supply chain structure in Input-Output terms (simplified picture – values above 2.5% of SCR’s total HVM GVA, only)

• Highlighting only the key industries in GVA production for SCR highlights the system inter-dependencies.

HVM supply chains are not simple linear chains, particularly highlighted in Manufacture of machinery

and transport equipment

• This reinforces the point that major ‘systems integrators’ (Apex companies) like Boeing & BAE Systems

view SCR (and Sheffield specifically) as possessing technological excellence in basic & fabricated metal

products, a key part of SCR’s HVM offer

Source: Steer ED analysis of Input Output & ONS NUTS 3 GVA data

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Estimated SCR HVM supply chain structure in Input-Output terms (simplified picture – values above 2.5% of SCR’s HVM GVA only) – percentage version


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Identifying other regions in England & Wales which share a similar mix of GVA to SCR’s HVM profile


• This map identifies the other NUTS 3

regions in England & Wales with similar

mixes of HVM GVA to Sheffield (thus

picking up regions with a similar emphasis

on metals & metal fabrication in the HVM

footprint)

• The HVM Index is the correlation

coefficient between HVM GVA proportions

in each NUTS 3 region compared to

Sheffield

• This approach can be further developed

to provide a geographical indication of

more complex HVM supply chain

connectivity using HVM inter-industry

patterns

Suggests a HVM supply chain ‘corridor running NE to SW across England & Wales …. Plus some ‘satellite’ regions

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. . . & zooming-in on SCR?


Sheffield

Barnsley, Doncaster & Rotherham

North Nottingham

shireEast

Derbyshire

• Opens up an opportunity to use this type

of supply chain system analysis to

examine within-SCR complementarities &

their future implications

• Useful for progressing the SCR offer, &

highlights the degree of difference

between the Local Authorities in SCR

compared to Sheffield

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International supply chain connections to SCR

• SCR GVA production in HVM is most reliant on imports from Germany

• The ‘unmeasured’ emerging economies (Rest of the World) feature at no. 2

• Due to the reliance on imports, Brexit-driven trade-disruption is of course a potential threat

• Further work can look to trace direct ‘downstream’ international supply chain dependencies (in a

similar manner to the indirect/”flow-through” profiles created using the OECD Trade in Value

Added database

Estimated HVM imports To SCR from direct country sources can be estimated based on the connections between UK Input-Output data and World Input-Output data


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Taking a broader view of the HVM supply chain system structure (via input coefficients)

• HVM industries excluding services (in the box) tend to have ‘dispersed’ knock-on effects

because the internal impact of inputs (same industry input & output, indicated in the

diagonal coefficients) are relatively low, i.e., an increase in output is associated with an

uplift in inputs from a wider range of industries (white in this table)

• This supports the point that SCR should focus on supply chain systems – HVM is a

complex & inter-dependent economic structure, not a set of linear ‘chains’

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HVM multipliers (national-level data)

• The metals production

element of HVM has

strong multiplier

effects (a capital-

intensive industry)

• These multipliers are

useful, but should not

be taken as a given.

Tactics to amplify

multipliers at the SCR

level via strengthened

supply chain system

synergies should be

considered

Source: Steer ED analysis of ONS Input-Output data

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Pause for thought

Messages

• This analytical work suggests that it is preferable to adopt a ‘core-halo’ approach to the

SCR HVM supply chain system consisting of:

• A ‘core’ of industries producing tangible products (but with very important services

integral to this offer)

• A ‘halo’ of supporting service industries (e.g. R&D services) that assist HVM but are not

central to HVM, as they have far broader scope contributions to the economy

• Given industry sector definition problems at the NUTS 3 level including ‘Manufacture of

petroleum, chemicals, pharmaceuticals & other minerals’ is rather general & therefore

distorts the data

Implications

• Preferable to move forward with a core group comprising (for NUTS 3 level analysis):





• The advantage of using this sort of localised Input-Output approach is that adopting a

narrow core HVM definition still allows the broader inter-industry impacts to be handled

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Pause for thought

Implications cont.

• This GVC & local/national supply chain research suggests that estimates of HVM supply chain

systems can be used to inform industrial strategy objectives & implementation by:

• Specifying current & potential future local economic multiplier effects in greater granularity

than is commonly achieved

• Emphasising the key point that HVM supply chains are a system with important inter-industry

dependencies

• Consequently underlining that it is these HVM system inter-dependencies that will help to

attract OEM & investor attention

• Highlighting that any HVM supply chain enhancement strategy should consider both the local

& national HVM supply chain system & its global connectivity – upstream (imports) &

downstream (exports)

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Observations & Implications

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Observations & Implications

This Concluding Section draws together the emerging observations & implications of the

analyses regarding supply chain development in SCR.

The Big Picture

SCR has a productivity problem. It ranks 33 of 38 LEPs in England for productivity, & although

productivity is increasing at a relatively fast rate, this is from a low base. Integrating High-Value

OEMs into SCR’s supply chain will lift this, by creating more opportunities for businesses to

engage in higher value activities in manufacturing. The positive growth in Manufacturing &

Communications broad sectors in SCR is reason for some optimism that this is achievable.

SCR’s Sector Profile

Manufacture of fabricated metal products is the largest contributor to turnover of businesses

with locations in SCR. This is aligned with SCR’s industrial heritage in this area, & is a potential

growth area, with products from this sector feeding into Aerospace, Automotive, Defence, &

Construction industries – all growth areas under Industry 4.0. There are further opportunities

to move, using core skills & technology, from pure metal products to composite materials

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Observations & implications (cont.)

Business Demography

The largest & highest grossing businesses in SCR are from overseas. These large OEMs have

strong influences on supply chains, dictating where products and materials are sourced from.

Integrating existing OEMs & attracting new high-value, large-scale OEMs into SCR’s supply chain

(& vice versa) is crucial to raising productivity in the City Region

Investment

Investment into SCR 2016-18 was dominated heavily by a small number of large investments.

Promotional activities for SCR’s offer to large OEMs can be targeted at regions which historically

produce firms who make transformational investments. Data for the time period in question

suggests the US, Netherlands, Germany, and Japan as key markets

The type of investment attracted to SCR is also important, with 48% of investments 2016-18

being acquisitions. New Investments, Expansions, & the creation of new sites/activities are

more inclusive forms of investment, which will have more positive supply chain multiplier

effects long term.

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A Distinctive Offer

GVC/national/local supply chain analyses indicate that SCR’s supply chain offer pivots on

building a more distinctive combination of metals (and advanced materials) & supporting

industrial & HEI R&D & education/training inputs. As Scoping Consultations (including those for

the GIC) have stressed, the strong industrial heritage in metals is not merely an ‘old-tech’

industrial legacy, it is increasingly a pathway for future regional economic prosperity,

Specifically:

• Numerous industries will require advanced metals (including low-weight steel) & metals-

non metals composites.

• Technological excellence in metals & composites is a key Industry 4.0 dimension –

especially regarding the use of advanced simulation modelling to reduce dramatically the

likelihood & consequences of material failures

GVC Participation

SCR’s Advanced Manufacturing capability relies on GVC participation, which at present is low,

with a low percentage of outputs being exported to intermediate or final demand (13%). OEMs

will consider SCR’s GVC participation when assessing investment opportunities, which stresses

the importance of SCR building an international profile. In effect, improving GVC participation

through OEM investment will help to shape the ‘internal’ investment structure of SCR’s supply

chains, making the economy more attractive, & in investment terms ‘sticky’

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The ‘Core-Halo’ Approach

This analytical work suggests that it is preferable to adopt a ‘core-halo’ approach to the SCR

HVM supply chain system, building:

• A ‘core’ of industries producing tangible products (but with very important services

integral to this offer)

• A ‘halo’ of supporting service industries (e.g. R&D services) that assist HVM but are

not central to HVM, as they have far broader scope contributions to the economy

For SCR, a core group of sectors for the supply chain comprises:





Adopting this approach will ensure that SCR’s key industrial strengths are leveraged, but that

the SCR offer is not constrained to these industries, enabling the City Region’s industrial offer to

adapt to Industry 4.0, through adoption of Digital and Advanced Materials (e.g. composites)

innovations.

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The ‘High Multiplier Manufacturing’ (HMM) perspective

From an SCR economic development perspective, it will be useful to enhance the existing focus

on HVM by drawing-out and exploiting the ways in which local HVM supply chain systems (as

inter-dependencies between HVM, and other, industries) create strong local economic

multiplier effects. Rather than take the multiplier effects as an assumed given, based on

national norms, this strategy would aim to foster amplified multiplier effects that exceed

national norms. All too often, actual multiplier effects do not meet assumed levels for a variety

of reasons, hence this strategy would be both pragmatic and compelling. This can be thought of

as a High Multiplier Manufacturing dimension to the current HVM focus.

Local & Global

It is important to consider local capabilities and connections in the supply chain alongside the

global destination of goods/services. Having an understanding of both means that important

GVC participation and investment attraction can, in part, be leveraged by encouraging growth

in supply chains relevant to global trends (e.g. SCR’s traditional strengths in the production of

fabricated metal products can be leveraged in an Industry 4.0 context, through transformation

to composite development and providing products for high-end technologies, as is already

occurring in parts of SCR.

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