A year of change
August 2009
Business Intelligence
Annual Report
Nexus Business Intelligence Annual Report (A Year of Change)
Released 11 August 2009
For further information or data requests please contact:
Paul Craney, Business Intelligence Manager:
0191 2033214
Or email the Business Intelligence team at [email protected]
Page | 1
Index
1 Editor’s Note ... 5
2 Executive Summary ... 6
3 Synopsis ... 10
4 Background Context – A Year of Change ... 11
4.1 Key Points of 2008/09 ... 12
4.2 The UK Economy ... 13
4.3 The UK Housing Market ... 16
4.4 UK Industry and Commerce ... 19
4.4.1 Car Production ... 21
4.5 The Fuel Crisis in North England ... 24
4.5.1 The Cost of Travelling to Work ... 25
4.6 Consumer Spending ... 26
4.7 UK Weather ... 28
5 Tyne and Wear Profile ... 31
5.1 Population ... 32
5.1.1 Population by District and Age ... 33
5.1.2 Ethnicity ... 34
5.1.3 Disability ... 35
5.2 Indices of Multiple Deprivation ... 35
5.3 The Labour Market in Tyne and Wear ... 37
5.4 Car Ownership ... 38
5.5 Households and Population Density by District ... 39
5.6 Crime Statistics ... 40
5.6.1 Anti Social Behaviour ... 41
5.6.2 Acquisitive Crime ... 42
5.6.3 Serious Crime ... 42
6 Public Transport in Tyne and Wear ... 45
6.1 Key Events of 2008/09 ... 46
6.1.1 Simonside ... 46
6.1.2 Northumberland Park Multi Storey ... 46
Page | 2
6.1.3 Gateshead College ... 46
6.1.4 Child All Day Ticket (CAT) ... 46
6.1.5 Mobility Scooters Banned from Metro ... 47
6.1.6 Washington Galleries ... 47
6.2 Overview of Public Transport in Tyne and Wear ... 47
6.3 Public Transport Information Services ... 49
6.3.1 Nexus Website ... 49
6.4 Looking Beyond 2008/09 ... 52
6.4.1 Metro: All Change ... 52
6.4.2 Haymarket ... 52
6.4.3 Ticketing and Gating ... 52
6.4.4 Sunderland Station ... 53
6.4.5 Smart Cards ... 53
6.4.6 Eldon Square Shopping ... 53
6.4.7 Science City ... 53
6.4.8 Olympics in 2012 ... 54
7 Bus Patronage in Tyne and Wear ... 55
7.1 Bus Patronage Overview ... 56
7.1.1 Commercial and Secured Patronage ... 57
7.1.2 Passenger Type ... 58
7.1.3 Ticket Type ... 60
7.1.4 Case Study – the Child All-Day Ticket (CAT) ... 61
7.1.5 Bus Stations and Interchanges ... 64
7.2 Showcase Services ... 65
7.2.1 Route 19 ... 65
7.2.2 Quaylink ... 67
7.2.3 LinkUp ... 69
7.2.4 TaxiLink ... 71
7.2.5 TaxiCard ... 72
7.3 Bus User Profile ... 72
Page | 3
7.3.1 Age Profile ... 73
7.3.2 Bus User Ethnic Profile ... 73
7.3.3 Customer Satisfaction ... 74
7.3.4 Journey Purpose ... 75
7.3.5 Journey Frequency ... 75
7.4 Bus Performance ... 76
7.4.1 Punctuality ... 76
7.4.2 Kilometres Operated ... 77
7.4.3 Secured Services Spending ... 78
8 Metro Use in Tyne and Wear ... 79
8.1 Metro Patronage Overview ... 80
8.1.1 Passenger Type ... 81
8.1.2 Ticket Type ... 82
8.1.3 Network Breakdown by Section ... 83
8.1.4 Network Breakdown by District ... 85
8.2 Case Study – Simonside Metro ... 87
8.3 Case Study – Northumberland Park Metro ... 88
8.4 Case Study – Airport Metro ... 89
8.5 Metro Stations and Interchanges... 90
8.6 Fraudulent Travel ... 92
8.6.1 Fraud – Breakdown by Section ... 92
8.6.2 Fraud – Breakdown by District ... 93
8.6.3 Market Research – Metro Fraud ... 93
8.6.4 Metro Re-Invigoration: Phase 1 – Ticketing and Gating ... 95
8.7 Ticket Machine (TIMs) Revenue ... 96
8.7.1 TIMs – Breakdown by Section ... 96
8.7.2 TIMs – Breakdown by District ... 97
8.8 Metro Performance ... 98
8.8.1 Reliability and Punctuality ... 98
8.8.2 Customer Satisfaction ... 99
Page | 4
8.8.3 Safety and Security ... 101
8.8.4 Anti Social Behaviour ... 102
9 Rail ... 103
9.1 Rail Patronage Overview ... 104
9.2 Comparison with Other Modes ... 106
9.2.1 Mode Comparison Summary ... 108
9.3 Market Research (Local) ... 109
9.3.1 Previous Mode of Transport ... 110
9.3.2 Changing Mode of Transport ... 111
9.3.3 Journey Purpose ... 112
9.4 Market Research (National) ... 113
10 Shields Ferry ... 115
10.1 Ferry Patronage Overview ... 116
10.1.1 Afternoon River Trips ... 117
11 Road Transport in Tyne and Wear ... 119
11.1 The Road Network ... 120
11.2 Major Improvements to the Road Network ... 120
11.3 Road Casualty Figures ... 121
11.4 Traffic Flows ... 122
11.5 Road Freight ... 123
12 Acknowledgements ... 125
Page | 5
1 Editor’s Note
Although primarily focused on public transport, this report also looks at a much broader range of related topics in order to set the necessary context. As the public transport network is part of a much wider socio-economic network, it is therefore influenced by a number of external factors such as car ownership, fuel costs, unemployment and related socio-economic conditions.
Public transport is not an end in its own right; it is a means to an end. People choose to use public transport to travel to work, school, hospitals or to visit friends and relatives, and consequently it is a fundamental part of the everyday lives of its users.
Developments in the economy, the knock effect to society and changing weather conditions will all, in some way, influence a change in the number of people using public transport and the number of journeys they make. Where these other topics are discussed, their relationship to public transport use is also examined to provide the necessary context.
Some sections in this report go beyond public transport use, particularly Roads (section 12) and Sea (section 13), however, these sections are intended to provide a broader context for Tyne and Wear with regards to its accessibility and connectivity on a regional, national and international level.
The public transport statistics within this report are based on the 2008/09 financial year and in most cases make comparisons to the previous financial year 2007/08.
However, in some cases, particularly with regards to socio-economic data and other external data sources, the 2008 calendar year has been used.
A number of internal and external data sources have been used to compile this report. Footnotes reference the first use of a data source and a full summary of sources is listed at the end of the report.
Page | 6
2 Executive Summary
The Business Intelligence Annual Report (A Year of Change) provides a compilation of public transport and socio-economic trends in Tyne and Wear during 2008/09 supported by data analysis and narrative context. The report is primarily focussed on public transport; however, it also makes the connections between public transport and the wider socio-economic environment to demonstrate the intrinsic links that help explain some of the changing trends in patronage.
As the title of the report suggests, 2008/09 was for many reasons ‘a year of change’, and although it was not evident at the time, the UK was in a period of negative economic growth during the summer of 2008. In January 2009, when the economic data for the fourth quarter of 2008 was released, it was officially confirmed that the UK was in a recession. The socio-economic impacts of the recession had far reaching implications for public transport.
Overall, 2008/09 was a good year for public transport with the more notable highlights being the increase in adult fare paying journeys on bus, which was the first time this passenger group had recorded growth in 17 years. Also, the concessionary Child All Day Ticket reversed a declining trend in the number of journeys made by children on public transport, and Metro patronage exceeded 40 million for the first time since 1991/92. The number of elderly and disabled concessionary journeys, on both Bus and Metro, recorded strong year on year growth. However, more significantly, when comparing the 2008/09 figures to 2005/06, which was the year before the free local scheme was introduced, the number of journeys made by this passenger group has increased by more than 50%.
Patronage on all modes in Tyne and Wear of Bus, Metro, Ferry and Rail increased by 4.1% in 2008/09 to more than 183 million journeys, which represents an additional 7.1 million journeys year on year. Bus patronage was the significant contributor and responsible for more than 90% of the recorded growth. Metro provided the remainder of the growth with both Ferry and Rail services recording a year on year patronage decline. Bus patronage was responsible for almost 77% of all public transport journeys in 2008/09, followed by Metro, which contributed just over 22% of the market.
Page | 7
Fuel prices in the UK reached unprecedented levels in 2008, which peaked in July when the cost per litre of diesel was 37% higher and petrol 23% higher than the previous year. The upward trend in fuel costs actual began back in the autumn of 2007, and after 6 months of successive rises in price another trend began to emerge.
In March 2008 the number of adult fare paying journeys on bus recorded a small year on year growth, and this trend continued and became more significant as the year progressed. In July 2008, the month fuel costs reached their peak; the number of adult fare paying journeys on bus was almost 12% higher than in July 2007. At the end of 2008/09 patronage in adult fare paying journeys on bus had increased by 2.6%, which represented a year on year growth of 2.1 million journeys.
A statistical analysis of the relationship between fuel costs and adult fare paying bus journeys in Tyne and Wear showed there was a strong correlation between the two, to the extent that around 60% of the growth in patronage could be explained by the related increase in fuel costs. These local findings were supported by national research1, which was carried out in August 2008, that showed that rising fuel costs and its impact on disposable income levels, meant that many people had changed, or were thinking about changing, their travel habits by switching some of their journeys from the private car across to public transport.
In July 2008, based on average commuting distance, it was costing an estimated 27%
more to commute to and from work in a private car than it was a year earlier. Further to this the motor industry suffered particularly badly from the economic downturn in 2008, with both car production levels2 and new car registrations down considerably year on year, suggesting that the relative attractiveness of the private car was in an unusual, if only temporary, state of decline.
Another key trend that emerged in 2008/09 was a shift in journeys made with season tickets from single use tickets3 on bus. Although this trend had been evident on Metro in the last few years, journeys made with MetroSavers further increased their market share of all Metro journeys in 2008/09, on bus there was a more significant change.
The number of journeys made with season tickets increased by more than 19% year on year, and the market share for season tickets increased by 13%.
1YouGov on behalf on National Express and Mott MacDonald on behalf on MerseyTravel (Aug 2008) 2Cars produced for domestic market
3Singles, Returns and Transfares
Page | 8 The economic impact of 2008 and the findings outlined in this report suggest there is some evidence of modal shift occurring from the private car to public transport. And, it is likely that most of this modal shift will have occurred among regular journey makers, as even with higher costs, the occasional car journey is unlikely to be abandoned. The figures suggest there has been a significant shift in existing public transport users from buying daily tickets to season tickets, and that the season ticket was also the product of choice for new users on the buses. As season tickets not only provide better value for money, but also provide increased flexibility and more opportunity for travel, they seem the natural choice for regular users trying to save costs, and for new users changing journeys from the private car.
According to the Department for Transport (DfT), traffic flow declined in all 5 districts of Tyne and Wear in 2008, with a cumulative decline of 53 million vehicle kilometres.
Although this is the 4th annual decline recorded in vehicle kilometres since 1993, what is more significant is that the 2008 decline is significantly higher than previous declines.
These findings are highly significant as relative to the sharp increase in bus patronage, they provide further evidence of a declining use of the private car and a modal shift to public transport.
As the recession took hold, many businesses were faced with the prospect of making redundancies or going out of business. Some high profile job losses in Tyne & Wear include Nissan who cut a quarter of the workforce, losing 1,200 staff at its Sunderland plant. A further 400 job losses were announced at businesses supplying Nissan, with Unipres in Sunderland cutting 100 full time and 200 temporary posts, and Johnson Controls in Washington cutting 100 jobs, which represented half of its work force.
Findus made more than 350 redundancies at its factory in Longbenton, and Newcastle Building Society announced 150 redundancies, with jobs being lost at both the head offices in Newcastle city centre and the new offices at Cobalt Business Park in North Tyneside.
After 3 years of relative stability, unemployment levels in Tyne and Wear increased in July 2008 and have increased further every month since then. When comparing the unemployment rate in March 2009, which stood at 7.9%, against March 2008, which stood at 4.9%, this represents an annual increase of 61%. In actual numbers this means that in the space of just one year, there were 14,500 more economically active residents of Tyne and Wear out of work. Although South Tyneside continues to have the highest unemployment rate in Tyne and Wear, Sunderland actually recorded the highest increase in 2008/09, with Nissan and its local supply chain being a key contributor to the increase.
Page | 9 Market research informs us that the main reasons people choose to use public transport in Tyne and Wear are work, shopping and leisure related, and consequently, it is a fundamental part of the everyday lives of its users. The impact of the recession is therefore of great significance to public transport to varying degrees. For example, the increase in fuel costs can result in an increase in public transport use, however, non essential ‘leisure’ journeys may be made less frequent, or not at all, because of the associated costs. Also, rising unemployment will result in less commuting journeys, which will reduce all forms of travel, and lower levels of disposable income will result in fewer journeys to the retail centres.
The months leading up to Christmas are traditionally a busy time for public transport in Tyne and Wear as many people make additional journeys into the city centres during this time in search of presents, retail therapy and leisure nights out. However, in 2008, it was somewhat different. The months of October and November were dominated by mass media coverage of the impending recession, rising unemployment levels and the increasing number of housing repossessions. For those who had not already been directly affected by the economic downturn, there was also the more tangible sight of shop closures on the high street, with Woolworths being of particular local prominence, with shops closing in all districts of Tyne and Wear.
In response to the economic downturn and rising inflation, the Bank of England initially cut interest rates in October 2008 by 0.5%, and in November they were slashed by 1.5%, followed by a further 0.5% in December. However, this did not appear to influence a significant change in consumer spending, which was hoped to stimulate the retail sector and the wider economy, as retail footfall was down significantly in the months leading up to Christmas 2008, including December, when compared to the previous year. This downturn in demand was also evident on public transport, as in December 2008, patronage on Metro was down 5.8% year on year, while the only growth on bus was in elderly and disabled concessionary journeys. Considering this patronage decline was set in the context of what was overall a strong year for patronage, this highlights how public transport is directly affected by the wider socio- economic environment.
Page | 10
3 Synopsis
This report consists of three key sections, which are the economic environment, people and society and transport.
Background Context – A Year of Change
Public transport use does not occur in isolation and is influenced by external factors and events such as fuel costs, unemployment and related socio-economic conditions. This section establishes the economic context for 2008/09 by analysing these, and other related factors, in an attempt to provide a background to public transport use in Tyne and Wear.
Tyne and Wear Profile
Building on the economic context established in the previous, section 5 illustrates the social and geographical profile of Tyne and Wear. This is designed to aid comparisons by outside groups who wish to use the data within this report and will form a useful reference tool on the socio-economic statistics of Tyne and Wear. As population profiles differ throughout the country, it is important to establish this profile in the context for the following sections.
Public Transport in Tyne and Wear
This section introduces the main body of the report and provides an overview of all modes of public transport within Tyne and Wear. These sections provide specific analysis of public transport use, primarily focussed on patronage levels in 2008/09.
Key findings and headline statistics are provided for each of the 4 main modes of travel; Bus, Metro, Rail and Ferry along with more detailed analyses based on ticket type, passenger group and time of travel.
Road Transport in Tyne and Wear
This section looks at various local statistics relating to the highway network including traffic flows, road casualty figures, road freight and Government expenditure on the region’s roads. It highlights a number of major road improvement schemes and establishes how these may affect public transport use.
4
The dow indu redu the
This the
4.1 4.2 4.3 4.4 4.5 4.6 4.7
Backgro
unprecede wnturn. The
ustry resultin uced in an wettest sum
section ana Year of Cha
und Conte
ented fuel housing m ng in spiral attempt to mmers on re
alyses the v ange.
Key The The UK In The Con UK W
ext – A Ye
crisis in th market crash
ling unemp o cope with ecord.
various com
points of 20 UK Econom UK Housing ndustry and Fuel Crisis in sumer Spen Weather
ear of Cha
e UK mark h coincided ployment. I
the econo
mponents wh
008/09 my
Market Commerce n North Engl
nding
ange
ked the be d with a d n addition, mic downtu
hich have le
e and
eginning of ecline in U , consumer urn and the
the econo K business r spending e UK saw on
omic and was ne of
ed us to refeer to 2008/009 as
Page 12 Page 13 Page 16 Page 19 Page 24 Page 26 Page 28 2 3 6 9 4 6 8
Page | 11
Page | 12
4.1 Key Points of 2008/09
There have been a number of significant changes in the wider socio-economic environment in 2008/09, many of which have been unprecedented. Fuel prices increased significantly in the early part of 2008/09 and peaked in July when the cost per litre of diesel was 37% higher and petrol 23% higher than the previous year.
The first signs of the housing market slump were evident early in 2008 as house prices began to fall, and this trend continued throughout 2008/09. According to the Halifax and Nationwide Price Indices, the average house price in the first quarter of 2009, was more than 11% lower than the previous year.
The threat of recession lingered for most of 2008 and confirmation arrived that the UK was officially in recession at the start of 2009. The final quarter of 2008 represented the second successive quarter of economic decline – the technical definition of a recession.
All of these factors inevitably affected the labour market and the rate of unemployment in Tyne and Wear was up 61% in March 2009 on the previous year. The start of 2009 saw the announcement of 1,200 job cuts at the Nissan factory in Sunderland4 and a warning of the knock on effect to the supply industry.
Retail footfall was -3.6% down in January 2009 compared to the same month in 2008 according to the Association of Town Centre Management High Street Index5.
The number of failing business reached 21,222 by the end of 20086 and is forecast to reach 32,300 in 2009, to a peak of 32,400 in 2010. These figures would be on par to the number of business failures recorded in the recession of early 1990’s, which peaked at 33,900 in 19927.
4BBC News 5Tynetown.co.uk
6The Insolvency Service (includes liquidations, administrations and receiverships) 7BDO Stoy Hayward Industry Watch
4.2 The UK Economy
Economic data for the fourth quarter of the 2008 calendar year confirmed that the UK had officially entered a recession as it represented the second successive quarter of negative economic growth (the technical definition of a recession). The table below shows that as the UK was entering into the recession in the summer of 2008, inflation levels were rising well above the Government target of 2%8 and increased steadily through the first half of the year before starting a downward trend from October 2008.
Inflation - Consumer Prices Index
Month Annual Change Target variance
Apr 08 3.0% 1.0%
May 08 3.3% 1.3%
Jun 08 3.8% 1.8%
Jul 08 4.4% 2.4%
Aug 08 4.7% 2.7%
Sep 08 5.2% 3.2%
Oct 08 4.5% 2.5%
Nov 08 4.1% 2.1%
Dec 08 3.1% 1.1%
Jan 09 3.0% 1.0%
Feb 09 3.2% 1.2%
Mar 09 2.9% 0.9%
The fuel crisis (section 4.5) was a strong contributory factor to the level of inflation and the reduction in the price of fuel in the latter half of 2008 helped to reduce the excessive inflation level. Fuel prices, and the related price of oil, are of great significance to the economy; energy costs are partly linked to the price of oil while the cost of transporting goods increased due to fuel prices thus resulting in higher retail prices for the consumer.
The Bank of England set interest rates in an effort to keep inflation at the 2% target level. In the event inflation deviates from the target by more than 1% point, an open letter is written to the Chancellor of the Exchequer explaining the cause and intended remedy. The table below shows the changes in the interest rate on a month-by-month basis in 2008/09.
Page | 13
8Inflation rate (ONS), Inflation target (Bank of England)
Inflation - Interest Rate
Month Interest Rate Monthly change
Apr 08 5.0% -
May 08 5.0% 0.0%
Jun 08 5.0% 0.0%
Jul 08 5.0% 0.0%
Aug 08 5.0% 0.0%
Sep 08 5.0% 0.0%
Oct 08 4.5% -0.5%
Nov 08 3.0% -1.5%
Dec 08 2.5% -0.5%
Jan 09 1.5% -1.0%
Feb 09 1.0% -0.5%
Mar 09 0.5% -0.5%
The interest rate remained stable for the first 6 months of the financial year and was first reduced in October. This initial reduction marked the first of many more cuts in each successive month which has since stabilised as of May 2009 (last cut in March 2009 to 0.5%). The biggest reduction was seen in November 2008 when the interest rate was cut by 1.5%, which is the largest ever interest rate cut to date. The chart below shows the relationship between inflation and interest rates. The shaded area represents the Bank of England’s inflationary target value ± 1% (i.e. where a report to the Chancellor is not required).
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Apr 08
May 08
Jun 08
Jul 08 Aug 08
Sep 08
Oct 08
Nov 08
Dec 08
Jan 09
Feb 09
Mar 09 Measure of Inflation
CPI Rate Interest Rate
CPI inflation target of 2%
[± 1%]
The chart shows a close relationship between the two variables. As inflation increased from the beginning of 2008/09 to a peak 5.2% in September, interest rates were cut to bring inflation under control. As the graph shows, this policy was successful to a point but has required a significant reduction in the interest rate from 5% at the start of the year to 0.5% by the end – a 10-fold reduction. By the end of
Page | 14
2008/09, inflation had fallen to 2.9%, closely mirroring the start of the year. This further highlights the degree of variability throughout the last year.
Most economic bodies have attempted to forecast the duration and severity of the UK recession. However, as referred to earlier, the changes seen in 2008 were largely unprecedented. While the UK has experienced previous recessions, the current downturn is part of the much larger global economic crisis brought on by the failure of large banking institutions and the slowdown of the credit markets. Therefore, it is not surprising that the number of different forecasts is limited only by the number of forecasters.
The table below9 shows that for 2009, Gross Domestic Product (GDP) is expected to retract by 2.4% while inflation is expected to be 0.5% - a considerable slowdown from the 3.1% seen in December 2008, and house prices are predicted to fall by almost 10%.
HM Treasury: Economic Forecast 2009 (% change)
Measure GDP Inflation (CPI) House Prices
Median -2.4 0.5 -10
Lowest -3.2 -0.9 -20
Highest -0.5 2.1 0
Gross Value Added (GVA) is a measure of the size of the local economy in relation to GDP as a national indicator. Growth rates in GVA within the North East have improved since 1999 and for the last four years have exceeded the national average10. This may somewhat mitigate the damage to the region from the conditions affecting the national economy.
The table below shows the forecasts of the 4 other major economic bodies, the International Monetary Fund, National Institute for Economic and Social Research, Financial Services Authority and the Confederation of British Industry, which go beyond 2009.
Page | 15
9HM Treasury:Based on a comparison of independent forecasts (29 for GDP, 27 for CPI and 19 for house prices). This is not the official forecast of HM Treasury.
10State of the Region report 2008 (NERIP)
Economic Outlook 2007-2010 (% change)
IMF Measure 2007 2008 2009 2010
GDP 3.0 0.7 -2.8 0.2
NIESR
GDP 3.0 0.7 -2.7 0.6
FSA Measure
GDP 3.0 0.8 -2.2 0.6
Inflation (CPI) 2.3 3.6 1.0 1.9
Unemployment rate 2.7 2.8 4.8 5.9
CBI Measure
GDP - 0.7 -3.3 0.0
Inflation (CPI) - 3.6 1.0 1.2
Unemployment rate - 5.8 8.2 9.4
The table shows11 how 3 of the 4 organisations expect the UK to observe minimal growth in 2010 (between 0.2% and 0.6%). However, the CBI is less optimistic and predicts a stagnant year in 2010. In terms of inflation, the Financial Services Authority forecasts that by the end of 2010 the UK will be just 0.1% below the Government target of 2%, while the Confederation of British Industry predicts 0.8% below. Finally, in terms of unemployment the FSA predicts this to be 5.9% in 2010, considerably short of the 9.4% expected by the CBI. As the rate of unemployment has already reached 7.1% in March 200912, it would appear the FSA forecast is overly optimistic.
These forecasts are not intended to offer a likely scenario to the duration or severity of the recession. Instead, they are shown to illustrate how the wider economic environment is particularly complex and that large economic organisations have considerably different views on the path the economy will take over the next 2 years.
4.3 The UK Housing Market
As one of the contributing factors to the current economic conditions, the housing market has also suffered particularly badly. The construction sector is anticipated to see over 6,000 businesses fail this year (BDO Stoy Hayward) while house prices have seen substantial declines. The table below shows the average house price in North England as provided by Nationwide and Halifax, the 2 main House Price Indices in the UK. The percentage change refers to year on year. Note how both institutions differ in
Page | 16
11World Economic Outlook January 2009 (IMF) | UK Economy February 2009 (NIESR) | Financial Risk Outlook 2009 (FSA) | Economic & Business Outlook February 2009 (CBI)
12Office of National Statistics
their appraisal of the housing market. Halifax record an 11.6% decline in the average house price in the first quarter of 2009 compared to the previous year. In contrast, Nationwide record a 15% decline. As the indices are based on mortgages issued by each institution, the difference in price, and thus the annual change in price, is influenced by the customer profile of each company. However, despite some variations, overall the table shows how the average house price has fallen dramatically over the last year.
North England Average House Price
Month Halifax Nationwide Halifax % chg Nationwide % chg
Q1 2007 £148,765 £129,378 6.1% 5%
Q2 2007 £156,202 £134,523 10.2% 6%
Q3 2007 £152,061 £134,534 5.4% 7%
Q4 2007 £152,214 £133,202 4.6% 4%
Q1 2008 £151,898 £132,349 2.1% 2%
Q2 2008 £138,523 £129,700 -11.3% -4%
Q3 2008 £138,130 £123,019 -9.2% -9%
Q4 2008 £123,350 £118,525 -19.0% -11%
Q1 2009 £134,311 £112,986 -11.6% -15%
Halifax seasonally adjusted; Nationwide not adjusted
The chart below shows the average price of a house in the North of England and the year on year percentage change.
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
£0
£20,000
£40,000
£60,000
£80,000
£100,000
£120,000
£140,000
£160,000
£180,000
Q1 2007
Q2 2007
Q3 2007
Q4 2007
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009 North England Average House Price
Halifax Nationwide Halifax % chg Nationwide % chg
As house prices decline, many buyers (particularly those still in the early period of their mortgage) may find themselves in negative equity. This can therefore lead to an increase in individual insolvencies. The Department for Communities and Local
Page | 17
Gov show
vernment tr wn in the ta
ack the rati able below1
io of house
3.
prices to inccome as a measure off affordabilitty as
Ratio Distr Gate New Nort Sout Sund Tyne T&W
In 2 whic 2008 Esta the prop cred hou the 2009
This falle the
13Co 14NA 15Cr
008, the av ch represen 8 was 3.4%
ate Agents growth in perties is i dit/finance.
using marke availability 9.
presents so en consider
credit is no
ommunities an AEA
redit Condition o of house prices
ict eshead wcastle
h Tyneside th Tyneside derland e and Wear
Change
verage cost nts a 3.4% re
more afford (NAEA) rep
would-be b inevitable.
. The ava t in 2008 an y of secured
omewhat of ably over th t readily av
nd Local Gove
ns Survey s to earnings
1997 1998 2.70 2.72 3.09 3.13 3.21 3.44 2.66 2.54 2.78 2.70 2.88 2.91 n/a 1.0%
t of a home eduction o dable than orted there buyers, the The third ailability of
nd the Bank d credit to
f a conflict w he last year
ailable whic
ernment Live Ta 1999 2000
2.55 2.64 3.20 2.83 3.08 3.34 2.56 2.49 2.72 2.58 2.83 2.74 -2.7% -3.2%
e was 5.67 t n the previo in 2007. In J e were 4 ho
NAEA ack componen credit was k of England
household
within the h r, estate age
ch is likely to
ables
2001 2002 2.82 3.13 3.13 3.53 2.93 3.20 2.52 2.91 2.62 2.84 2.79 3.03 1.8% 8.6%
times highe ous year or June 2009, t ouse hunters knowledges nt in hous a key co d15 found le ds in the thr
housing mar ents are rep o prolong th
2 2003 200
3 3.40 4.7
3 4.13 5.1
0 4.03 5.4
1 3.22 4.5
4 3.04 4.2
3 3.46 4.7
% 14.2% 36.1
er than the a r in other w
the Nationa s for every p s a short te
ing is the ontributor to
nders had f ree months
rket; the cos porting stron he housing m
04 2005 2
78 4.94 5
13 5.62 6
47 6.23 6
56 5.00 5
22 4.61 5
71 5.10 5
1% 8.3% 9
Page average sa ords, housin al Associatio property14. erm shortag availability o the decli
further redu s to mid Ma
st of houses ng demand market dec
006 2007 5.38 5.74 6.40 6.76 6.26 6.70 5.70 5.79 5.15 5.22 5.56 5.87
.0% 5.6% - 2008 5.61 6.39 6.09 5.38 5.12 5.67 -3.4%
alary, ng in on of With ge of
y of ining uced arch
s has d but cline.
| 18
4.4
A re busi The anti busi num belo of th
UK Indus
eport by BD iness failure report hig icipated 6,4 iness failure mber of bus
ow shows th he trend line
0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
stry and Co
DO Stoy Hay s will increa ghlights the 400 business es – up by siness failure he number e, which sho
Q1 Q2
200
ommerce
yward, look ase to 32,30 e construct
s failures. T 38% on th es, the leve
of business ows a level
Q3 Q4
06
Busin
king at indu 0 by the en tion sector This comes o he previous
l of unemp s failures fro of growth in
Q1 Q2 Q
2007 ess Insolve
stry in the U nd of 2009 to
as being on the bac s year. Ine
loyment wi m 2006-200 n the numb
Q3 Q4 Q
7 encies
UK, predicts o a peak of the harde ck of 2008 re evitably, wit ll also incre 08. Note the ber of failing
Q1 Q2 Q
2008
A recovery market is de good flow o
Page s the numbe
f 32,400 in 2 est hit with ecording 21 th such a ease. The c e upward c g businesses
in the housing ependent on a of credit
g a
er of 2010.
h an 1,122
high chart urve .
Q3 Q4
| 19
The chart above shows that in the 4th quarter of 2008 there were almost 7000 business failures, which represents an increase of 89% on the previous year. In every quarter, the number of business failures was higher in 2008 compared to 2007. However, it is important to also note the rate of company liquidations. While an increased number of business failures will have a knock on effect to other areas (i.e. job losses, transport use, household expenditure etc), the measure fails to take into account the total number of businesses. The table below shows the rate of company liquidations as a proportion of all active businesses registered with Companies House16.
Rate of company liquidations Year Quarter Rate (%)
Q1 0.7%
Q2 0.7%
Q3 0.7%
Q4 0.6%
Q1 0.6%
Q2 0.6%
Q3 0.6%
Q4 0.6%
Q1 0.6%
Q2 0.6%
Q3 0.6%
Q4 0.7%
2006
2007
2008
The table shows that the rate of company liquidations has remained fairly consistent over the last 3 years, fluctuating by no more than 0.1%. This shows that while the overall number of business failures is increasing, some of this is offset by new business start-ups. Statistics referring to the number of business start-ups is available up until 2007 only and therefore does not cover the impact of the recession. However, there has been an increase in the stock of VAT-registered enterprises (i.e. business start-ups minus closures) in every year since 199617. The number and rate of business insolvencies show the state of the wider economy. Individual insolvencies (bankruptcies and Individual Voluntary Agreements) show how the economy then affects the public at large. The chart below shows the number of individual insolvencies over the last 3 years.
Page | 20
16The Insolvency Service
17Dept. for Business, Enterprise and Regulatory Reform (BERR) 2008
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2006 2007 2008
Individual Insolvencies
The table above shows that in 4th quarter of 2008 there were almost 30,000 insolvencies, which represents an increase of 18% on the same period in 2007, but is actually down by 0.9% on the same period in 2006. Overall, the number of individual insolvencies seen in 2008 was at the same level as 2007 (-0.1%). As the UK recession takes hold and the number of job losses and business failures increase as anticipated, it is highly likely we will see a considerable increase in the number of individual insolvencies in 2009.
4.4.1 Car Production
The motor industry has suffered particularly badly from the economic downturn with both car production18 and new car registrations down considerably. Between January and March 2009, over 7,000 jobs were lost in the car industry according to UKRecession.com19. Worldwide, the BBC has reported on over 100,000 job losses directly linked to the motor industry20. Section 2 refers to a significant number of job losses at Nissan in Sunderland – with knock on effects to the local economy and towards personal travel habits.
By March 2009, the MAT for new car registrations was 22% lower than at the same point a year earlier and was worse for production with a reduction of 27%. However, the rate of decline has increased and when comparing March 2009 to March 2008, production was down 47% while registrations were down 28%. The chart below shows production and registrations over the last 2 years on a moving annual total
Page | 21
18Cars produced for domestic market 19UKRecession.com
20BBC.co.uk
(MAT) basis to eliminate seasonal fluctuations, and illustrates how the current decline began in the summer of 2008 and has continued to date.
700,000 750,000 800,000 850,000 900,000 950,000 1,000,000 1,050,000 1,100,000
250,000 270,000 290,000 310,000 330,000 350,000 370,000
Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
Car production and registrations (moving annual total) Production Registrations
The chart below shows an index value based on annualised figures to eliminate seasonal fluctuations.
70 80 90 100 110 120 130
Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09
Index: Mar 2007 = 100
Moving annual total Private car vs public transport Fuel Public transport Registration
Fuel costs begin to rise
Car registrations fall and public transport use increases
The trends show that between March and October 2007 there was little variation in fuel prices, public transport patronage or private car registrations. However, this changes in December 2007 where fuel prices begin to rise. The trend of increasing public transport use is first witnessed in April 2008 with car registrations falling only 2 months later.
Page | 22
Although fuel prices are shown here as a major contributor to increased public transport use, it is important to note that these increases are also symbolic of a general deterioration in the economy. The graph seems to show a latency period whereby increases in fuel price had little or no effect for around 4 months until an increase in public transport patronage is seen. This may be due to prices reaching a particular monetary value or as a result of prolonged higher prices (or a combination of the two).
The subsequent fall in car registrations illustrates a pattern whereby external factors make car use less favourable, existing car users then switch some journeys to public transport followed by less new cars being sold. While this will include a lack of new buyers, it is most likely a reflection of existing car holders choosing not to upgrade to a new car in the current economic climate. The chart below shows the year on year change in production and registrations going back to April 2006.
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
Apr-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09
UK New car production & registrations year on year change Registration Production
Car production went through a boom period in 2007 and in August of that year, it was 46% higher than the same month in the previous year. However, taking the chart back to April 2006 further highlights the significant, and dire, situation the industry is now in following the economic downturn. Registrations have fallen year on year since December 2007 without exception while production began falling in August 2008. However, despite a boom in production in 2007, there was little change in the number of registrations with minor fluctuations throughout 2007. The trends suggest that over-confidence in the market among car manufacturers resulted in over- production during 2007, which placed them in such a high risk position for 2008.
Page | 23
4.5 The Fuel Crisis in North England
The cost of a barrel of oil saw fuel prices reach unprecedented levels in 2008 with July seeing the peak (diesel was 37% higher and petrol 23% higher than the previous year). The excessive increase in fuel prices (particularly over such a short term) was a major contributory factor to the increase in inflation last year, prompting cuts in the interest rate. As inflationary pressures subsided (helped by the reduced cost of fuel from October 2008), it was apparent more aggressive cuts in the interest rate were required to minimise the economic decline. The table below shows the price of unleaded and diesel in North England and the corresponding rate of inflation. The correlation between the yearly change in the price of fuel and the inflation rate is 0.62 showing a very strong relationship between the two variables and shows how fuel prices effect, and are affected by, inflationary pressure.
North England Fuel Prices
Month Unleaded Diesel Unleaded yearly % chg
Diesel yearly
% chg CPI
Apr 08 107.6 117.2 16.1% 23.2% 3.0%
May 08 112.1 123.7 17.0% 27.9% 3.3%
Jun 08 117.6 131.3 21.1% 34.8% 3.8%
Jul 08 119 132.9 22.9% 36.9% 4.4%
Aug 08 112.4 125 17.0% 29.0% 4.7%
Sep 08 112.3 123.8 18.2% 27.8% 5.2%
Oct 08 106.2 117.4 8.9% 17.5% 4.5%
Nov 08 94.6 108.8 -6.5% 3.2% 4.1%
Dec 08 89.5 102.2 -12.6% -5.2% 3.1%
Jan 09 86.8 99 -16.4% -9.3% 3.0%
Feb 09 90.6 100.5 -12.4% -7.9% 3.2%
Mar 09 90.5 99.8 -14.8% -12.5% 2.9%
Yr avg 103.3 115.1 4.9% 13.8% 3.8%
In most months of 2008/09, the price of unleaded and diesel was more expensive year on year. However, this trend was reversed in November for unleaded and December for diesel when prices finally fell below their equivalent level 12 months earlier. The chart below shows the relationship between fuel prices and inflation over the course of the year.
Page | 24
4.5.
At t was incr the The wer pric whic
In Ju alth com diffe
21Ba costs 22Tra
1 The Cos the peak in s £45.80 per reasing the average co trend of inc re not a driv ce crisis was ch has cont
uly 2008, it a hough this h mmuting dis ers depend
ased on avera s for cars price ansport Trends
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Yearly fuel price chg
st of Travelli n fuel prices
r month – a appeal and ost had falle creasing ad ving factor
s one of th tinued to w
appeared t has not bee
stance of 8 ing on the c
ge commute o ed up to £20,00
2008 (DfT)
Apr 08 May 08
ng to Work s (July 08), an increase d subseque en to £35.69 dult bus pat
in increasin he first signs
orsen and h
the yearly c en the case 8.7 miles22. commuting
of 8.7 miles ea 00 when new
Jun 08 Jul 08 Aug 08
Fuel
Unleade
the averag of 27% a ye ent take-up
9 – actually ronage ma g bus use b s of the wi has culmina
commute w e. The figur The table
distance.
ach way (DfT) a
Aug 08 Sep 08 Oct 08
Prices & Infl
ed Dies
£550 p/a (↑ £117)
ge cost of c ear earlier.
of bus trave lower than ay initially se
but it is impo der econo ated in the c
would cost a res above a
below sho
and petrol cos
Nov 08 Dec 08
lation
sel CPI
a )
commuting This is large el. However
the July 20 eem to imply
ortant to no mic situatio current rece
an additiona are based o
ws how the
sts per mile (The
Jan 09 Feb 09 M 09
Page to/from wo ly credited r, in March 2 07 figure by y that fuel c ote that the on – a situa
ession.
al £117 per on an aver e monthly
e AA). Averag 0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
CPI yearly chg
Mar 09
ork21 with 2009 y 1%.
costs e fuel ation
year rage cost
ge of
| 25
Monthly commute cost year on year
Distance each way Jul-07 Jul-08 £ chg
8 miles £33.15 £42.11 £8.96
10 miles £41.44 £52.64 £11.20
15 miles £62.16 £78.96 £16.80
20 miles £82.88 £105.28 £22.40
For a 20 mile commute to work (40 mile round trip) the cost in July 2008 was £22 per month more than the year before - £264 per year. Rather than concluding fuel prices did not influence an uptake in public transport use (due to patronage increasing despite a fall in the price of fuel), the related trends demonstrates a long term lasting effect. The rapid rate in which fuel prices rose most likely gave people ‘pause for thought’ – a prudent course of action given the most recent increases in fuel prices (again exceeding the £1 per litre barrier at the time of writing). According to the DfT, car traffic flow declined in all 5 districts of Tyne and Wear in 2008, with a cumulative decline of 53 million vehicle kilometres (refer to section 12.4).
4.6 Consumer Spending
Retail footfall on the high street declined significantly throughout 2008/09, with almost every month recording a year on year decline, with an average decline of 5.1% over the course of the year. While some of this fall has been as a result of increased spending online (average increase of 19% in 2008/09), it illustrates one of the symptoms of the economic downturn. The table below shows the monthly breakdown change in high street footfall23 throughout 2008/09.
Retail footfall year on year change
Month % chg
Apr-08 -11.4%
May-08 -0.1%
Jun-08 1.3%
Jul-08 -2.4%
Aug-08 -8.5%
Sep-08 -10.6%
Oct-08 -6.6%
Nov-08 -6.0%
Dec-08 -8.0%
Jan-09 -0.8%
Feb-09 -7.8%
Mar-09 -0.2%
Yearly average -5.1%
Page | 26
23ATCM – Springboard via tynetown.co.uk
This both incr repr redu thus 2008
reduction i h in terms reased by j resents a 5 uced, altho s offset the 8/09 represe
n footfall ha of volume just 1.8% in 4% slowdow ough less sig
significant ents a 29% s
as resulted and value n 2008/09 c wn in the r gnificantly, w
fall in sales slowdown o
in a severe e. As the g compared rate of grow which also h
s volume.
on the previ
slowdown graphic bel to 4.1% in wth. Similar highlights ho
In terms of ious year.
in the grow ow shows24 the previo rly, the valu ow prices w value, the
wth in retail s
4, sales vol ous year, w ue of sales were higher 2.6% grow
sales ume which also and th in
Growwth in sales
The typi high wee yea equ Pric from fruit sign
24Ba 25Of 26BB 27BB
economic cal food pr her than 20 ekly expend ar. The over
uates to alm e Index sho m January t
and vege nificantly in 2
ased on ONS re ffice for Nation BC article Sept BC Food price
c conditions rices signific 006. The Ex diture on foo
rall change most £1,500 owed food to August 2 tables (+14 2008.
etail sales inde nal Statistics: F tember 2008 Index
s of 2008 w cantly highe xpenditure od had incr
across all e 0 additional
prices in U 2008 with no 4.7%)26. As t
ex
amily Spendin
were more er than the p
and Food reased by 9 expenditure annual sp UK superma
otable incre the charts
directly felt previous ye Survey25 s 9.7% in 2007 e groups wa end. Adde arkets and s
eases for m below show
t at the su ar, which th howed tha compared as 9.4% year ed to this, t shops had meat and fis w27, food p
permarket hemselves w at the aver
to the prev r on year, w
the BBC’s F increased sh (+22.9%) prices increa
with were rage vious which Food 8.3%
and ased
g 2007 and 20008
Page | 27
In the same article, the British Retail Consortium reported food price inflation between mid 2008 and mid 2009 amounted to 10%, more than twice the official Consumer Prices Index (CPI) inflation rate of 4.4%.
4.7 UK Weather
The weather in the North East of England during 200828 was particularly poor compared to 2007, which in turn performed poorly when compared to 2006. The table below shows summary weather statistics for 2007 and 2008.
Weather statistics year on year
Year Max temp Min temp Days AF Rain (mm)
2007/08 13.7 6.2 38 603.8
2008/09 12.9 5.9 48 707.4
No. chg -0.8 -0.3 10.0 103.6
% chg - - 26% 17%
During 2008, there were 10 additional Air Frost (AF) days compared to the year before. Rainfall was also significantly increased, up 17% year on year. Over the course of the year both bus and Metro patronage increased, which would imply that
Page | 28
28Met Office: Durham weather station
the weather had little effect. However, this was not the case over the summer months (July – September), as both bus and Metro recorded year on year patronage declines in at least one passenger group. The three month period recorded an increase in rainfall of 92% with July registering the most rainfall. The table below shows the year on year change in weather over the summer months covering July to September.
Summer weather year on year (July - September)
Year Max temp Min temp Days AF Rain (mm)
2007/08 18.5 10.1 0 170.2
2008/09 18.6 11.1 0 327.1
No. chg 0.1 1.0 0.0 156.9
% chg - - 0% 92%
Temperatures were actually slightly higher in 2008 but the most striking difference is in the level of rainfall. The summer of 2008 had higher than average rainfall and was 92% higher than the previous year and was the 7th wettest summer since 1914. This undoubtedly deters the often impromptu journeys which are common during periods of warm, dry weather.
To demonstrate the impact of the rainfall the image below shows the relative change in rainfall and Metro patronage for July 2008. This shows that in contrast to the overall patronage trend on Metro, which was one of growth for 2008/09, the July 2008 period recorded a year on year decline of 8%, which represented the highest periodic decline of 2008/09 (section 8 refers).
Rainfall 34% higher year on year
Metro patronage 8%
down year on year
The map below shows how the level of rainfall in the summer of 2008 compares nationally to the average rainfall recorded between the years 1971 – 200029.
Page | 29
29Met Office
Note the darker shades of blue around the North East area showing that rainfall was at least 150% of the 1971 – 2000 average clearly indicating how last year was particularly poor in terms of weather. This is not to be underestimated; trend analysis shows a correlation of -0.46 between rainfall and Metro patronage, and a much weaker correlation of -0.11 between rainfall and bus patronage. This means that up to 46% of a change in Metro patronage can be explained by the weather conditions, however, the same conditions would only influence up to 11% of an associated change on bus. This highlights how Metro is used relatively more for leisure journeys, for example, day trips to the seaside, and is therefore more susceptible to poor weather conditions than compared to bus.
Optimistically, the Met Office seasonal forecast for summer 2009 is for rainfall below average and temperatures above average, which means public transport should be well placed to capitalise on the good weather. This is also supported by the current economic conditions and poor exchange rates with UK holiday makers more likely to stay at home while foreign visitors are more likely to come to the UK and visit the tourist attractions of the North East. Research by VisitEngland showed that 20% of respondents who had travelled abroad in 2008 were planning to holiday in the UK in 2009 instead30.
Page | 30
30Thisismoney.com
5
Tyne long une
This area
5.1 5.2 5.3 5.4 5.5 5.6
Tyne and
e and Wea g history an employment
section loo as.
d Wear Pro
ar has a div nd culture, t, ethnic div
ks at the pr
Popu Indic The Car Hous Crim
ofile
erse popula there are versity, crime
rofile of the
ulation ces of Multip
Labour Mar Ownership seholds and me Statistics
ation of alm some cons e rates betw
Tyne and W
ple Depriva rket in Tyne
d Population
most 1.1 mil siderable d ween the d
Wear with fo
tion and Wear
n Density
lion and de differences
istricts.
espite sharin in the leve
ng a els of
ocus on the
Page following
Page 32 Page 35 Page 37 Page 38 Page 39 Page 40 2 5 7 8 9 0
| 31
