Sectoral analysis
The UK has an open economy, with a business-friendly environment, and this helps to promote the evolution of established industries and the creation of new ones. In recent years, globalisation has expanded the international market, bringing many more consumers but also many more competitors. Globalisation and the diffusion of IT have, in addition, brought a much more informed and organised consumer to the market place and companies are having to work harder to meet their expectations, with regard to both product-price combinations and operating standards. Firms are also having to deal with a more holistic approach at policy level as the government looks to ensure that future development is environmentally and socially sustainable.
Within this framework the challenge for industries and governments is to maintain a competitive advantage in those sectors in which UK firms already excel and to develop new areas of expertise in existing or new sectors so that UK businesses can remain profitable and globally competitive. This will support the sustained growth of the UK economy and in turn create the jobs and wealth desired by government and individuals alike. In this context sectoral analysis is a necessary aspect of strategy or policy formulation and is one area where CE's expertise can help you. CE has extensive experience and expertise in modelling the UK economy at a disaggregated level and analysing the results to support the needs of clients in business and government.
Tools and competence
CE specialises in the application of detailed sectoral modelling covering the UK economy using our Multisectoral Dynamic Model (MDM) to gain an improved understanding of what drives sectors, and to analyse and understand the nature of sectoral changes and the potential impact of sectoral or non-sectoral policies. Specifically we offer:
- a long standing reputation for sectoral modelling, having its origins in the work of the Nobel laureate Richard Stone
- the MDM model which integrates economy, energy and environment indicators and produces forecasts for 41 disaggregated industries that are consistent with our UK and global macroeconomic forecasts
- a team of qualified economists with extensive experience in sectoral modelling and analysis: collecting, processing, interpreting and presenting data; statistical analysis; writing concise, accessible briefing documents which communicate effectively the key messages; and the production and presentation of project reports
- a clear and continually updated understanding of the broader economic and industrial trends in the UK and an ability to set the analysis of strategy or policy measures in this wider context
- experience in working on and leading multi-partnered projects
- a Quality Management System (QMS), which has been approved as complying with the international standard ISO 9001:2000
Examples of our work
Cross-Solent Hi-Speed Passenger and RoRO Traffic Forecasts and Risk Analysis
For a major international private equity partnership
This project was commissioned to inform the content and the due diligence procedures of an international private equity partnership bidding for a UK transport infrastructure company. CE's role was to provide an independent assessment of the economic drivers for the future revenue and costs of the traffic business of the company and to conduct a risk assessment of these factors, and to explain the analysis in discussions with the equity group's capital funders. The work involved estimating travel demand equations for the travel components of the company's business, and then informing the analysis through a site visit, briefings from senior managers of the company and a detailed study of the segments of the core business of the company and of the strength of the competition on its routes. The quantitative analysis was used to develop an understanding of the competitive position for the company and to assess the extent to which internal management procedures, competing routes and attractions, the risks of regulatory price control and the potential for external competitor might affect the yields of the business. A baseline forecast and two variant macroeconomic scenarios to 2021 were constructed to test the sensitivity of the various segments of the business to variations in the economic drivers to inform a risk assessment of the effects of a recession or an acceleration of growth on the stability of future returns.
Profit & Costs Survey
Builders Merchants' Federation
For this annual project CE collected questionnaire information on profits and costs from a survey of Builders Merchants' Federation (BMF) members and produced an analysis of the results to relate them to trends in the construction industry and the broader economic environment. Survey responses were entered into a confidential database and industry averages were calculated across a range of financial variables. These results were analysed and a report containing commentary on broad trends in the data and detailed statistics on industry averages was produced, for circulation to all BMF members.
Economic Impact of the UK Screen Industries
UK Film Council
This innovative and comprehensive study of the economic impact of the UK screen industries was led by CE in collaboration with Optima, specialists in in-depth strategic studies of media markets. The study undertook an extensive survey of the screen industries and the resulting data was combined with information from CE's Multisectoral Dynamic Model (MDM) of the UK and its regions to develop a model to show how activity in the screen industries affects the economies of the regions of the UK. The model was used to provide a common analytical framework for comparing the screen industries with other UK industries, and to provide estimates of regional and national economic multipliers for the screen industries. The study delivered a basis for improved understanding of the inter-regional dynamics of the screen industries to assist the UK Film Council in its strategic development. On completion, the client commented: 'I appreciated the way Cambridge Econometrics was able to combine high level technical work with an astute assessment of the political context in which their work would be read. I’m sure the findings of the study they did for us will prove influential for a number of years into the future.'
Skills in England, 2006
Learning and Skills Council
This project, led by the Warwick Institute for Employment Research, produced the 2007 edition of the (national) Learning and Skills Council's annual report reviewing skills needs. The project reviewed the existing evidence for the supply of and demand for skills and identified the main areas of skill deficiency. CE's role was to review the evidence relating to (a) 27 detailed industry sectors across the UK, and (b) the 47 local learning and skills council areas. The analysis identified and summarised the main economic trends in sectors, regions and local areas, and extracted for policy-makers the key implications for skills needs in each case.
Review of Britain's Skills Needs
HM Treasury
The study was commissioned to contribute to the Leitch Review of Skills and was undertaken in collaboration with the Institute for Employment Research. The study examined the implications for the pattern of employment by sector, occupation and skills in a future in which productivity growth is higher as a result of greater investment in human capital. The study developed quantified projections and scenarios, and drew out the qualitative implications of these alternative futures. The methodology used built on the approach adopted for the SSDA in Working Futures by developing sectoral projections within an integrated sectoral economic model of the UK, namely Cambridge Econometrics’ Multisectoral Dynamic Model, MDM and extended the projections presented there to 2020 as a ‘baseline’ projection against which two alternative ‘high skills’ scenarios were compared. Summary results were incorporated in HM Treasury's December 2005 Pre-Budget Report, and in the accompanying Interim Report of the Leitch Review of Skills, Skills in the UK: The long-term challenge.
Analysis of Large Non-Quoted Entities
DTI Future & Innovation Unit
This study examined data from the company accounts of all companies with a turnover greater than £5 million (some 30,000 companies) to assess the contribution of medium-sized firms to economic performance and the factors influencing that contribution. Using k-means cluster analysis a multi-dimensional measure of performance was examined and firms were allocated to a small number of segments that represent different ‘kinds’ of performance. The characteristics (firm size, age, sector, location etc) associated with these different segments were then identified. The analysis yielded a manageable number of segments with characteristics that are suggestive for ‘kinds’ of companies, where the ‘kinds’ are helpful for interpreting the companies’ experience and their contribution to national and regional economic development.
Cross-Industry Futures
PricewaterhouseCoopers
This project established a knowledge database to draw out cross-industry patterns of business success and failure relevant for the analysis of future strategy. The project drew on CE’s sectoral expertise at the UK, European and global levels to identify and categorise strategic responses by firms to broad economic and businesses trends (such as the Internet, globalisation, European Monetary Union). Patterns of success in one industry were generalised so that lessons could be drawn for adaptation and application for use in other industries.
For further information contact:
Graham Hay
Manager, UK Industrial Service
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