3. The economic challenge
Overview
Although East Sussex offers a superb environment and an excellent quality of life, it has economic challenges that are long-term and persistent. These are reflected in relatively low productivity, which translates into a pay gap; relatively high costs; and economic disadvantage which is geographically highly concentrated. It will be important to address these over the lifetime of this strategy, and this will demand action on a number of fronts.
Introduction
East Sussex’s quality of life assets make it an attractive place to live. They are also a source of local pride and distinctiveness, as well as being drivers of opportunity. But the county faces some significant economic challenges which will need to be addressed over the period of this strategy. Essentially, these boil down to three key issues: weak productivity and low pay; relatively high costs; and sharp spatial disparities. This chapter discusses each of these in turn.
Productivity and pay
Since the financial crisis of 2008/09, the UK has experienced weak productivity growth. In 2022, national productivity (measured as the amount of output per hour worked) was some 16% below that of the United States or Germany (Source: House of Commons, 2024, Productivity: Key economic indicators), with growth averaging less than 1% per annum over the preceding decade (source: Office for Budget Responsibility, 2024, Historical Official Forecast Database). This matters: increasing productivity (generating greater value from the resources that we already have) is the largest single component of overall economic growth and is important in maintaining and improving living standards. Consequently, raising the rate of productivity growth has long been a key national objective.
Measured as gross value added (GVA) per filled job, productivity in the South East as a whole was some 8% greater than the national average in 2021. But the picture for East Sussex is much less positive: GVA per filled job was 73% of the UK equivalent. And while the county has seen modest productivity growth in recent years, this has not been sufficient to significantly change the relative position.
Productivity can appear to be a somewhat abstract measure. However, it ultimately translates into pay. In 2022, gross weekly earnings commanded by people working in East Sussex were around 90% of the UK average – although the gap was lower for East Sussex residents working in jobs outside the county.
These low rates of pay coincide with a labour market in which employers report significant workforce skills shortages – even though unemployment has been somewhat higher, and economic activity somewhat lower, post-pandemic in East Sussex than nationally. Formal workforce qualifications are relatively low, and within a strongly SME-oriented economy, there are gaps in management skills in all sectors (source: Future Skills Sussex, 2022, Local Skills Improvement Plan p23).
The challenge therefore is to generate higher rates of pay over time. In turn, this means generating more ‘value’ for every job – whether this is enabled through higher workforce skills and capabilities, increased business investment in new products, processes and management, or better infrastructure that enables firms to operate more efficiently. These ‘drivers of productivity’ have been widely recognised for many years (currently described by the Government as "Education, Enterprise, Employment, Everywhere", although similar definitions of the key drivers of productivity have been set out in successive national strategies), although their practical application depends on the local context.
Relatively high costs
The East Sussex ‘pay gap’ is exacerbated by the fact that the county is a relatively expensive place in which to live. While housing has become less affordable across the UK (and especially in the South East), East Sussex has some of the country’s highest housing costs relative to pay. In all districts in East Sussex, housing is less affordable than it is nationally, and the gap has widened over time: in Wealden, median house prices were 13 times median workplace earnings in 2022, compared with an England average of eight times earnings (Source: ONS, Housing affordability in England and Wales - house prices in Rother and Lewes were also over 12 times median earnings, with Eastbourne and Hastings closer to the national average). Rising purchase prices also translate into reduced affordability in the rented sector. Changing working practices (especially reduced daily commuting) might also have a significant impact on the county’s housing market.
In part, this is a consequence of the county’s attractiveness as a place to live, and the challenges associated with sustainable development in protected environments. But it means that for many people working locally, the prospects of home ownership are likely to be distant, wealth inequality is likely to increase over time if affordability continues to fall, and labour bottlenecks (especially in those sectors, such as social care, that are growing and relatively labour-intensive) are likely to expand. Over the long term, there is a need to enable people to live and work locally, while improving the county’s environmental quality and the sustainability of the housing stock.
Concentrated challenges
The third major challenge is the prevalence of sharp economic disparities at a local level across East Sussex. Almost three-quarters of East Sussex neighbourhoods classified as in the 10% most deprived nationally are located in Hastings (Source: DLUHC, Index of Multiple Deprivation, 2019), and the borough also experiences a higher concentration of worklessness and – perhaps surprisingly for an urban area that ought to attract inbound commuters – a relatively low number of jobs relative to working-age residents. Economic inequalities correlate with wider health and social outcomes: there is, for example, a nine-year gap in male life expectancy between parts of Hastings and the area around Wadhurst (Source: Office for Health Improvement and Disparities).
Smaller concentrations of disadvantage are of course distributed throughout East Sussex, including in towns such as Hailsham and in some rural communities; and there has been successful investment in Hastings over the years, not least in its cultural infrastructure, highlighted in the previous chapter. But the challenges facing the town (and by extension, the wider Hastings-Bexhill urban area) are significant. Looking ahead to 2050, it matters that East Sussex’s larger towns all perform successfully as focal points for economic, social and cultural activity: a sustainable and prosperous East Sussex needs to be well performing everywhere and have good transport connections, especially in its biggest towns.
Conclusions: Implications for strategy
At the time of writing, the ‘pay gap’ and high housing costs highlighted earlier are especially acute given the current ‘cost of living crisis’ and the weak outlook for growth (and real pay growth) in the medium term (source: Office for Budget Responsibility, 2024). But the evidence is that the three challenges highlighted in this chapter have been persistent over time: earnings growth has not kept pace with housing costs growth for 25 years; the workplace ‘pay gap’ has not narrowed; deprivation (and a lack of economic ‘scale’ relative to urban potential) remains quite concentrated; and sustainable connectivity remains constrained. These are long-term challenges which a generational strategy needs to address, supported by the coordinated use of funding and responsibilities at local level and through other strategies (e.g. transport).
Positively, these challenges are in the context of the substantial strengths outlined in the previous chapter. But looking to 2050, they also need to be considered alongside long-term transformational trends, which the next chapter explores further.