Knowledge economy

1. The Knowledge Economy
in Cornwall and the Isles of Scilly
Impact Knowledge Innovation Efficiency Insight Expertise
LEADING THE DEVELOPMENT

AND DELIVERY OF
KNOWLEDGE AND ENTERPRISE SERVICES
Research conducted by The Work Foundation, April 2011

2. Contents
1.The Changing Economy
2.Understanding the Knowledge Economy in
Cornwall and the Isles of Scilly
3.Opportunities for Cornwall and the Isles of Scilly
4.Implications for Cornwall and the Isles of Scilly

3. 1. The Changing Economy

4. What is the Knowledge Economy?
•Over last 40 years the UK economy has undergone an important shift
•We have moved away from an economy dominated by basic
manufacturing and reliant on physical capital and low cost labour for
competitive advantage
•Towards what is often called a ‘knowledge economy’ in which the
ability to produce, use, share and analyse knowledge is increasingly
important as a source of economic growth and wealth creation
•This shift towards a more service-based, knowledge-intensive and
skills-hungry economy has affected all sectors, all sizes of firm and
both the public and the private sectors in every part of the UK

5. Drivers of the Knowledge Economy
Driven by 3 forces:
–Market demand from consumers, business and government
shifting towards higher value added goods and services
–New ‘general purpose’ technologies such as the ICT
technologies introduced in the early 1980s
–Globalisation acting as an accelerator
Characterised by 3 major shifts:
–Growth of knowledge based services which have become
major generators of value added, exports, and new jobs
–A shift in business investment priorities towards knowledge
based intangible assets
–An increasingly well-educated and qualified workforce

6. Shift in business investment priorities
Investments made by
business in ‘intangibles’
increasingly important,
such as:
0
0.2
0.4
0.6
0.8
1.0
1.4
1970 1975 1980 1985 1990 1995 2000
ratio (tangibles = 1.0)
Business investment in ‘intangibles’
Source: HM Treasury
•Innovative inputs (R&D
•Computerised
information (software)
•Firm competencies
(training)
•Organisational structure
(management)

7. Knowledge intensive services
Knowledge intensive services include communications, financial services, business services, education and health
Source: TWF estimates from ONS statistics
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
197 8 1 979 1 980 1 981 1 98 2 1 983 1 984 1 985 19 86 1 98 7 1 988 19 89 19 90 1 991 1 99 2 1 993 19 94 199 5 1 996 19 97 19 98 1 99 9 2 000 2 001 2 002 20 03 2 004 2 005 20 06 20 07
KE services
All other services
Manufacturing
– as major drivers of growth

8. Growth of an educated workforce
Source: EU KLEMS database

9. Major challenges over the next decade
1. Adapting to the
long term shift to
a more knowledge
intensive economy
2. Addressing low
skill levels and
high unemployment
3. Creating a
low carbon
society
4. Driving efficiency
and managing
public expenditure
constraints

10. High level skills
•Fewer have degrees relative to GB,
and unevenly distributed
32.9
34.8
18.9
24.9
26.6
17.0

11. Low skills
•Similar to GB average
14.3
22.2
29.3
27.9
25.7
36.2

12. 2. Understanding the Knowledge Economy
in Cornwall and the Isles of Scilly

13. Measuring the Knowledge Economy
Measuring the Knowledge Economy remains challenging, but there are
three definitions that make it easier to measure something:
–Knowledge industries: high tech manufacturing, water & air transport,
post & telecommunications, financial & business services; education;
health; leisure services
–Knowledge jobs or occupations: professionals, associate professionals
and senior managers
–Knowledge workers: residents with NVQ level 4 (degree level)
qualifications or above
None of these measures fully capture the knowledge economy (IT workers work in
retail; cleaners in universities), but together the measures give a picture of demand
for knowledge and supply of knowledge.
Knowledge industries (as defined by Eurostat) are: high tech manufacturing; mid-high tech manufacturing; water
transport; air transport; post & telecommunications; financial intermediation; insurance & pension funding; auxiliary
financial intermediation; real estate activities; renting of machinery; computer & related activities; research &
development; other business services, education; health; recreation, culture & sport activities.

14. Geography is highly important
•Knowledge intensive industries
are highly (but not increasingly)
geographically concentrated
•Benefit from force of
‘agglomeration’ – proximity to
other economic mass
•In the UK, this often means
proximity to London
•But possible to overcome –
some remote places have
strong knowledge economies,
such as Carrick
© The Work Foundation
% of employment in
Knowledge Intensive
Services, 2005
50.43 to 84.61
46.37 to 50.43
43.45 to 46.37
40.87 to 43.45
38.36 to 40.87
36.43 to 38.36
34.11 to 36.43
22.57 to 34.11

15. Employment in knowledge industries
43.7
50.1
47.9
37.6
39.4
36.9
24.4

16. Employment in high skill occupations
39.0
49.1
47.6
35.7
31.5
34.1

17. Private sector Knowledge Economy lags
•Employment in public
sector knowledge
industries similar to
GB average
•However, private
sector knowledge
industries lag behind
Source: BRES, 2009 - may differ from earlier
ABI results. Definitions as before.

18. But diverse within region
•Much of area dependent
on public sector
knowledge economy
•Public sector reliance
challenging because of
reductions in public
spending
•Private sector knowledge
economy strongest in
Carrick and Penwith
Source: BRES, 2009 – may differ from earlier ABI results.
Public sector KI = Public administration and defence (SIC
84), Education (85), Human health activities (86), Residential
care (87) and Social work without accommodation (88)

19. Knowledge Industries
•Knowledge intensity is below average and the majority of knowledge
intensive industries are underrepresented in Cornwall & Isles of Scilly
•There are some exceptions:
–Cornwall: real estate, education, health & social work and recreation,
culture & leisure
–Isles of Scilly: water transport, post & telecommunications, real estate
•Cornwall and the Isles of Scilly are much more dependent on the public
sector for jobs in knowledge intensive industries
•Yet a relatively high proportion of the Cornish workforce is employed in
high skill occupations
•The challenge over the next decade will be to capitalise on this to
increase employment in private sector knowledge industries

20. 3. Opportunities for
Cornwall and the Isles of Scilly

21. Opportunities
•The next ‘austerity’ decade will be challenging for Cornwall and
the Isles of Scilly and all parts of the United Kingdom
•It will be the expansion of knowledge intensive services that
drives economic recovery over the next decade
•Growth of knowledge intensive industries, businesses and
occupations is therefore essential for the future prosperity and
success of Cornwall and the Isles of Scilly
•Four major opportunities:
1.Low carbon goods and services
2.The creative industries
3.Moving other sectors and businesses up the value chain
4.Capitalising on anchor institutions

22. The low carbon economy
•Low carbon goods and services include activities:
–Focused directly on reducing the use of fossil fuels and increasing
the use of ‘clean’ forms of energy generation
–That reduce of emissions or remove CO
2
from the environment
–That support the transition to less carbon intensive operations
•Low carbon is a crowded arena but Cornwall has a strong base
•Particularly in clean energy generation - although this is unlikely
to sustain large numbers of skilled new jobs in the long term
•There are opportunities to capitalise on the success of the Eden
Project to foster the growth of:
–low carbon product design and architectural services
–software and computer services
–provision of services that support behavioural change
•Potential benefits of ‘low-carbon’ tourism

23. The creative industries
•The creative industries are industries based on ‘individual creativity,
skill and talent’ that have the potential ‘to create wealth and jobs
through developing intellectual property’
•Recognised as mainstay of the tourist economy and local exports and
as a key source of highly skilled jobs and productivity at present and
as central to building a new knowledge economy
•Yet despite a strong reputation for creativity, the creative industries are
currently underrepresented in the economy of Cornwall & Isles of Scilly
– 1.3% of employment in 2008 compared to 3.5% in Great Britain
•Priorities:
–Increasing provision and take-up of high speed broadband
–Increasing the number of creative arts graduates in creative
industry and traditional businesses

24. Moving sectors/businesses up the value chain
•The Work Foundation forecasts that the national economy will see a rising
share of employment in four sectors:
–Low carbon goods and services: building on consumer demand and regulatory change
–Creative industries: developing the UK’s reputation in this area and due to increasingly
affluent global consumers
–High tech services: particularly those focusing on linking businesses and exchanging
knowledge
–Advanced manufacturing: where technologically advanced manufacturing links with high
value services
•Important to build on success: where specialist clusters of employment
and expertise exist, efforts should be made to build on this success and
support business and employment growth
•However, Cornwall & the Isles of Scilly should also focus on increasing value
added, productivity and employment in non-knowledge industries in which
there are clusters of expertise and employment e.g. food manufacturing

25. Capitalising on anchor institutions
•Anchor institutions are the ‘civic, cultural and intellectual institutions
which contribute to the cultural, social and economic vitality of places’
•Include universities, FE colleges, hospitals, museums, libraries,
theatres, galleries, sports teams and large private sector businesses
•Locally rooted institutions are key actors in economic, social and
cultural life in Cornwall and the Isles of Scilly
•They represent ‘sticky capital’ as they are tied to a place by their
histories, missions, physical assets and local relationships
•At a time of public sector retrenchment and low private sector
confidence, anchor institutions should think strategically about whether
they could do more to support entrepreneurialism and the growth of
high value businesses and employment, e.g. Truro college works with
local employers to tailor courses to local need
•Individual and/or collective action

26. Anchor institutions framework
Source: The Work Foundation, adapted from Örjan Sölvell (2008)
Cultural
Capital
Financial
Capital
Social
Capital
Physical
Capital
Human
Capital
Impacts of Anchor
Institutions:
Benefits & Challenges
Intellectual
Capital
Market
Capital

27. 4. Implications for
Cornwall and the Isles of Scilly

28. Implications
•Future prosperity and economic growth will rely in part on the growth
of more knowledge intensive businesses and forms of employment
•This is challenging because economic activity and knowledge
intensive economic activity in particular tend to be urban phenomena
•The predominantly rural and peripheral nature of Cornwall and the
Isles of Scilly means they cannot offer the same competitive KE
advantages as large cities
•Nonetheless they are distinctive places with unique histories,
landscapes and quality of life offerings that greatly appeal to many
highly skilled workers and entrepreneurs
•There is a need for strategic action to:
–Capitalise on the opportunities and advantages that do exist
–Eliminate or reduce challenges that limit the potential for KE growth, such as
the distance of parts of the area from large cities

29. Implications
•Numerous KE projects and initiatives have taken place, are underway
or are planned (e.g. those by Combined Universities in Cornwall)
•The focus on developing human capital, supporting business networks
and university-business linkages and fostering innovation and
enterprise as well as investing in ‘hard’ infrastructure in the form of
new facilities and broadband connectivity should be welcomed
•More attention should be paid to building on existing strengths and
moving firms and sectors up the value chain
•Convergence funding will enable Cornwall and the Isles of Scilly to
fund investments in physical and human capital over the next 3 years
not available to other places
•However there is a need for careful ‘succession planning’ for the
period beyond 2013 to ensure that the momentum continues