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Local Economy Forecasting Model (LEFM)

LEFM is a custom built computer package designed to enable users to produce their own economic projections for local areas within the UK. It provides a more complete economic picture of the local area covering various key economic indicators and a number of labour market indicators as well as employment.

1. Local economic analysis - the problem

For many business planners and policy advisers, the focus of their analysis is a local area. Economic forecasts at the national and regional level are of limited relevance. But economic analysis at the local level has typically not met users' needs adequately.

Typical approach

  • Need to draw on national or regional data to supplement limited local data
  • Scale of task requires use of external consultants
  • Projections based on forecasts at national level

Drawbacks for the user

  • Usually handled in an ad hoc way, which cannot readily be reproduced
  • In-house staff less able to interpret and update the analysis
  • In-house staff have no access to the national views and find it difficult to assess
    their local significance

2. Local economic analysis - the user's needs

In response to these problems, CE and IER have developed a local economy research programme to meet the following needs:

  • an efficient means of generating local economic projections that makes maximum use of the national, regional and local information available.
  • easy updating, allowing the user to draw on and reassess previous analysis
  • a rigorous and transparent method of analysis, yielding results that can be readily traced back to assumptions
  • easy links to regularly updated, authoritative forecasts at the national and regional levels
  • an explicit way to introduce local knowledge and views
  • substantial sectoral detail, so that projections can be identified closely with major local firms
  • substantial labour market detail (sector, gender, occupation)
  • the ability to implement scenarios and sensitivity testing
  • the ability to carry out impact studies (e.g. opening/closure of a large establishment)
  • easy access to results for evaluation, plotting, transfer to other software for report writing, presentations, etc.

3. Local economic analysis - LEFM©

The solution is LEFM© - a friendly PC-based tool for local economic analysis and projections. It draws on CE and IER's combined expertise in sectoral and labour market analysis at European, national and regional levels. LEFM© is provided with a base forecast calibrated to local conditions, but it allows users to produce their own scenarios. Comparison with national and regional projections is made available, in order to put the local results in context.

4. LEFM's features:

  • a stand-alone model providing forecasts of local economic and labour market indicators, linked explicitly to national and regional forecasts
  • inputs regularly updated based on the latest CE/IER forecasts (annual or semi-annual)
  • the ability to incorporate local information explicitly
  • a 'report writer' providing tailored summary tables suitable for direct export into the user's own reports
  • software running under Microsoft Windows

5. LEFM's outputs:

annual projections for the chosen local area for:

  • gross domestic product
  • consumers' expenditure
  • 41 sectors for output and employment (Standard Industrial Classification)
  • 25 occupations (Standard Occupational Classification)
  • selective disaggregation of employment by gender, full-time/part-time employment, and self-employment
  • population and labour force by age and gender
  • unemployment

6. The authors of LEFM©

Cambridge Econometrics was founded in 1978 to provide commercial access to research in the Department of Applied Economics at the University of Cambridge. It specialises in economic forecasting services providing detailed sectoral and regional/city projections for the UK and the EU economies. Clients include a range of major companies, government departments, TECs, local authorities, management and property consultants, and the European Commission. It has undertaken software develoment to assist economic analysis for the Commonwealth Secretariat, the UN, the European Commission and OPEC. CE is a member of the ERECO network of leading European economic institutes.

The Warwick Institute for Employment Research was founded in 1981 and is internationally recognised for its labour market expertise for the UK and the EU. Its regular Review of the Economy and Employment has become a standard reference for UK labour market analysis. IER's work on local area forecasting forms part of its Local Development and Human Resources programme, which combines data analysis of local labour markets with applied work (skills audits, employer surveys, labour market assessments) principally for TECs/LECs, local authorities and the Department for Education and Skills. The programme also incorporates a training course for labour market analysts.


Cambridge Econometrics

Shyamoli Patel:

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