Geospatial restructuring of industrial trade (GRIT): integration of secondary data to model geospatial economic responses to fuel price

During the 21st century an energy revolution must take place to avoid the worst effects of climate change. Understanding the impact this revolution will have on the cost of goods and services is a vital challenge, but beset by speculation. However, we can be confident that efforts to decarbonise the economy, confront peak oil, and address fuel security, will results in substantive shifts in the price of energy. How will changes in future fuel prices impact upon economic activity across the UK? Which economic activities will experience the greatest pressure from rising fuel prices, and so which locations will have an economy most or least able to cope with future fuel prices?

This project will create a new set of data, built on existing sources, to help generate answers and consider potential solutions. By working with business throughout, it will help strike a balance between a strategic look at the UK's spatial economy and understanding the challenges UK businesses will face.

In Britain, over four million businesses rely on a web of connections to other establishments, as well as to their staff and customers. Each of these connections has its own cost: it takes energy and time to move goods across space. What will happen to that web if energy and fuel costs continue to increase? It is surprisingly hard to find answers based on data and analysis - in large part because data is so sparse. A great deal is known about the UK's economy at the national level, but little about how trade moves internally, at the regional scale and below. Lacking good data, it is difficult to investigate the larger picture. We do not know if business will respond to fuel price increases by focussing more on local markets, or if rising transport costs will be seen as an inevitable part of economic globalisation. Some argue that moving goods is such a small percentage of overall production costs, it hardly matters and can be ignored.

Businesses are doing what they can to plan, given the evident uncertainties, but in using data they acquire from their own operations, their view is necessarily narrow. This project will therefore attempt to provide a more strategic, national overview of trade flows in the UK under changing fuel price scenarios. We will address economic activity disaggregated into 110 classes (SIC 2007) for the UK in 133 regions (NUTS 3 areas). To do this we will use the Business Structure Database that describes almost every business in the UK, and the national level 'Supply and Use' tables to develop trade flows between industrial sectors within the UK at a fine-grained geospatial level. This offers an exciting opportunity to develop new insights into the UK's spatial economy by creating a more detailed picture of the UK's economy than has previously been possible.

We will use the resulting data to examine an important question: how will changing fuel costs alter the UK's economy spatially? This will be done at a broad level for the UK, and in detail for one particular sector, to prove the methodology. We expect the project data to be significant in providing insights into how the UK's economy changes spatially. This is very important to a range of critical activities, such as of infrastructure and utilities planning, and provision of housing and social services, as well as understanding the carbon emission implications of economic restructuring across the UK.

Who will benefit?

The problem the project addresses is important to many stakeholders including government departments concerned with trade, the spatial economy, and climate change (BIS, DfT, DECC, CLG); UK business and trade bodies affected by uncertain fuel price futures; civil society groups involved in campaigning on climate change and 'peak oil' adaptation at the local level; and research organisation such as the UK Energy Research Centre.

We have established agreement to work with the Co-operative Group to examine the issues they face in planning for the risks posed by fuel cost changes (see letter of support), and to help the project understand the details faced by working organisations. The Co-operative is a large organisation; we will also collaborate with a business network, such as 'Deliciously Yorkshire' to work with small to medium size enterprises. The challenges facing smaller firms are likely to be unique; this work will be of great benefit to these enterprises.

The UK 'Transition movement' is predicated on taking action at the local level to mitigate the worst impacts of climate change and energy issues. It has, in recent years, developed strong links with academic researchers. A vibrant knowledge exchange has developed between locally acting groups and many academic organisations. It has matured enough to start collecting data that aims to build on these exchanges to the mutual benefit of both, making sure that "transition and research form a symbiotic relationship" (Brangwyn 2012). We anticipate benefits through engaging with this group.

How will they benefit?

Short to medium term impact: This research is the first attempt to develop a detailed geo-spatial map of inter-UK trade flows, and how such flows may respond to fuel price changes. The impact of this research project in the short term is likely to be relatively modest, as much of the work is of a proof of concept nature, demonstrating how the secondary data can be synthesised to produce potential benefit for a diverse range of stakeholders (outlined above). Lasting impact depends upon third party application of the results derived (this could be expected to occur for the case study partner, who would benefit from the intelligence provided which will inform their future strategic retailing plans).

Continuing impact: The real impact of the research is likely to be realised over the longer term, and could be profound. As fuel prices change, and the economy is subject to geo-spatial stress on trade flows, we will see changes in transport and distribution. Thus the research provides a basis for understanding how fuel price changes impact upon issues such as freight distribution, and associated carbon emission - such intelligence is vital to understanding the impacts of fuel pricing on carbon emission, in the context of national carbon reduction commitments.

Where fuel price pressures on trade flows are high, there are likely to be changes in the rate and location of different types of economic activity. Our research could provide new insights into the spatial distribution of economic activity across the UK in future. This would inform strategic appraisal across a range of domains: for example, we can envisage working with the water industry (where we have very strong links - see www.wateratleeds.org) to explore how spatial restructuring changes future spatial patterns of non-domestic water demand. The geo-spatial intelligence produced would be valuable in informing infrastructure development needs for other utilities, and via production implications for employment, has implications for the spatial location of demands for housing and social services.