ISSUE 24 Lancaster University Management School | the place to be FIFTYFOUR DEGREES Research that goes beyond scholarship How universities shape regional development 6 How servitization can reinvigorate business 10 How to spot housing market bubbles 18 MAKING AN IMPACT
superior expert in the field MSc/PGDip/PGCert in Data Science & Econometrics www.timberlake-edu.co.uk Jean-Michel Zokoian ENSAE and CREST Prof Wouter Verbeke KU Leven Régis Amicha Foxintelligence Prof Emmanuel Flachaire Aix-Marseille School of Economics Global World-Class Faculty edu@timberlake.co.uk • Join the world’s first live, fully online Data Science and Econometrics Degree, built with you in mind • Gain the technical skills and better market knowledge for career opportunities in the private and public sector • Flexible, innovative and accessible part-time learning • Learn from distinguished, globally-leading academics and industry experts in the fields of Big Data, Deep Learning, Programming Languages, Data Mining and more • Boost your career in policy-making institutions (central banks, government offices and authorities, market regulatory bodies) and industry (finance, energy, real estate, Information Technology) • IIF certified: graduates will be awarded an International Institute of Forecasters (IIF) Certificate in Forecasting Practice, which will entitle the holder to use the credential IIF Certified Forecaster • The IIF is a non-profit organisation known for the leading peer-review journal in forecasting, International Journal of Forecasting, and organising events such as the renowned International Symposium on Forecasting
FIFTY FOUR DEGREES | 3 Servitization: Competing Beyond the Product Professors Andreas Schroeder and Kostas Selviaridis, and Dr Nhu Quynh Do discuss their work with manufacturing and engineering businesses on expanding their offering through servitization. 6 In this issue... 34 Rise Like a (Farmed) Salmon Dr Josi Fernandes and Dr James Robinson share their work on farmed salmon in the UK, showing how it has become a more common part of our diets through determined efforts of producers and retailers. 22 The Secret Sauce of Rankings Dr Dasha Smirnow explains her work looking at sustainability rankings, how they are made, what effects they have, and what they mean for businesses and their stakeholders. 14 A divided workforce Not everyone has the same benefits or advantages should they have ill health during their working life. The Work Foundation’s George Williams shows how health inequalities are reshaping the UK labour market. 30 Why won’t you go green? Dr Jingxi Huang and Professor Ahmad Daryanto outline their work exploring how companies can encourage more people to join their GLPs, and choose green rewards when they cash in their points. The Great Sustainability Reporting Divide Dr Di Wang reveals how the financial concept of materiality has come to first unite and then separate those involved in the crucial issue of corporate sustainability reporting. On The Bubble Professor Themis Pavlidis outlines a new method to spot when bubbles are happening, using the expectations and beliefs of ordinary people. 18 10 Diving into companies’ ocean impacts Professor Jan Bebbington unpacks research showing how companies impact the oceans – and how they acknowledge and report on these consequences. 38 Home Advantage As levels of home education increase among children across the UK, Dr Rachael Barrow speaks to those who have been home educated to see the effects it has had on their working lives – with some surprising findings. 42 26 A Fresh Look at Regional Entrepreneurship Professor Ellie Hamilton explains how can we reshape regional development and entrepreneurship to address inequalities and tackle marginalisation. 46 Who Governs Meta’s Metaverse? Dr Jekaterina Rindt dives into the metaverse to look at who makes the regulations, and how they can spread to govern global platforms.
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Foreword Subscribe online at lancaster.ac.uk/fiftyfour SUBSCRIBE Over recent years, there has been an increasing recognition of the importance of universities and business and management schools like our own in making a practical and noticeable impact on the world around us and at large. I am not thinking solely about the role we have as employers and educators, providing livelihoods and good education, but rather about the work that goes on – sometimes behind closed doors, but progressively more out in the open with business, industry and society – with our researchers. Lancaster University Management School has a proud history of working with organisations big and small, on our doorstep here in Lancashire and further afield around the globe, to affect positive change. Whether that occurs in business operations, in widespread accounting or financial practice, in management and leadership approaches, or in any number of other ways, we can see clearly the role which LUMS academics have had in bringing about shifts. Ellie Hamilton has seen this more than most. Ellie is now an Emerita Professor in our Department of Entrepreneurship and Strategy, where she was a valued colleague of my own for many years. Ellie herself has collaborated with businesses in our region and beyond on some of our many renowned knowledge exchange programmes, bringing her expertise on entrepreneurship to the fore. It seems only fitting, therefore, that Ellie’s most recent work – undertaken with former Lancaster colleagues Danny Soetanto and Rhiannon Pugh – looks at the changing face of entrepreneurship, how it can help regional (re)development and reduce inequalities, and the big role universities can play in that renaissance. There is much to take from Ellie’s words about the positive impact we can have and have already had on shaping mindsets and actions for great results. You can see engagement in action in the work of Andreas Schroeder, Kostas Selviaridis and Nho Quynh Do as well. They are part of a team here at Lancaster working to introduce the concept of servitization to businesses throughout the Morecambe Bay area and beyond. Their Servitization Bootcamps offer organisations a look at how they can switch to a service offering rather than providing one-off product sales. It is a fascinating concept which has already been applied by some big companies, and those taking part in the workshops are seeing change in their operations. It may take a little longer for the results of the Work Foundation’s endeavours on the effects of ill health on the workforce to be seen, but this is equally important. The thinktank held their first Work and Health Summit in London this year, attracting important figures from the employment realm, before following up with an event here in Lancaster. George Williams’ article outlines their findings, and the importance of removing health and income inequalities. Themis Pavlidis works with key figures at the Federal Reserve Bank of Dallas, and together they have produced a new method for predicting bubbles in the housing market. We have seen the effects of such bubbles globally in recent years, and Themis’s research can help us see them coming in future and protect the economy as a result. The fact that he and other members of the International Housing Observatory are working with the Federal Reserve already demonstrates the real-world application of their expertise. You can see such function in the endeavours of many of our researchers, even when it might not be obvious at first glance. Dasha Smirnow, Di Wang, and Jan Bebbington all work on various aspects of company sustainability – from how they compile reports to how they are rated for their efforts, and how they perceive the importance of such work. This lets us all see where effort needs to be concentrated to improve sustainability practice, and what aspects we need to pay attention to when it comes to understanding why organisations act the way they do. The Pentland Centre, of which all three are members – and, indeed, Jan is the Director – engages regularly with businesses and other organisations to ensure this potential for engagement becomes reality. I know the other researchers included in this edition will have real-world relevance in mind for their work as well – for instance, how we can improve seafood diets, how employers consider home educated employees, how the metaverse is governed, or how companies make green reward schemes more successful. It is clear from all this interesting and relevant work, in addition to the research of our other colleagues across the School, how we are continuing to help shape responsible business and behaviour across so many organisations. I hope you enjoy reading and take inspiration from the articles in this edition. Welcome to Issue 24 of Fifty Four Degrees. Professor Claire Leitch Executive Dean Lancaster University Management School FIFTY FOUR DEGREES | 5
6 | How can we reshape regional development and entrepreneurship to address inequalities and tackle marginalisation – rather than reinforce them? Professor Ellie Hamilton explains how new thinking can plot the way forward, with universities having the potential to play a key role. A Fresh Look at Regional Entrepreneurship
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We take pride at Lancaster in how we engage with our region. The Civic University agenda may have emerged in the last decade, but for much longer Lancaster University Management School has worked with businesses and individuals across the North West of England. One of our main contributions has been collaborations with entrepreneurs. We encourage learning, spark networking and new connections, and help to improve the area. This role as an anchor institution brings us into the orbit of local and national government, community groups, rural and urban organisations. It has been transformational for all involved. And it is a way of operating that fits perfectly into new ways of thinking on how to solve the grand societal challenges. As we tackle climate change and continuing (even increasing) economic inequality, we must transform how we view entrepreneurship and regional development – and how we plan for the future. Entrepreneurship is being reimagined as a tool for social change, community empowerment, and sustainable regional growth. As we know at Lancaster, universities have an essential role. NEW PERSPECTIVES Entrepreneurship has long been celebrated as a driver of economic growth. It is celebrated as a dynamic and transformative force. But its benefits are often unevenly distributed, reinforcing inequalities. In our new book, we ask what if entrepreneurship could spark social transformation? What if it could help address regional disparities, empower marginalised communities, and foster more inclusive economies? When strategically harnessed, we believe entrepreneurship can help to bring about positive change for communities. Entrepreneurship’s role in regional development needs to be reframed. We must address how it can be leveraged in a way that ensures long-term benefits for all – we cannot continue to see entrepreneurship as being predominantly about young white men in tech-based initiatives in big cities in the Global North. When we talk about ‘place’ in entrepreneurship, we must go beyond geographical location to encompass the social context within which entrepreneurial action can emerge. No region is homogeneous – disparities in knowledge, skills, market opportunities, and institutional support create diverse developmental trajectories. When aligned with local values and supported by inclusive policies, entrepreneurship can help regions build resilience, foster innovation, and create meaningful opportunities for all. WIDER UNDERSTANDING Traditionally, regional development is predominantly contextualised through an economic lens, emphasising job creation, growth, and industrial productivity. This is reinforced by policy frameworks aimed at stimulating economic expansion and investment. But economic growth alone does not guarantee equitable prosperity, social cohesion, or environmental sustainability. A region experiencing strong economic growth may simultaneously face challenges such as inadequate access to education, healthcare disparities, and cultural marginalisation. Alongside economic measures such as GDP growth, job creation, and investment metrics, we need to assess health outcomes, life expectancy and quality of life, environmental sustainability, social cohesion, overall wellbeing, air quality, and pollution levels. There are other issues with the current situation. Historically, development policies have often followed a topdown approach, favouring urban centres, large enterprises, and politically influential actors. This exacerbates intra-regional disparities. Instead, they should be rooted in the unique histories, cultures, and needs of each region. The active involvement of grassroots organisations and community-led initiatives is crucial for ensuring strategies align with local needs and aspirations. Concepts and ideas developed in one setting must allow for flexibility elsewhere. Rural areas benefit from different models to high-density hightech urban clusters, for example. Support mechanisms need to align with regional strengths rather than trying to replicate what has worked elsewhere. Not everywhere can be Silicon Valley. Policies must be tailored to local realities. This means supporting social enterprises, cooperatives, and 8 |
community-based ventures, investing in education, mentorship, and networks. OUR ROLE As we tackle grand societal and environmental challenges, entrepreneurial universities have a role to play. Higher education institutions serve as anchors for regional development through economic and social engagement in their region and beyond. Like Lancaster, they are deeply embedded in local communities and capable of driving change. Universities contribute in multiple ways: • Knowledge creation and transfer: There is a critical role for learning, both at individual and collective levels. We can develop new perspectives and frameworks that push thinking in new directions. Universities generate ideas and technologies that can be used to address local challenges. • Entrepreneurial education: Entrepreneurial learning can foster adaptive capacities, skill development, and knowledge exchange. Networks of entrepreneurs, institutions and organisations are essential for this learning. Universities such as Lancaster are key to creating environments that facilitate continuous learning and knowledge exchange. They play a pivotal role in ensuring businesses not only survive but grow by navigating challenges and adapting to evolving market conditions. You can see it here at Lancaster with the Entrepreneurs in Residence network, with close to 100 entrepreneurs from around the world helping to educate and advise the next generation, and working closely with our research experts. • Regional engagement: Many universities actively collaborate with local government, businesses, and civil society to co-create solutions to regional problems. At Lancaster, we all had experience of the Wave 2 Growth Hubs Programme. Through this, we witnessed the importance of local context in designing and developing growth hubs. We believe it is possible to create a virtuous circle where research insights from universities are factored into and disseminated via policy-led initiatives which can impact on regional development and in turn foster new research insights with policy implications. ENTREPRENEURIAL ECOSYSTEMS An entrepreneurial ecosystem includes all the elements that support or hinder entrepreneurship in a region: financial institutions, government policies, cultural attitudes, infrastructure, and more. Universities are a key part, providing talent, research, and connections. But the concept assumes all actors contribute equally, whereas the reality is that large corporations, government, and elite investors wield disproportionate influence, and underrepresented groups can be excluded. Unequal access to financial resources, skills, and networks often mean that entrepreneurship remains concentrated among privileged demographics and regions. Women, ethnic minorities and those from lower-income backgrounds face barriers to entry. We require a more inclusive and dynamic approach, one that recognises the diversity of regional contexts and actively works to reduce barriers. Regional learning ecosystems go beyond individual entrepreneurial learning to consider how entire regions can learn, adapt, and evolve. Universities again play a crucial role. By acting as hubs of knowledge exchange, they can help regions build capacity to respond to economic disruption, technological shifts, or environmental challenges. This kind of collective learning is essential for longterm resilience and sustainability. WHAT HAPPENS NOW? The question now is not whether entrepreneurship should play a role in regional development, but how it can do so in a way that is inclusive, sustainable, and context-sensitive. Key stakeholders, including industry, financial institutions and universities, contribute essential resources, knowledge, and support networks. They together create the environment in which entrepreneurship operates. By embracing their role as anchor institutions, fostering entrepreneurial learning, and engaging with their regions in meaningful ways, universities can help build ecosystems that support not just economic growth, but social and cultural growth as well. Policymakers must rethink their assumptions. They should focus on nurturing the unique strengths of each region, supporting diverse forms of entrepreneurship, and addressing the structural inequalities that hold people and places back. Strengthening entrepreneurial learning, fostering multi-stakeholder collaboration, and tackling structural inequalities are essential to ensuring entrepreneurship serves as a force for sustainable regional growth. FIFTY FOUR DEGREES | 9 Ellie Hamilton is an Emerita Professor in the Department of Entrepreneurship and Strategy. She was a founder of the Institute for Entrepreneurship and Enterprise Development, and her research encompasses entrepreneurship and innovation in dialogue with business and community. Rethinking Entrepreneurship and Regional Development, by Professor Eleanor Hamilton, of Lancaster University Management School; Dr Rhiannon Pugh, of Lund University, and Dr Danny Soetanto, of Adelaide University, is published by Edward Elgar. Dr Pugh and Dr Soetanto are both former Lancaster University Management School researchers. e.hamilton@lancaster.ac.uk
10 | Companies are looking for new ways to make their mark in a competitive global market. Professors Andreas Schroeder and Kostas Selviaridis, and Dr Nhu Quynh Do explain their work with manufacturing and engineering businesses on expanding their offering through servitization. Servitization: Competing Beyond the Product
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Manufacturing is a big part of the UK’s economy, accounting for nearly 10% of output and half of all exports. It provides jobs for more than 2.5 million skilled workers, who earn good pay and support their local communities. But the sector is facing serious challenges. Cheaper international competitors are making high-quality products, creating difficulties for UK manufacturers to stay competitive. We must find ways to help UK manufacturers compete in a rapidly changing global market. THE PROMISE OF SERVITIZATION One key trend in business today is servitization. This means manufacturers are changing how they operate, focusing on providing results for their customers rather than just selling products. Instead of selling equipment once, they offer services that help industrial clients achieve the outcomes that matter most to them. Rolls-Royce Aerospace’s TotalCare programme is a prime example. Instead of just selling engines, RollsRoyce provides a “power by the hour” service, where airlines pay for guaranteed performance – thrust, uptime, and efficiency, rather than just purchasing hardware. This approach emphasises reliable performance over physical products, aligning better with airline priorities. The focus is on dependability and peace of mind, not just the product itself. In servitization, the product becomes part of a comprehensive system designed to deliver specific outcomes, enhancing value and customer satisfaction. WHY SERVITIZATION MATTERS Servitization offers major benefits for manufacturers, their customers, and the broader industry. Manufacturers gain stability through long-term service contracts and recurring revenue, reducing reliance on one-time sales and avoiding boomand-bust cycles. Focusing on outcomes helps differentiate firms and protect margins against low-cost competitors. For industrial customers, servitization fosters closer strategic relationships with suppliers motivated to innovate and share risks, building trust for deeper, long-term collaborations. Industry-wide, it promotes sustainability and circular economy goals by emphasising design for repair and reuse. Shared responsibility for efficient operations aligns with efforts to reduce greenhouse gas emissions across the supply chain, supporting organisations to meet their Scope 3 emission targets. WHY SERVITIZATION IS DIFFICULT While many manufacturers see the potential of servitization, the primary barriers they face are not technical, but rooted in organisational factors like skills, culture, and mindset. The traditional product-focused approach views services as secondary or ‘necessary evil’ rather than as a strategic differentiator and area of innovation. Transitioning to outcome-based services requires rethinking skills, culture, and structures. This is challenging but achievable. Our team at Lancaster University Management School, in partnership with the Advanced Services Group (ASG), has over a decade of experience in servitization, working with 300-plus manufacturers to solve challenges and develop practical strategies for their transformation. An EPSRC-funded Impact Acceleration Account project allowed us to collaborate with the Morecambe Bay-based ElecTech Innovation cluster, providing collaboration opportunities for manufacturers to work with Lancaster University. A PRACTICAL PATHWAY Our research shows that choosing the right starting point is crucial on the servitization journey. To simplify this process, we created a Servitization Bootcamp that clarifies the concept, offers practical tools to build the business case, and guides the development of projects through three key steps. 1. Apply the concepts The first step is to make servitization concepts practical and relevant for businesses, highlighting opportunities they can exploit. Look at best practice in your industry, with examples from leading companies – large and small. Servitization is not just for large manufacturers. SMEs, with their agility, strong leadership, and close customer connections, are well-placed to benefit from the shift. The step also includes mapping manufacturers’ existing service activities to various service levels, from basic to advanced, to understand current service offerings and how these activities are interconnected. For instance, providing uptime depends on robust repair and maintenance capabilities. Our ElecTech Cluster members found it valuable to identify and compare their current offerings, such as advisory services, although they noted that since these are rarely charged, they are mainly seen as costs rather than sources of revenue or profit opportunities. 2. Build the business case Start building a strong business case for a service-based offering. This is crucial to gaining leadership support and to securing resources for full development. A common challenge manufacturers face is limited insight into customer needs. While they are often product experts, developing services that meet customer needs and profitability objectives demands a much deeper understanding of the customer’s business. Manufacturers need to use customer empathy techniques to understand customer needs, opportunities, and pain points. Based on our experience, mapping out the customer’s economic situation, strategic goals, process hurdles, and product experience is especially effective. These techniques should be employed in collaboration with multiple customers to learn about their broader business challenges. Working with the ElecTech Cluster, we found they struggled to analyse customer businesses deeply, underscoring how crucial this 12 |
understanding is for creating convincing proposals. This exercise raises a key question for business: who is our customer in a service context? For many manufacturers, the product is bought by the next link in the supply chain. But in service settings, where the product is part of a larger system and the engagement lasts through its use, the real customer is often the end-user, about whom we usually know even less. 3. Learn through piloting Develop compelling service value propositions that directly address customer pain points and benefits, focusing on the customer’s context to deliver real value. The goal is to develop straightforward propositions guiding targeted service development. Many manufacturers struggle here: while they often test and improve their product designs systematically, they neglect doing the same for services. Service development is more complex and uncertain because it hinges on the customer’s unique business activities – areas where manufacturers typically lack experience. From our perspective, successful service development is an ongoing cycle of experimentation focused on learning and validating the best ways to deliver value to customers. The focus is on creating candidate value propositions that can be piloted as minimum viable services with customers. These pilots serve to discover and validate. Among the candidate service value propositions that were identified within our cluster were a two-way radio manufacturer offering communication and coordination solutions for remote quarry operations, and a manufacturer of high-voltage connectors providing flexible, plug-and-play capabilities to its customers. NOT OPTIONAL For many manufacturers, servitization is increasingly a business imperative. When they cannot differentiate their products alone, innovation and expanding their service offerings become crucial. While the goal is straightforward, the path is often challenging and filled with common pitfalls: treating servitization as solely a digital or engineering project instead of focusing on customer outcomes; assuming you fully understand what your customers need; and overcomplicating services without testing them with real customers. One of the ElecTech Cluster companies has already taken one of its core service value propositions, which they are now testing with a major customer. We see a clear appetite for change among manufacturers. With the power of structured collaboration, this ambition can be transformed into action. Servitization is not about abandoning manufacturing; it is about leveraging deep product expertise to deliver maximum value to customers, and ensuring manufacturers are rewarded for their expertise and can compete with it in the future. FIFTY FOUR DEGREES | 13 Listen to Andreas discussing servitization on the Transforming Tomorrow podcast: https://pod.fo/e/2da6c3 trAnsfoRming toMorrow Andreas Schroeder is a Professor of Digital Strategy and Services Innovation in the Department of Management Science. Professor Kostas Selviaridis is Chair in Operations and Supply Chain Management in the Department of Management Science. Dr Nhu Quynh Do an Assistant Professor in Logistics and Supply Chain Management in the Department of Management Science. Their work on Servitization Bootcamps has been supported by Lancaster’s EPSRC Impact Acceleration Account (EP/X525583/1). Lancaster University will run further Servitization Bootcamps and, through these, will support more businesses to innovate, strengthen their service offerings, and accelerate their transition toward outcome-based business models. Companies interested in taking part are encouraged to get in touch to explore future opportunities by emailing lumsforbusiness@lancaster.ac.uk andreas.schroeder@lancaster.ac.uk; k.selviaridis@lancaster.ac.uk; q.do1@lancaster.ac.uk
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FIFTY FOUR DEGREES | 15 Not everyone has the same benefits or advantages should they have ill health during their working life. The Work Foundation’s George Williams shows how health inequalities are reshaping the UK labour market. A DIVID WORKF VIDED KFORCE
The UK labour market is at a crossroads. Despite signs that the wave of economic inactivity driven by ill health may be stabilising, 2.8 million people remain out of work due to long-term sickness. New research with Professor Stavroula Leka, Director of the Centre for Organisational Health & Well-being at Lancaster University, reveals that structural divisions in job quality risk leaving millions unable to balance their health needs with sustained employment. One in 17 workers report they expect to leave their current job within the next year due to health reasons. Our report, A Divided Workforce? Worker Views on Health and Employment in 2025, drew on a national representative survey of more than 3,700 workers. It paints a picture of a two-tier workforce: where some workers benefit from secure, supportive employment, while others face poor job quality, limited protections, and associated health risks. At the heart of this divide, the report – launched at the inaugural Work and Health Summit in London earlier this year – reveals three groups: workers already in poor health; those on low incomes; and young people at the beginning of their careers. Each of these cohorts faces a distinct set of barriers that risk compounding a cycle of poor health and employment outcomes. A REINFORCING CYCLE Work environment and working conditions have a substantial bearing on whether people with ill health are more vulnerable to leaving the workforce early. It is therefore critical that workers in ill health are engaged in good quality and healthy forms of employment that help protect against further deterioration of their wellbeing. Worryingly, our research uncovered the opposite was often the case. Workers who reported they were in poor health were much less likely to feel their employer was supportive of their health. They were more likely than those in good health to say their job had a negative impact on their physical (two times) or mental (1.5 times) health. They were also 1.6 times more likely to be worried their deteriorating health would impact their ability to remain in employment. Workers in poor health also have noticeably less access to key attributes of ‘good quality’ work, including autonomy, job security and flexible working arrangements. All are often critical factors in supporting those in poor health to remain in employment. 16 |
DISPARITIES IN SUPPORT Our findings reveal that low-income workers – those earning less than £25,000 a year – are consistently less likely to benefit from workplace policies that support health, than middle- and higher-income workers. Many report they do not have access to workplace health adjustments, occupational health services and enhanced sick leave payments. They are also less likely to feel their employer is supportive of their health, with just half of low-income workers (51%) believing their employer would make adjustments if they developed a long-term health condition. Even fewer (47%) feel their employer takes their mental and physical health seriously. A DIFFICULT START The picture is no brighter for young workers. Those aged 16 to 24 are 1.5 times more likely to report poor mental health than any other age group. They are also the age group most likely to expect their health to deteriorate in the next year or say their job negatively impacts their mental wellbeing (43%). The findings are particularly important given the long-term implications of poor early experiences of work. If young workers are beginning their careers in roles that damage their health, this can have lasting effects on their career prospects, earning potential, and engagement with the labour market over time. ADDRESSING THE DIVIDE The implications of our findings extend far beyond the individuals affected. Workers leaving the labour market due to health reasons pose a challenge to the government’s plans for growth and risk placing additional strain on welfare and healthcare systems. The UK Government has recognised the need to stem the flow of people leaving the labour market due to ill health. Its appointment of Sir Charlie Mayfield to lead a ‘Keep Britain Working Review’ is an acknowledgement of the role government and employers can play in tackling health-based economic inactivity and promoting healthy and inclusive workplaces. To achieve this objective there must be a recognition that workplace support for people in poor health needs to be strengthened through comprehensive occupational health provision, improved sick pay and leave policies, and greater access to the core elements of good-quality work, such as flexibility. Job quality for low-income workers must be improved by enhancing their access to employment rights, protections, and wider health support in the workplace. Substantial additional support is needed for young people at the start of their careers, including better access to NHS mental health services, tailored employment programmes for those currently out of work, and a job guarantee to ensure all young people can access secure, good-quality employment. This agenda is not just a social imperative but an economic one. A workforce riven by health and income inequality threatens productivity and national prosperity. The message is clear: workers’ experiences must be at the centre of reform efforts. Only by addressing the structural factors that undermine health at work can the UK hope to reduce economic inactivity and build a labour market fit for the future. FIFTY FOUR DEGREES | 17 George Williams is a Research and Policy Analyst for the Work Foundation. The A Divided Workforce? Worker Views on Health and Employment in 2025 report was launched at the inaugural Work and Health Summit in London. More than100 participants from business, policy and civil society attended. Key speakers included Sir Charlie Mayfield, Rt Hon Alan Milburn (Chancellor, Lancaster University), Professor Stavroula Leka, Rt Hon Chloe Smith (former Secretary of State for Work and Pensions) and Dame Clare Moriarty (Chief Executive, Citizens Advice). george.williams@lancaster.ac.uk
18 | When a housing bubble goes pop, the consequences are felt across society. But detecting these market issues is not easy. Professor Themis Pavlidis outlines a new method to spot when bubbles are happening, using the expectations and beliefs of ordinary people. ON THE BUBBLE
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Housing bubbles can be devastating. The 2008 housing crisis provided a painful lesson about what can happen when house prices spiral out of control. When home prices rise far beyond what people can afford only to crash later, the fallout hurts families, communities, businesses and entire economies. In contrast to financial markets like the stock market, this a market to which everybody is exposed to some extent. But what if we could spot a bubble before it bursts? Detecting housing bubbles as they are happening has always been difficult. There is a lot of uncertainty surrounding what the price of housing should be. The broad aim of the International Housing Observatory is to increase our understanding of how housing markets operate. We have a specific focus on monitoring housing markets for periods of exuberance, of overheating. We are also trying to provide information to the public and to policymakers in real time. Economists traditionally look at fundamentals – factors such as income, population growth, construction costs, and interest rates – to determine what homes should reasonably cost. When prices climb far above what these factors suggest, it might signal a bubble. But nobody can agree on exactly which fundamentals matter most or how to measure them. One economist might focus on rental prices, another on local job growth, a third on mortgage rates. Models also rely on backward-looking data, are slow to update, and often miss the bigger picture. This makes it nearly impossible to definitively say whether rising prices reflect genuine economic conditions or dangerous speculation. A NEW WAY We took a different approach. In our research, we are trying to see what consumers believe about the housing market, to make use of their expectations about house prices. Using data from the University of Michigan Survey of Consumers (UMSC), we looked at what ordinary Americans expect to happen to housing prices. The UMSC has been asking Americans about their expectations for housing prices for decades. By comparing these forecasts to what happened, we can measure how accurate expectations were, and whether they consistently underestimated price growth. By looking at deviations between what people expect and what actually happens we get a clean signal of what is happening in the market, and whether we are in a bubble period or not. We are not looking at how big the deviation between belief and actuality is on its own; we are looking at how fast this deviation changes over time. If people keep under-guessing how fast home prices will rise – and that mistake snowballs month after month – it is a tell-tale sign that prices are being driven by hype rather than fundamentals. So, why should we look at “forecast errors”? Imagine a weather app that keeps saying, “Expect 20°C tomorrow,” yet the thermometer turns out to be 21°C, then 23°C, then 26°C. Each day is not just warmer than forecasted, but hotter than the day before. Those escalating misses pile up into a clear signal that something abnormal is driving temperatures beyond expectations. One of the advantages of our method compared to the traditional methods is that we have higher frequency data for survey expectations compared to those traditional fundamentals, like income, that we have every quarter. For real-time monitoring, this is a beneficial method to see what people expect about the housing market and how far away that is from what actually happens. TRACKING EXPECTATION This is how it works. Imagine that in 2019, survey respondents expected home prices to rise by 3% over the next year, but prices actually rose by 8%. Now imagine this pattern repeats month after month, with people consistently underestimating how fast prices are rising. This suggests prices might be climbing faster than even optimistic buyers think is reasonable, a potential sign of speculative excess. Using this method, we identified two major periods of housing market exuberance in the USA since the 2008 financial crisis. 20 |
1. 2016–2018: The “Silent” Bubble Before Covid, the bubble was silent. There was not much attention from the media and from policymakers. There was some discussion of ‘the everything bubble’, where quantitative easing and monetary policy were accommodating after the financial crisis. A lot of liquidity was injected into the market, and this liquidity ended up in financial markets and in real estate markets. It caused asset prices to surge. This was not the dramatic bubble of the mid-2000s, but it represented a clear departure from normal market behaviour. Our analysis shows that expectations lagged behind reality and people did not fully anticipate how fast prices would climb. This mismatch suggests speculative dynamics were at play, even if they went unnoticed at the time. 2. 2021: The Post-Pandemic Boom After Covid-19 hit, the housing market surged. Low interest rates, government stimulus, and a shift to remote working all contributed to soaring demand. This period saw some of the most extreme price increases in recent memory, with homes selling for well above asking prices and buyers waiving inspections in bidding wars. Once again, people underestimated how quickly prices would rise. Our survey data confirmed what many observers suspected: the market had entered territory where prices seemed disconnected from reasonable expectations. EVERYONE TOGETHER One important aspect of our research is its ability to examine different groups of society separately. The UMSC is a representative sample of the US population, around 500 households who are interviewed every month. They are not experts on the housing market; they come from different socioeconomic and demographic groups. We are looking at the overall population and we are getting a feeling from the overall population, which is a good starting point because you want to see what everybody believes. By having a sample that is representative from the population, you get the views, the mood, of the entire market. This means we can look at gender, for instance, education levels, or those with and without stock investments, where there might be assumed to be differences in their beliefs. One of our interesting findings is that the bubble seems to be consistent across socioeconomic and demographic groups. This suggests housing bubbles can become systemic, affecting the entire market, not just a few hotspots. KEEPING IT REAL Our method’s strength lies in its simplicity and real-time applicability. It requires tracking whether people’s expectations are consistently wrong in ways that suggest speculative behaviour. Understanding how beliefs shape housing markets can help policymakers, regulators, and even everyday buyers make better decisions. For policymakers, this could provide earlier warning signs of dangerous market conditions. For individual homebuyers and investors, understanding these patterns might help inform decisions about when to buy, sell, or wait. Expectation-based tools offer several advantages: • They are timely: Beliefs can shift before hard data like income or rent catches up. Survey data becomes available relatively quickly, potentially allowing for faster identification of concerning trends. • They are detailed: Surveys capture household-level insights across different groups. By tracking consumer expectations alongside traditional economic indicators, regulators and analysts could develop a more complete picture of market conditions. • They are flexible: They do not rely on rigid models or assumptions about what prices “should” be. By paying attention to what people expect, not just what has already happened, we can gain a clearer picture of where the market might be headed. Economists can gain insights that purely technical approaches might miss. Housing bubbles do not always announce themselves. They can build quietly, driven by optimism and reinforced by rising prices. But by listening to what people believe and how those beliefs evolve, we can spot the warning signs earlier. We do not say that our method should replace everything that is being done to monitor the housing market, but this is a useful addition to our arsenal. It will not prevent bubbles, but it can help us see them coming, and that is a crucial step towards protecting financial stability. FIFTY FOUR DEGREES | 21 Professor Efthymios (Themis) Pavlidis is a Professor in the Department of Economics, and CoDirector of both the UK and International Housing Observatories. The latter is run in collaboration with the Globalization and Monetary Policy Institute of the Federal Reserve Bank of Dallas. The working paper Bubbling Up? What Consumer Expectations Reveal About U.S. Housing Market Exuberance, is coauthored by Enrique Martínez-García, of the Federal Reserve Bank of Dallas, and Professor Themis Pavlidis. e.pavlidis@lancaster.ac.uk
The Secret Sauce of Rankings Rankings and ratings are everywhere in business. Dr Dasha Smirnow explains her work with Professor Jan Bebbington, looking at sustainability rankings, how they are made, what effects they have, and what they mean for businesses and their stakeholders. 22 |
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Think about the last time you checked a ranking or rating before making a decision. Maybe it was a TripAdvisor score when booking a hotel, a movie rating before choosing what to watch, or a Trustpilot ranking as you looked for a reliable local tradesperson. Today, ratings, rankings and league tables are everywhere. They are no longer the domain of sports teams or individuals. There are different types: some are rating aggregators, like TripAdvisor, that pool user-generated ratings together; others are expert critics, like restaurant critics and financial analysts, who use a more subjective methodology; and others are produced by organisations using quantitative methods, like corporate ESG ratings. Across all these scales, companies are evaluated in many ways. From credit ratings by Moody’s to Fortune’s Most Admired Companies, these scores shape reputations and guide the decisions of clients, partners, and stakeholders, influencing billions of pounds in economic activity. The numbers and lists can feel authoritative too. We may sometimes wonder “How did they calculate that?” – but we still use them. And companies pay attention, because rankings can affect customers, investors, and regulators. But here’s the question rarely explored: Who makes these rankings, and how are they actually built? MEET THE RANKINGS ENTREPRENEUR For our work, we are interested in producers who create their own ranking or rating based on a quantitative methodology. In business and policy, many rankings and ratings are made by what researchers call benchmark producers. These can be big names like Standard & Poor’s (credit ratings) or the Dow Jones Sustainability Index (ESG ratings), but also smaller producers that rate companies on specific issues, such as human rights (e.g., BankTrack), climate action (e.g., CDP), or animal welfare (e.g., Business benchmark on Farm Animal Welfare – BBFAW). Our research focused on one such small but fascinating producer: Seafood Intelligence (SI). Between 2011 and 2017, SI published an annual transparency rating of around 35 of the world’s largest salmon producers, who between them accounted for about 80% of global production. Why salmon, you might ask? Although the industry is highly concentrated, it is economically and environmentally significant – worth billions of pounds, and growing rapidly, it significantly impacts the ecologies and communities where it operates and beyond. Key impacts include changes to the surrounding habitat and impact on local species, employment and labour practices, and sourcing of fish feed materials. The person behind SI was a former journalist turned rankings entrepreneur: creating a rating not just to measure performance, but to change it. For this benchmark producer, boosting transparency was both a way to improve industry sustainability and to make information available for journalistic reporting and analysis. BEHIND THE SCENES Most people think rankings are rather technical: you crunch the numbers, follow a method, and out comes a 24 |
score. But the reality is far messier and more complex. We found that building and maintaining a benchmark involves a series of tradeoffs. We also found that the benchmark grows the authority of the benchmark producer and gives them greater influence. Here are our key insights. The SI transparency rating changed over time as it navigated competing objectives: Firstly, it prioritised credibility. From the start, SI was transparent about its methodology and based its indicators on key industry-specific and general standards like Salmon Aquaculture Dialogue and the Global Reporting Initiative (GRI). Then, the method needed to be doable: over time, SI reduced the number of indicators to what could be realistically assessed. Lastly, SI tried to be useful to its audience: SI included detailed breakdowns in its reports to help companies learn from the results. It also created more categories (for example, by region) so more companies could be recognised as being “top” performers. Extending past the benchmark’s inner workings, as the benchmark becomes established it gives the producer extra authority in the industry. SI was invited into policy discussions and industry working groups—spaces where its influence extended beyond the ranking itself. For example, the founder was invited to engage with the EU’s Fisheries department – a forum that would be much less accessible without the insights and the authority of the benchmark. Lastly, benchmarks do not just use existing standards and norms, but they help spread them. SI took international reporting standards, such as the GRI, and adapted them to the salmon industry, making them more relevant to the companies being rated. In this process, SI underscored which parts of the standards that companies should pay attention to and reinforced the influence of these standards. THE FUTURE MANAGER If you work for a large enough organisation, it is almost certainly rated or ranked by someone. It could be a sustainability rating, a supply chain transparency index, or an employee satisfaction ranking. Indeed, some rankings become so influential they act like de facto regulators. For example, credit ratings from agencies like Moody’s or S&P can affect a company’s ability to raise funds, and failing to meet certain sustainability benchmarks can shut companies out of supply chains. But, generally, understanding how rankings are put together can help you engage with them strategically. Indeed, a ranking might be very helpful to you, whether as a tool to measure sustainability performance, to compare with peer companies, or to persuade company decision-makers to make changes. Many of today’s benchmarks aim to drive social or environmental change by pressuring not only companies, but also investors, policymakers, and the public. Done well, these rankings can: • Spotlight best practice and encourage companies to improve. • Give consumers and investors clear, comparable information. • Make invisible issues – like water pollution or labour rights – visible and urgent. But there is a catch: if companies focus too much on boosting their scores, they might treat the ranking as the goal, rather than the underlying sustainability improvements. That is why it is essential to scrutinise how these rankings are made – because those design choices shape the kind of change they create. THE BOTTOM LINE Rankings and ratings might look like objective numbers, but they are built by people making choices and negotiating trade-offs. These “rankings entrepreneurs” influence not only how companies are evaluated, but how entire industries define success. For future business leaders, the more you understand the machinery behind these lists, the better you can navigate – and shape – the systems that increasingly govern corporate behaviour. FIFTY FOUR DEGREES | 25 Dr Dasha Smirnow is a Lecturer in Accounting in the Department of Accounting and Finance. Dr Smirnow has worked with Professor Jan Bebbington, Director of the Pentland Centre for Sustainability in Business, on research focused on sustainability benchmarking processes, their strictures, and their effects. d.smirnow@lancaster.ac.uk Listen to Dasha discussing her work on the Transforming Tomorrow podcast: https://pod.fo/e/272bf1 trAnsfoRming toMorrow
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