This week three major intelligence products for partners have been launched. These are: (1) the Cultural Infrastructure Map – cultural facilities are the cornerstone of our arts and cultural ecology, which will help support the arts and cultural sector. (2) The WMREDI partnership launched the State of the Region 2021 and the reports can be accessed here. (3) The partnership also launched the West Midlands Data Lab site which presents all the data and reports which underpin the State of the Region. These resources continue to grow the capacity and infrastructure for developing evidence to underpin recovery.
- The International Monetary Fund (IMF) has reported that economic prospects have diverged further across countries. Vaccine access has emerged as the primary fault line along which global recovery has split countries into two blocs.
- Global economic uncertainty has continued to decline but is still significant. The slow progress of vaccinations in developing countries will not see them approach herd immunity before 2023.
- Global recovery figures have remained unchanged since April; however the prospects for emerging and developing countries have been marked down, but advanced economies have been marked up.
- Advanced countries are facing increasing inflation. Part of the reason for this is that there are frictions between global supply chains and labour markets that are inducing inflationary pressures. The UK may feel this more acutely due to the impact of Brexit on supply chains.
- It is not only the UK that is facing widespread labour scarcity. In the US the number of open but unfilled jobs recently reached 9.2 million, the highest figure on record. A number of Australian and Canadian businesses have reported difficulties in finding workers to fill vacancies.
- Output per hour in the West Midlands decreased by 1.4% in 2020 when compared with 2019 – this was the largest decrease across any region. Over the same period, the UK had an increase of 0.4% in output per hour.
- Movements in output per hour worked during 2020 for the countries and regions of the UK broadly follow one of three patterns because of differing changes in GVA and hours worked. The West Midlands follows the second pattern of change: a muted increase in output per hour in Quarter 3. Both GVA and hours worked show similar declines and recoveries throughout 2020.
- The WMCA (3 LEP) GVA per hour worked increased from £32.32 in 2018 to £32.86 in 2019. The UK increased from £35 in 2018 to £35.78 in 2019, leading to a shortfall of £2.92 between the WMCA and the UK.
- The WMCA (3 LEP) GVA per filled job increased from £51,864 in 2018 to £52,640 in 2019. The UK increased from £56,334 in 2018 to £57,721 in 2019, leading to a shortfall of £5,081 between the WMCA and the UK.
- There was positive growth in GDP in seven of the twelve English regions in 2020 Q4, with London having the highest growth with an increase of 3.1%. The West Midlands and the East Midlands were the only regions estimated to have contracted, with the West Midlands contracting by 0.3%.
- In the West Midlands 7 Met. area, there were 5.9% (4,290) of 16-17-years olds not in education, employment or training (NEET) or not known (NK) at the end of 2020; an increase of 0.2 percentage points (pp) when compared to the end of 2019. Over the same period, England-wide NEET & NK has remained at 5.5%.
- 70% of responding businesses had high confidence in surviving over the next three months. 21.9% had moderate confidence in survival, 1.1% had low confidence and 6.5% were not sure.
- The Institute for Government has looked at the Shared Prosperity Fund and states that government needs to improve its approach to consultation with the devolved governments, share more information, and refrain from making announcements without prior notification; and establish transparent criteria for the allocation of funds based on an assessment of relative need at the local, as well as regional, level.
- The Chartered Institute of Public Finance and Accountancy (CIPFA) explores the ways in which local authorities and other public services have approached their budgeting during the coronavirus prior to COVID-19, 21% of respondents had budgets that were in deficit pre covid. They may have to use a greater proportion of their reserves or increase council tax by a larger percentage in order to deliver services. This makes them more vulnerable to service cuts and may require additional support from the government.
- The Business, Energy and Industrial Strategy Committee highlights the confusion about what ‘Levelling Up’ actually means in practice and how it might translate into specific policy initiatives and strategies, what progress has been made and who is responsible for delivering it.
- The Health Foundation explores action to ‘level up the nation’s health’ but highlights that levelling up is an opaque term, and the government’s plans are still under construction. Despite encouraging signs, levelling up funding and policies laid out so far are partial and fragmented.
Shocks
- The Honda factory in Swindon finally closed its doors after Honda announced it would be stopping production in Swindon in 2019. This was a shock as the Swindon plant was one of the company’s most productive. It will see 3,000 people who worked there lose their jobs and will send ripples throughout the local economy with about 1,800 jobs ending at two local firms that supply the plant. Workers will struggle to match their previous wages at Honda; workers may have earned £20 per hour at Honda.
- Lack of semi-conductor chips means cars are only being partly built at Jaguar Land Rover, and this could force temporary closure.
- The costs of materials are still on the increase with paper prices increasing by 40% in the past year. Organisations are also experiencing a UK shortage of corrugated cardboard as the UK is reliant on two pulp mills in Turkey which are unable to keep up with demand.
Opportunities
- Last year nearly 2,000 jobs were created in Coventry and Warwickshire thanks to investment from foreign companies. 1,909 new jobs have been created and 42 jobs safeguarded, with 45 successful foreign direct investments in the area, and a further five shared across multiple areas.
- A new business programme will target the economic legacy of the Commonwealth Games 2022. Leaders running the initiative say that they hope it will generate more than £650 million in investment, £7 million in export deals and £12 million in visitor spend in the five years following the event.
- Thousands of jobs are set to be created in the Midlands after the region’s bid to become a world leader in advanced ceramics received a significant cash boost. The Midlands Industrial Ceramics Group (MICG) has secured £18.27 million in government funding provided through UK Research and Innovation’s flagship Strength in Places Fund (SIPF).
- Construction plans for a new ‘gigafactory’ creating electric car batteries have been submitted. The factory could generate 6,000 jobs across the West Midlands. A joint venture team of Coventry City Council and Coventry Airport has lodged the plans for the 5.7 million sq ft facility at the airport site.
Covid Impacts
- Across multiple sectors, there are challenges because of rising infection rates, or requirements to isolate. This is causing workforces to work at reduced levels – with reports of between 16% and 50% off work. This is leading to decreased productivity and missed opportunities for growth.
- West Midlands businesses are being urged to “take swift action” if their finances are under pressure after new Government figures reveal corporate insolvencies have hit their third highest monthly total since the start of the pandemic.
- UK supermarket shelves will be bare and panic buying will intensify unless critical issues currently threatening UK food supply are solved promptly.
- The shipping industry is still experiencing a difficult time due to cost increases and a decrease in clients. There are delays still from the disruption from the Suez canal incident.
- The WMCA (3 LEP) area had 120,600 employments furloughed on the 30th June 2021. This reflects a 7.1% take-up of eligible employments for the scheme, compared to 6.5% UK-wide. When compared to 31st May 2021, the number of employments furloughed in the WMCA (3 LEP) area decreased by 25,400 (-17.4%), compared with a UK figure of -24.1%).
- The Business insights and impact on the UK economy points out businesses trading and furlough remain roughly the same as the last survey. The percentage reporting turnover has not been affected has increased but those not able to export has also worsened by 10%
- PWC has found that consumer trends have changed for good. Since 2018, online shopping via a smartphone has almost doubled and continues to rise steeply, increasing 2% since their last survey in March 2021.
- The emerging findings from the Future Business District study show that the way in which businesses and people will work and interact in the office is likely to change. Office working is unlikely to return quickly 2019 pat Hybrid working, is likely to continue to be the norm.
- 2% of responding West Midlands businesses reported they intended to use increased homeworking as a permanent business model going forward.
- Researchers have found that there was little delay in the transition to home working (32%). Where there were delays the majority were due to technical issues such as waiting for a computer for home use. Workers who remained in the workplace had much greater anxiety when it came to them potentially catching Covid-19 in the workplace: 67% were worried they may catch it travelling to or during work. Home workers faced their own anxieties: 32% experienced increases in their work volume, as well as increased intensity of work (38%), pace of work (32%) and pressure of work (32%). Video team meetings are regarded in most respects by a majority as effective or more effective than face-to-face meetings, excepting the difficulty of concentrating (less effective 25%) and the ability to interact with colleagues (less effective 38%). 31% indicated a preference for 0 days in the office and 5 days working from home. STUC found that 78% stated a preference for working in the office for 2 days or less. Only 9% expressed a preference for 4-5 days in the office
- The Midlands’ labour market is among the most heavily impacted by Covid in the UK, as well as Brexit, and the 2008 financial crisis and austerity. Data shows that the availability of good work is heavily concentrated in London and the South-East of England. Arguably, too many citizens in places like the Midlands have been economically and culturally forgotten, causing extensive working poverty and loss of self-esteem. There is considerable scope for improving wages and working conditions, and creating better quality working lives, for key workers in the foundational economy. The good work agenda should encompass ‘contributive justice’ and meaningful work (as well as ‘distributive justice’) in a more inclusive ‘moral economy’. This is necessary to rebuild individual and regional self-esteem under a new human-centred ‘social contract’. Extending meaningful work of social value in key worker occupations and sectors can act as a springboard for harnessing human capabilities that sustain human life for the common good.
- The Social Mobility Commission notes that by autumn 2020, disadvantaged pupils in primary school were a total of seven months behind their more privileged peers. By this point, Covid-19 had already increased the attainment gap by 0.5-1 month on top of the existing gap. This is the equivalent of erasing between one-third and two-thirds of the last decade’s progress on closing the educational attainment gap. People from working class backgrounds are slowly becoming more upwardly mobile – 33% of people from working class backgrounds were in professional jobs in 2014 rising to 39% in 2020.
- In the week ending 25th July 2021, the seven-day average number of UK daily flights was 2,877. This is a 17% increase from the previous week and the largest weekly rise since the Bank holiday weekend in May 2021.
- 3% of West Midlands businesses reported stock levels are lower than normal. 42% of West Midlands businesses reported stock levels had not changed and 10.2% reported stock levels are higher than normal. Covid-19 was still the main reason as to why stock levels had been impacted in the West Midlands at 37.2%.
- Demand for parent-paid childcare hours fell substantially during the first lockdown and stayed significantly below usual levels even after restrictions changed in June 2020 due to the shift to home working and parents reducing or stopping work temporarily (on furlough) or permanently (through unemployment).
- NFER has published work that shows there are widespread concerns for pupils wellbeing and mental health, with anxiety the most common issue; schools cannot rely on specialist services to support pupils, and staff wellbeing is an issue.
EU Transition impacts
- 6% of responding West Midlands businesses reported they had made changes to supply chains. Where businesses stated they had made changes, the highest response at 52.7% of responding West Midlands businesses reported they were using more UK suppliers. 24.7% of responding West Midlands businesses reported extra costs due to additional transportation costs. Although, 36.0% reported no extra costs.
- 9% of responding West Midlands businesses reported they had not been able to get the materials, goods or services from the EU in the last two weeks. 5.9% of West Midlands businesses had only been able to get the materials, goods or services due to changing the supplier or finding an alternative solution. 1.9% of responding West Midlands businesses reported that they intended to open new branches or subsidiaries in the EU in the next 12 months.
- 7% of responding West Midlands businesses reported they were stockpiling goods or materials. 72.0% of West Midlands businesses were sourcing the stockpiled goods or materials from UK suppliers. 41.5% of responding West Midlands businesses reported they were stockpiling metals and materials.
Download and view a copy of the West Midlands Economic Monitor
The bi-weekly monitor brings together data and intelligence from the WM REDI partnership into one single source which can be shared and utilised in planning and responding to the challenge of the virus. This is a rapid review of the issues. It is not intended to be a comprehensive assessment but rather a practical report which places emphasis on emerging issues and the best data and intelligence we have to date.
The monitor is feeding into the regional recovery planning that can help the regional economy bounce back and quickly move forward once lockdown restrictions start to be lifted.
The work is being endorsed by political and business leaders a task force of experts are being set up through WM REDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.
City-REDI / WM REDI has developed a resource page providing analysis of the impact of Coronavirus (COVID-19) on the West Midlands and the UK. It includes previous editions of the West Midlands Weekly Economic Monitor, blogs and research on the economic and social impact of COVID-19. You can view that here.
This blog was written by Rebecca Riley, Business Development Director, City-REDI / WM REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.