This week forecasters are predicting that the UK will enter a recession in the 4th quarter of the year and global climate change issues are compounding the inflationary effects of energy prices, product supply and war. The West Midlands is being buffeted and affected by these impacts, the region particularly hit by fuel and energy costs. The latest data tells us that people are starting to increase debt to cover costs, which means less resilience if inflation continues to grow.
- Globally the economy is continuing to weaken. Driven by prices, war, and a housing market crash in China.
- Extreme weather effects continue, flash floods in Pakistan and the costs of rebuilding and the demand for raw materials will exacerbate the price issues globally. Whilst China is facing a heatwave affecting the autumn harvest and Europe is facing the worst drought in 500 years.
- The energy price cap is set to rise by 80% from the 1st of October for 24 million Britons in England, Wales and Scotland. Joseph Rowntree Foundation (JRF) has found that in 2023/24, the poorest 5th of families, are forecast to have an average of £11,600 after taxes and housing costs, however with the recent energy price rises almost half (46%) of their income will be spent on energy bills. Middle income households, with average incomes of £31,400, will spend 19% on the same energy bills, which is historically large for this group. The group most impacted will be low-income single-parent households which will rise to 120% of their incomes after taxes and housing costs. These households may also be forced to increase their credit use in order to pay for essentials, debt which they will unlikely be able to afford and struggle to pay back.
- Goldman Sachs has warned that inflation in the UK could reach as high as 20% next year if rising energy prices (specifically gas) continue. This will likely plunge millions of households into poverty and leave businesses at risk. If gas prices remain elevated at current levels then headline inflation could reach 22.4%, well above their baseline forecast of 14.8%.
- Savanta ComRes found that if energy bills were to rise in the Autumn, those in the South East (60%), West Midlands (58%) and East Midlands (58%), would be the most likely to be unable to afford the rise
- According to the Bank of England, individuals borrowed an additional £1.4 billion in consumer credit in July, on the net, following £1.8 billion of borrowing in June. This is returning to levels pre-pandemic, with credit card growth at the highest rates since Oct 2005.
- Smart Money People conducted a survey that found almost 75% of the UK population have less disposable income now than they would usually have, due to the cost-of-living crisis. 2/3 of people are more worried about their finances now than they were during the pandemic. The survey also found that 2 in 5 expect that they will take out a new form of credit in the next year, at an average of £5,250 each. This adds up to £101.1 billion over the next 12 months.
- Food prices are the second largest concern, (12%), petrol and diesel are consumers third largest concern with an average 8% of the England population concerned. Concern around petrol and diesel prices was also highest within the West Midlands at 14%, 6% higher than the England average.
- Centre for Cities’ highlighted that government policy in the 1960s deliberately stifled Birmingham’s economy after the Second World War, where restrictions on office supply were unfairly introduced to deal with the city’s growth in population and increases in office employment. As of 2021, Birmingham has more industrial space (28%) than the English city centre average (10%) but still lags behind the country average for office space (41% versus 53%).
- Mega event short and long-term benefits have been identified through analyses of FIFA World Cups, Olympic and Commonwealth Games, as well as Formula One Grand Prix. However, these events do not tend to translate into long-term growth – turning a short-term boost in spending and jobs into sustained economic growth needs a different set of policy interventions. Achieving impact requires targeted and sustained support to ensure the attention, investment and interest generated by the games can provide a lasting positive legacy to Birmingham’s cultural and creative landscape.
- City-REDI/ WMREDI released our City Index Dashboard, a tool that ranks England’s cities across 10 different categories currently using 55 different metrics to measure key performance. There are significant issues with data availability and setting levels. There are 3 levelling-up missions without good metrics at a local authority level: mission 3 R&D; Mission 9 Pride in place; Mission 12 local power.
- SDG dashboards look at thematically grouping indicators which often cut across the various WMREDI’s research projects as well as the indicators/metrics. Over 35 various metrics with each identified metric having a dashboard dedicated to it. These goals are accessible via the WM Data Lab for all Local Authorities.
- WMREDI/CityREDI have launched The Universities & Regions Policy Forum which will bring together academic researchers with policymakers and practitioners from outside higher education (HE) seeking to enhance their understanding of levelling up challenges and build more effective shared responses to them.
Megatrends – Future Skills Impacts:
- Increasing technological innovation and the growing adoption of new technologies is changing the types of jobs available and the range of skills required by employers. At the same time, participation in training is declining. The Covid-19 pandemic risks accelerating and accentuating these trends, further polarising labour markets and widening inequalities. As the Futures of Work blog puts it “By compressing processes already underway, the pandemic has expedited the future of work into the present”.
- Key policy implications – Reskilling and upskilling the UK workforce is urgent to avoid significant skills gaps and mismatches within the next decade; Developing training and improving the quality of managers is important if firms are to maximise the benefits of increased technological capability; There is a need for employers to work with government, education providers and job search platforms to improve data regarding job and skills opportunities for workers; There is a need to work across organisations to share good practice for developing the quality of managers and a broader institutional culture which champions training. It is vital such initiatives are actively led from the top of organisations; Firms need to work with skills providers to develop opportunities for school and university students and leavers who have faced two years of disrupted education. Strategic partnerships are essential to preventing a spiral of decline.
- Modelling by McKinsey suggests that by 2030 skills shortages are likely to be more severe in terms of ‘workplace skills’ than ‘qualifications’ and ‘knowledge’ and that the most widespread under-skilling is predicted to be in basic digital skills. In line with advances in technology, ‘basic digital’ skills by this point, are likely to be increasingly advanced compared to skills considered ‘basic’ today.
Megatrends – Future Transport Impacts:
- Analysis from 20 countries shows that “more than 20% of the workforce could work remotely three to five days a week as effectively as they could if working from an office. This means that if remote working took hold at that level, there would be three to four times as many people working from home than before the pandemic”
- The importance of growth in walking and cycling goes beyond the coronavirus outbreak. Pre Covid-19, the West Midlands is a region which already had poor health outcomes. Walking and cycling can help to implement more physical activity into people’s lifestyles while commuting and help to reduce the health costs of sedentary lifestyles
- Hyper-proximity can be a source of new economic and social models in cities. An approach of dense but friendly cities can help to boost the economy since pedestrianised streets can help to encourage shopping in an approach that can translate into a more favourable impact on the well-being of communities.
- A pre-Covid-19 study by the Mayor’s office in Madrid using data from BBAV Bank found that the increased use of walking and public transport had a positive impact on the businesses in the centre
- Policy recommendations – Infrastructure is essential but this should go hand in hand with a change in values and behaviour; “Local transport authorities to produce plans to permanently reshape local transport networks based on active travel shared and public transport and ensure local authorities and bus operators work together to re-plan bus provision, with better integrated, multi-modal networks”; Increase support and guidance for developing staggered working hours and other measures in order to distribute the demand for transport; Enhance support for individuals and businesses to incentivise mobility start-ups and scale-ups projects as well as encourage public-private partnerships to revive the hardest-hit sectors and further enable MaaS; “Redesign the mobility taxation to stimulate alternatives for car: a higher demand for both green and electric vehicle technologies, as well as public transport with attractive first and last-mile solutions”; Re-allocation of street space from cars to cycling and walking in order to realize modal shift and climate ambitions; Strong commitment to academia and research institutes since these “will be critical to economic and social recovery from the impacts of COVID-19”
ONS Data update
- Vacancies are still increasing the largest increase was in “legal”, which increased by 5.5%. the highest decrease was in “wholesale and retail” by 4.1% to 201.9% of Feb 2020. West Midlands online job adverts increased by 1.4%
- Reasons for mobility in the West Midlands region compared with the previous week shows that grocery & pharmacy decreased by 2.3% (to 105.0%), retail & recreation decreased by 3.0% (to 91.3%), transit stations decreased by 11.1% (to 76.8%) and parks decreased by 13.8% (to 135.4%). While workplaces increased by 0.3% (to 73.5%) and residential increased by 2.2% (to 105.2%).
- There were 6,119 voluntary dissolution applications in the wk 19/8, up from 4,825 recorded in the same week in 2020. This is also up from 4,142 recorded in the same week of 2020 and from the same week in 2019 (4,462).
- Debit card transaction data showed spending in all sectors fell in the week to 21st August 2022. The largest weekly decrease was in “automotive fuel” spending, which fell by 11 percentage points. The “food and drink” and “entertainment” spending categories both fell by 7 percentage points in the latest week.
- 2% of West Midlands businesses reported that turnover in July 2022 had increased when compared to the previous calendar month. 41.6% of West Midlands businesses reported turnover had stayed the same. However, 24.3% had reported that turnover had decreased.
- 5% of responding West Midlands businesses reported that importing stayed the same in July 2022 when compared to July 2021. 10.8% of West Midlands businesses reported to importing less and 15.1% reported to importing more.
- 4% of responding West Midlands businesses reported that exporting stayed the same in July 2022 when compared to July 2021. 19.0% of West Midlands businesses reported to exporting less and 16.8% reported to exporting more.
- 7% of West Midlands businesses were able to get the materials, goods or services it needed from the EU in July 2022. 10.2% had to change suppliers or find alternative solutions and 5.1% of West Midlands businesses reported they could not get the materials, goods or services needed in July 2022
- Where applicable, 22.9% of West Midlands businesses reported experiencing global supply chain disruption in July 2022. In contrast, 43.4% reported none. 34.2% of West Midlands businesses reported the main reason for the global supply chain disruption was due to the shortage of materials.
- 0% of West Midlands businesses expect the main concern for business in September 2022 will be inflation of goods and services prices.
- 0% of West Midlands businesses reported the prices of goods or services sold in July 2022 when compared to the previous month had increased. 57.8% reported that prices had stayed the same and 1.2% of West Midlands businesses reported that prices of goods or services sold had decreased.
- Factors that are causing West Midlands businesses to consider raising prices in September 2022 include; energy prices (43.2%), raw material prices (38.3%) and labour costs (36.0%).
- 3% of West Midlands businesses reported production had been affected by recent increases in energy prices, 19.1% of West Midlands businesses reported suppliers had been affected and 22.2% of West Midlands businesses reported that both production and suppliers were affected. 60.2% of West Midlands businesses have had to absorb costs due to price rises
- 6% of West Midlands businesses reported to currently experiencing a shortage in workers. Although, 40.9% reported no shortages in workers.
- 1% of West Midlands businesses reported to being affected by industrial action in June 2022. Although, 61.1% of West Midlands businesses reported not being affected by industrial action. 31.9% of West Midlands businesses reported that due to industrial action in June 2022, the workforce had to change their working location
Download and view a copy of the West Midlands Economic Monitor
City-REDI / WMREDI has developed a resource page examing 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 it here.
This blog was written by Anne Green, Professor of Regional Economic Development at City-REDI / WMREDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI, WMREDI or the University of Birmingham.