Despite some bright spots of recovery in the nation and West Midlands, the forecast remains turbulent for the UK economy. Perhaps the biggest news is inflation: despite falls in inflation over the period since the previous monitor, the base rate is now at 4.5% and the hopes of easing interest rates in the medium term are dampened. Mortgage providers have pulled over 800 deals reflecting the change in outlook with concerns rates will remain stubbornly high for longer than anticipated.
The sector of focus in this issue is the MedTech and HealthTech sector. The West Midlands is due to house a MedTech/HealthTech innovation accelerator as part of the policy commitments outlined in the 2022 Levelling Up White Paper.
Business activity and economic outlook
- The West Midlands Business Activity Index rose marginally from 52.7 in March 2023 to 52.8 in April 2023. Early indications show that business activity growth was linked to greater client spending, successful marketing efforts, new business wins, improved consumer footfall and acquisitions.
- The UK Business Activity Index increased from 52.2 in March 2023 to 54.9 in April 2023.
- The West Midlands Future Business Activity Index decreased from 78.0 in March 2023 to 76.5 in April 2023. Despite falling to a three-month low, the latest reading still shows a strong degree of optimism for the upcoming year. The latest reading is the second highest seen in 14 months. Optimism in West Midlands firms for the upcoming 12 months was linked to new sales opportunities, expanded capacities, product diversification and expectations of better global trading conditions.
- Out of the 12 UK regions, the West Midlands was the highest for Future Business Activity in April 2023.
- The FSB’s Small Business Index (SBI) report found that small business confidence in the UK recovered strongly between Q4 2022 and Q1 2023, but is still in lightly negative territory. The SBI reached -2.8 in Q1 2023, up 43 points from Q4 2022 but 18.1 points lower than in the same quarter last year (Q1 2022: 15.3). Confidence levels in the West Midlands are ahead of the UK average, with a sharp increase in confidence compared with previous reporting periods. The greatest perceived barriers to growth over the next year remain general economic conditions in the UK, utility costs and rising labour costs.
- While the latest Business Barometer from Lloyds Bank showed that business confidence dipped in the West Midlands during May (from 31% to 30%), but is relatively steady. Firms identified their top target areas for growth in the next six months as introducing new technology (43%), evolving their offer (37%) and investing in sustainability (36%).
- Despite inflation now falling, the cost of living and doing business squeeze continues to hold back investment and growth, as noted by FSB and others, including BDO. BDO’s bi-monthly Economic Engine survey has revealed that high corporation tax is having an impact on firms too: 33% of respondents said they will either have to make redundancies or take on fewer people as a result. Worryingly, nearly half (42%) said the uplift in corporation tax had prompted them to consider leaving the UK.
- Another macroeconomic impact hitting businesses and communities in the region is interest rate rises – with the base rate now at 4.5%. Business concern about interest rates has firmly risen up the agenda in recent months.
- Some businesses are selling up or ceasing to trade because of these impacts, including in the West Midlands where business deaths have risen significantly in recent months.
- Separately, there is some concern about delays to the roll out of the UK Shared Prosperity Fund (UKSPF) and a potential lack of consistency of support between local authorities.
City Growth
- The recently released Demos-PwC Good Growth for Cities report looks at how the radical reshaping of public and private sector roles would help cities respond to current challenges (the Index covers broad measures of economic wellbeing, including jobs, income, health, skills, work-life balance, housing, transport and the environment), while at the same time steering towards growth and genuine levelling up.
- When measured against the priorities chosen by the public, cities in the West Midlands tend to perform below the national average, with the exception of Stoke-on-Trent. The highest performing city is Stoke-on-Trent, which comes 21st in the index. The lowest performing city is Birmingham, ranking 47th out of 51.
- As a whole, the four cities in the West Midlands included in the analysis perform most strongly on the following criteria:
- Work-life-balance: Wolverhampton and Walsall and Birmingham score above the UK average, while Coventry and Stoke-on-Trent score similarly to the UK average.
- Income Distribution: Stoke-on-Trent and Wolverhampton and Walsall score higher than the UK average, while Coventry and Birmingham score more similarly to the UK average.
- Conversely, cities in the West Midlands score poorly on High Streets, Jobs, Income and New Businesses variables.
Sector focus – MedTech and HealthTech in the West Midlands
- The West Midlands Life Sciences economy contributes £10.3 billion to the region’s economy, employing around 17,000 healthcare professionals, 9,600 MedTech specialists, 4,000 bio-pharma workers and 3,000 medical device experts. With four university-based medical schools at Warwick, Aston, Birmingham and Wolverhampton, the region produces 11,000 medical science graduates every year. This is boosted by 87,000 STEM students, 22,000 of which have skills specifically aligned to healthcare and data-driven research. With residents from 190 countries, the region’s talent pool is also highly diverse, multicultural, and multilingual.
- MedTech encompasses equipment, medical devices, machines, diagnostics, software and tools. Better treatments and improvements on things like laser surgery, managing patient health journeys etc.
- HealthTech is concerned with prevention, monitoring of wellbeing, mental health and telehealth. Which includes wearables, software applications, data, connectivity, AI and in practice management.
- The West Midlands has key strengths in Diagnostics, Digital Health and Medical Devices – all driven by access to digitised patient data and highly advanced technologies – the region has additional expertise in specialist health disciplines including cell & gene therapy, genomics and clinical trials.
- Data-driven healthcare: Underpinning the region’s healthcare economy is the ability to access, analyse and cross-reference clinical and genomic data from a demographically-diverse, non-transient population. This includes digitised patient records – drawn from a population of nearly five million people – collated and maintained via one of the most advanced electronic medical record systems in Europe.
- Medical devices: The West Midlands has extensive experience in established and emerging medical device markets. A proven ability in digitalised technologies – such as 3D-printing, sensors, Digital Twins, and other Industry 4.0 manufacturing processes – means there is expertise and capability to help prototype, test and produce mass market, specialised, and highly bespoke medical device solutions.
- Digital health: This sector is supported by deep and agile technology supply chains – and digital-led industries.
- Announced in the Government’s 2022 Levelling up White Paper, the West Midlands Innovation Accelerator serves the purpose of forging a new co-design relationship between the region and Government, ensuring the region benefits from the commitment to increase in overall UK public Research and Development (R&D) funding to £20bn by 2024/5.
- The West Midlands HealthTech / MedTech 6D Innovator Accelerator has six deliverables (6Ds):
– Diagnosis of company needs
– Definition of major NHS and industry-based challenges to target
– Development and refinement of prototype products
– Deployment of innovation in real-world NHS settings
– Diversification of supply chains, skills, and services
– Demonstration of significant economic and health benefits for our region - It is important that the region’s assets in terms of research, technology and knowledge transfer, talent, supporting infrastructure and market strengths that can be mobilised. Success factors include:
– Shortening the length of time to market
– Provision of specialist guidance at each stage of the business journey
– Improving accessibility and costs associated with clinical trials
– Improving accessibility and costs associated with data that can be used to help develop and test products
– Creating an investment fund
– Establishing centres of excellence building on existing strengths, e.g. regulation, diagnostics and cell and gene therapy
– Provision of suitable space including incubation, grow-on, demonstration, sandbox ideas and creation testbed
– Capitalise on the West Midlands as a centre of illness prevention
– Improved sharing of information between health providers, academia, and businesses.
Labour market summary
- For the three months ending March 2023, the West Midlands Region employment rate (aged 16 – 64 years) was 74.2%. Since the three months ending December 2022, the employment rate decreased by 0.4 percentage points (pp). Compared to the same period in the previous year, the employment rate was 2.0pp lower. The UK employment rate was 75.9%, an increase of 0.2pp compared to the previous quarter and an increase of 0.3pp compared to the previous year.
- For the three months ending in March 2023, the West Midlands Region unemployment rate (aged 16 years and over) was 5.1% (the highest of all regions) and has increased by 0.7pp since the previous quarter and an increase of 0.6pp from the previous year. The UK unemployment rate was 3.9%, an increase of 0.1pp from the previous quarter and a 0.2pp increase when compared to the previous year.
- For the three months ending March 2023, the West Midlands Region economic inactivity rate (aged 16 – 64 years) was 21.9%, a decrease of 0.1pp from previous quarter but an increase of 1.6pp when compared to the previous year; the highest increase seen across all regions. The UK economic inactivity rate was 21.0%, a decrease of 0.4pp from the previous quarter and from the previous year.
- There were 128,820 claimants in the WMCA area in April 2023. Since March 2023, there has been an increase of 4.0% (+4,920) claimants in the WMCA area, while the UK increased by 2.7%. When compared to March 2020 (pre-Coronavirus pandemic), claimants have increased by 29.7% (+29,520) in the WMCA area, with the UK increasing by 26.1%.
- Overall, for the WMCA the number of claimants as a proportion of residents aged 16-64 years old was 7.0% compared to 3.8% for the UK in April 2023.
- Overall, for the WMCA the number of youth claimants as a percentage of residents aged 18-24 years old was 8.1% compared to 4.9% for the UK in April 2023.
Download and view a copy of the West Midlands Economic Monitor
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.