West Midlands Economic Impact Monitor – 3 June 2025

Fragile growth, rising trade tensions and increased cost pressures are shaping the national and regional economic outlook.

In this context, business leaders have warned that firms are seeking a ‘platform of stability’. Trade deals between the UK and the US and between the UK and India are viewed as positive.

Curbs on immigration set out in the Immigration Bill announced in May 2025 threaten to disrupt the delicate balance between reducing reliance on immigration and driving economic growth.

Global trends

In their latest World Economic Outlook the International Monetary Fund has revised forecasts for global growth downwards compared with those at the start of the year. This reflects high levels of tariffs and a highly unpredictable environment. Global headline inflation is expected to decline at a slightly slower pace than what was expected in January 2025.
Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions.

National trends

The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 4.1% in the 12 months to April 2025, up from 3.4% in the 12 months to March 2025. On a monthly basis, CPIH rose by 1.2% in April 2025, compared with a rise of 0.5% in April 2024.
The latest ONS release on Business Insights and Impact on the UK Economy revealed that economic uncertainty was the most reported challenge affecting turnover for trading businesses in early May 2025, at 30%, down 3 percentage points from early April 2025. For businesses with 10 or more employees, the most commonly reported challenge was cost of labour at 39%.
Around half (46%) of trading businesses with 10 or more employees cited labour costs as a reason for considering raising their prices in June 2025; this is 7 percentage points higher than June 2024.

Regional trends

The latest State of the Region report published by the WMA reveals that CO₂ emissions per capita in the WMCA area have consistently decreased from2013 to 2022. Over time, differences between local authorities have narrowed, indicating a convergence toward lower emissions. Industry emissions in the West Midlands decreased from 1.5 tonnes per capita in 2018 to 1.2 tonnes in 2020. Domestic CO₂ emissions in the WMCA area decreased from 1.4 tonnes per capita in 2018 to 1.1 tonnes in 2022, an 18% reduction.
In 2023, 60.7% of residents in the WMCA area aged 16 to 64 held at least one Level 3 qualification (A-level or equivalent) or higher. This is an increase from 59.3% in 2022, though it continues to lag behind the wider West Midlands region (63.6%) and England (67.4%).

Gross Value Added (GVA)

The WMCA area total GVA increased from £76.1bn in 2022 to £76.9bn in 2023. This equated to a 1.0% (+£774m) annual increase which was above the UK growth rate of 0.3%. However, when compared to 2018, the WMCA total GVA was 1.2% lower (-£963m) while for UK-wide GVA there was an increase of 4.4%.
Within the WMCA, there was annual growth across five of the seven local authorities, with decreases in Dudley (-3.7%) and Wolverhampton (-0.8%) but with notable strong growth in Birmingham (+2.7%) and Solihull (+1.2%). When compared to five years ago, Birmingham was the only local authority within the WMCA area that had increased (+3.0%).
In 2023, GVA per head in the WMCA area was £25,794. This is a gap of £7,498 to the UK GVA per head figure (£33,292).
Business, professional & financial services remained the largest sector in terms of GVA at £24.3bn (31.7% of the total, compared with the UK at 34.5%).

Business activity

The West Midlands Business Activity Index increased from 48.7 in February 2025 to 49.6 in March 2025, a four-month high. Some firms suggested that constrained client budgets affected output, while others reported growth amid the start of new projects and tentative signs of improving demand. The UK Business Activity Index increased from 50.5 in February 2025 to 51.5 in March 2025.
The West Midlands Future Business Activity Index decreased from 74.3 in February 2025 to 68.5 in March 2025. Firms cited new product releases, efficiency gains and tech investment as supportive factors.

Business births and deaths

Nationally the number of IDBR business creations in the UK in Q1 2025 was 89,515. This figure is 2.8% higher than the number of business creations in Q1 2024. The number of business creations increased in 12 out of 16 main industrial groups during this quarter compared with Q1 2024. The most significant rise came in retail (up 9.7%).
The number of business births in the WMCA area in Q1 2025 was 3,820. This figure was 3.5% (-140) lower than the number of business births in Q1 2024 while the UK had growth of 2.8%.
The number of business deaths in the WMCA area in Q1 2025 was 3,860. This figure was 5.7% (-235) lower than the number of business deaths in Q1 2024; the UK fell by 4.4%.

Regional labour market trends

For the three months ending March 2025, the West Midlands Region employment rate (aged 16–64 years) was 72.7%. Since the three months ending December 2024, the employment rate decreased by 1.5 percentage points (pp), this was the second highest fall (behind just the North East at -2.3pp). When compared to the same period in the previous year, the employment rate was 1.2pp lower. The UK employment rate was 75.0%, remaining unchanged when compared to the previous quarter and an increase of 0.5pp when compared to the previous year.
For the three months ending March 2025, the West Midlands Region unemployment rate (aged 16 years and over) was 4.5%, which has increased by 0.2pp since the previous quarter but was 0.6pp lower when compared to the previous year. The UK unemployment rate was also 4.5%, with a 0.2pp increase from the previous quarter and also 0.2pp higher when compared to the previous year.
For the three months ending March 2025, the West Midlands Region economic inactivity rate (aged 16 – 64 years) was 23.8%, an increase of 1.6pp from the previous quarter and also an increase of 1.6pp when compared to the previous year. The UK economic inactivity rate was 21.4%, a decrease of 0.2pp when compared to the previous quarter and a 0.7pp decrease from the previous year.
There were 148,505 claimants in the WMCA area in April 2025. Since March 2025, there has been an increase of 0.5% (+670) claimants in the WMCA area, while the UK remained broadly unchanged (only decreasing by 0.03%). When compared to April 2024 claimants have increased by 18.4% (+23,070) in the WMCA area, with the UK increasing by 9.3%.
There were 27,735 youth claimants in the WMCA area in April 2025. Since March 2025, there has been an increase of 1.4% (+375) youth claimants in the WMCA area, the UK increased by 0.6%. When compared to April 2024, youth claimants have increased by 12.1% (+2,990) in the WMCA area, with the UK increasing by 9.9%.
For the WMCA area, 42.0% (763,100) of the working age population had RQF4+ qualifications in 2024, an increase of 0.6% (+4,600) since 2023. While for the UK, 47.4% were qualified to RQF4+ levels, an annual increase of 1.3%.
In 2024 the WMCA occupied a middle position amongst all Combined Authorities for those qualified to RQF4+ level. West of England Combined Authority scored highest at 58.4%.
For the WMCA area 10.3% (187,700) of the working age population had no qualifications in 2024, an increase of 14.5% (+23,700) since 2023. For the UK, 6.8% had no qualifications, an annual increase of 2.7%.

For further details, read the full report.

This blog was written by Anne Green, Professor of Regional Economic Development and Co-Director, City-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.