New Research From the Midlands Engine Economic Observatory Examines the Drivers, Opportunities and Barriers Facing the Midlands

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We are happy to announce that the Midlands Engine is today publishing key outputs from the Midlands Engine Economic Observatory (MEEO). The MEEO is a partnership led by City-REDI, which includes Nottingham Trent University, the Black Country Consortium, SQW, and Cambridge Econometrics. It aims to provide essential research capacity and grow contemporary insights into the functioning of the economy in the Midlands Engine.

The publications include:

  • The Midlands Engine Independent Economic Review
  • A synthesis of deep-dive interviews conducted with businesses across the Midlands
  • An evidence paper examining Geographical Scales And Functions: The Case of The Midlands Engine
  • Analysis of public spending in the Midlands over recent years, focusing particularly on comparisons with other parts of England and the wider UK
  • A series of papers analysing the potential impact of Brexit on sectors in the Midlands
  • Future growth projections and scenarios
  • Local Area Profiles – identifying productivity assets, barriers to performance and opportunities going forward in each Local Enterprise Partnership area in the Midlands.

The Independent Review provides an extensive analysis of the Midlands economy, at a depth and scale not seen before.  Based on a review of existing evidence and analysis of the deep-dive interviews, it examines the key factors driving productivity performance across the Midlands, identifying commonalities and economic linkages across the region.

Existing strengths

The publications emphasise how the Midlands benefits from a very rich manufacturing heritage and a broad business base. It is home to a range of innovative firms such as Toyota and Jaguar (automotive sector), Alliance Medical (MedTech), Experian (business services), Mondelez (confectionary), QinetiQ (defence), Rolls-Royce (aerospace), Bombardier (rail engineering) and HSBC (Fintech). The Midlands’ economy benefits from an “impressive concentration of world-class science and innovation assets, expertise”.

Productivity challenges

Despite these strengths, the Independent Economic Review reveals how the Midlands faces key challenges in terms of economic growth, competitiveness and resilience. It identifies:

  • How the Midlands suffers from a productivity gap. In 2017 GVA per capita in the Midlands stood at nearly £22,000. This was only 92% of the England minus London average. Closing this gap would enable the Midlands economy to generate an additional £20bn each year.
  • Variable productivity levels within the Midlands. Consistently strong performance within Coventry and Warwickshire, Greater Birmingham and Solihull, and Leicester and Leicestershire over the last two decades are not mirrored elsewhere in the region.
  • Challenges relating to starting and growing a business in the Midlands. Some areas in the Midlands have some of England’s lowest incidences of High Growth Firms, and low in-firm productivity.
  • Skills; infrastructure; access to growth finance; and barriers to R&D collaboration, commercialisation and knowledge diffusion/technology adoption as the most important and common factors holding back productivity and growth across the Midlands. How differences in productivity performance within sectors are important in explaining the productivity gap in the Midlands. Whereas the motor vehicles sector is a “star performer” in terms of productivity, overall only 10% of jobs in the Midlands are in sectors, which have productivity levels above-average levels in England (excluding London). It is striking that productivity is relatively low within some sectors identified as priorities within the Midlands and which are affiliated to the regions’ key strengths (for example, other transport equipment and pharmaceuticals). Productivity challenges are also identified in the business-related services sector.
    Figure 1: Midlands Productivity Performance 2017 by sector. Source: Independent Economic Review. (2020). P.9. Based on SQW analysis of Cambridge Econometrics data. Note: Midlands sectoral productivity performance, scale and concentration relative to the England minus London average shown for sub-sectors where productivity performance is above or below the benchmark only, 2017. Size of the bubble represents Midlands jobs in 2017.
    Insights for COVID-19 resilience and recovery in the West Midlands

Several of the conclusions from the Independent Economic Review are pertinent as policymakers in the West Midlands seek to move into the resilience and recovery phases of the COVID-19 economic recovery framework.

The research demonstrates how certain parts of, and sectors within, the Midlands were already vulnerable before the COVID-19 crisis created even deeper labour market and productivity challenges. Before moving onto economic recovery and growth, we must focus on the short-medium resilience of the Midlands economy.

The Review stresses the need to focus on business support interventions on increasing productivity and long-term resilience, through accelerating technology adoption and boosting skills and leadership and management capacity.  It also calls for the establishment of a more integrated and collaborative science and innovation landscape across the Midlands. The Review identifies that the Midlands has a large number of medical technology, diagnostics and device companies and life sciences expertise across a range of specialisms. In the context of COVID-19, developing these to avoid dependence on supply chains outside of the UK is even more of a priority. Facilitating stronger networks, and better connecting capabilities and expertise across networks and clusters is vital to supporting the establishment and growth of the cross-sector collaborations required as the region seeks to respond to the structural economic changes it is facing.

With regard to a pan-Midlands approach, the Review emphasises the importance of establishing clarity regarding the division of responsibility between the various “tiers” of government operating in the Midlands. The scale and depth of the challenges presented by COVID-19 crisis necessitate that such questions are considered as a matter of urgency. Maximising synergies between partners’ actions and reducing confusion is likely to be crucial to the Midlands successfully designing a short to long-term recovery and resilience action plan. Research by City-REDI before the COVID-19 pandemic revealed how the capacity for and expertise in lobbying for funding to support project delivery at LEP level varies. Adopting a coordinated approach offers the opportunity to drive such long-term economic recovery and resilience.

This blog was written by Dr Abigail Taylor, Research Fellow, City-REDI / WM REDI, University of Birmingham. 

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The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI / WM REDI or the University of Birmingham

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