The optimism about the economic recovery that characterised many indices of business confidence in June and July has given way to a much more mixed picture as we move into Autumn. Recently it has become clear that multiple global issues, such as climate change, port delays, container shortages, HGV driver shortages, Covid-19 spikes and subsequent lockdowns, energy prices, raw materials shortages amidst increasing demand, are all causing inflationary pressures on prices, as governments and industries try to fix the supply chains. In recent weeks we have begun to see this play out more starkly, particularly in relation to shortages of fuel, gas and some foods. While damaging the confidence of the public, this is also causing major issues for many cash strapped businesses that are heavy consumers of energy and fuel.
- The Oxford Economics baseline forecast to 2040 predicts WMCA GVA will grow to £131bn by 2040, an average of 1.16% per year lagging the UK at 1.35%. GVA per head is expected to grow to £29,939 by 2040. Earnings are predicted to grow from £28,444 to £52,441, just behind the UK annual average.
- There is currently a global shortage of new cars and this is impacting the used car market.
- About 70% of the world’s toys are made in China and the cost of delivery has rapidly increased. There is currently a shortage of containers leading to shipping prices being 10 times higher than last year and there is less time available to get the toys on the shelves before the festive season.
- Ports across the globe are reporting record levels of backlogs, with Ocean carriers’ reporting delays of up to 30 days on the worst-hit China to EU routes and 22 days on the worst-hit China to US routes.
- Over the last 18 months, consumers have been spending their time at home as a result of lockdowns and switched from purchasing services to goods. This has translated into a rapidly increased demand for freight and shipping containers, with global container demand increasing by 6% to 8% this year. This will likely lead to further delays.
- The US is also having its own HGV driver’s crisis. ‘Trucking’ in the US is the primary source of container transport. A shortage of drivers across the country means much of the container volume has been sitting idle at capacity-strained facilities.
- Nationally in the UK there is a 100k shortage of drivers due to a range of factors including EU Exit resulting in the loss of thousands of EU drivers; Trade and Border controls, slowing the process of inbound and outgoing freight; The ageing driver workforce; Covid-19 issues stemming from the need for workers to self-isolate; The lack of new drivers compounded by the unavailability of HGV tests throughout 2020 and into 2021; IR35 rules removing many agency drivers from the labour market.
- The global food ecosystem has been hit hard, with some employers having to raise wages at a double-digit pace. This will likely continue to push food prices up even higher; prices in August this year were up 33% globally from the same month last year.
- Coffee prices have risen as this year Brazil suffered a severe drought which led to reduced crops and is now suffering from severe frost which will likely lead to a reduction in supply next year as well.
- Shortage of durum wheat after this year’s soaring summer temperatures hit Canada, one of the world’s largest producers. This has led to price rises of up to 90%. Durum is a key ingredient for products like pasta and prices could rise by 50%.
- Advanced countries may be rolling out vaccines at a fast rate, but poorer countries do not have the same ability to do so. This is causing significant delays further down the line, as spikes of Covid-19 and the resulting lockdowns drain the labour supply from poorer countries and further intensify supply chain issues.
- The EU has also been hit by soaring energy prices, threatening to derail post-pandemic recovery, strain household incomes and detrimentally impact the transition to greener energy. Natural gas prices across Europe have risen from €16 megawatt per hour in early January to €75 by mid-September, an increase of more than 360% in less than a year. Gazprom, Russia’s state-backed energy company, has refused to increase exports to the EU.
- The Global gas crunch is particularly bad news for the UK following a string of issues with the UK electricity system. Nuclear power plants have been forced to take unplanned outages for maintenance, the main power cable used to import electricity from France has shut down due to a fire, and the UK’s wind turbines have slowed during some of the least windy months since 1961.
- Brexit will likely cause a greater impact for the UK comparative to the EU, as the EU’s internal energy market allows member states to trade with each other in a way that balances prices out. Whilst the UK can now take full advantage when prices are cheap, it also means that it is also fully exposed when prices are high.
- The Guardian found that this time last year, households with average energy usage who were on the cheapest gas and electricity bills were paying around £800 to £817 a year. Households that pay by direct debit will now face bills averaging £1,277 a year for duel fuel, whilst those on meters – typically the most vulnerable – will see average energy bills rise to an average of £1,309 a year.
- The Universal Credit £20 weekly uplift ends at the end of September 2021, as well as the Coronavirus Job Retention Scheme (CJRS). Over the last 18 months, the CJRS has covered the wages of roughly 11.6 million people and has provided 2.3 billion days of furlough at a cost of almost £70 billion (in gross terms). Along with other economic support measures, it has ensured that the worst recession for 300 years saw only a small rise in unemployment.
- It is anticipated that around 1 million people will still be on furlough on 30th September as it ends, with half of those still fully furloughed. Therefore, it is likely that there will be at least a moderate rise in unemployment.
- The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.0% in the 12 months to August 2021, up from 2.1% in the 12 months to July. The increase of 0.9 percentage points is the largest increase ever recorded in the CPIH National Statistics 12-month inflation rate series, which began in January 2006; however, this is likely to be a temporary change.
- 56% of women thought that working from home would help progress their careers. As traditionally, the majority of childcare, caring and unpaid household duties fall on women within the household, the flexibility of home working has made this less of an issue.
- Solihull has become one of the first places in the UK to see driverless vehicles take to its roads; as part of new ground-breaking passenger trials.
- BT has announced that it is to recruit 1,000 new people at its flagship Birmingham office, with around 225 posts currently available. BT still believes in the future of the office but has recognised the benefits of home working for employees as well, and as a result, will be offering a flexible ‘Smart Working’ approach.
- A recent report by the Midlands Engine highlights low carbon opportunities, relating to the use and production of green goods, digital, relating to the manufacture and use of digital technologies in products and the manufacturing process, and new products and markets, some of which are used elsewhere but are new for the region.
- Research by WMREDI shows that the downstream space sector employs the majority of space sector workers (79%) and has grown at an average rate of 5% per annum in the last 5 years. The West Midlands has the second-largest cohort of students outside of London studying in these subject areas. This makes it attractive for investors in this emerging industry.
- The seven-day average number of UK daily flights was 3,593, broadly unchanged from the previous week (3,579). The average number of UK daily flights in the latest week was at 54% of the level seen in the equivalent week of 2019.
- The volume of overall retail footfall in the UK remained unchanged from the previous week (week to 11 September 2021). This is the first week since the week to 28th August 2021 where the volume of overall retail footfall in the UK has not seen a week-on-week decrease.
- Between the 10th and 17th September 2021, total online job adverts increased by 4.3 percentage points. On the 17th September 2021, total online job adverts were at 132.7% of their average level in February 2020. The West Midlands region increased by 5.3 percentage points; total online job adverts for the West Midlands were at 149% of their average level in February 2020.
- 28% of trading businesses in the West Midlands reported their turnover had decreased by at least 20%. However, 46.1% of trading businesses in the West Midlands reported that their turnover was unaffected and approximately 13.7% reported their turnover had increased by at least 20%.
- 29% of exporting businesses in the West Midlands reported their businesses were still exporting less than normal. Of those businesses who continued to trade and import, 20.8% in the West Midlands were importing less than normal. 56.1% of West Midlands businesses who were exporting reported that they had not been affected and 63% reported that importing had not been affected.
- 2% of responding West Midlands businesses reported they intended to use increased homeworking as a permanent business model going forward. 46.5% of West Midlands businesses reported they did not intend to use this business model with a further 22.3% unsure.
- 9% of adults in the West Midlands reported low levels of life satisfaction (matching Great Britain (GB)). 9% of West Midlands adults reported a low level of feeling worthwhile (8% GB). 16% of responding West Midlands adults reported a low level of happiness (12% GB) and 36% reported high levels of anxiety (33% GB).
The bi-weekly monitor brings together data and intelligence from the WMREDI 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 WMREDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.
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 that here.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.