West Midlands Economic Impact Monitor – 15 October 2021

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This week the IMF has dropped its expected growth forecast for many of the leading economies globally. This reflects disruptions to supply chains and a softening of consumption in the third quarter. As government spending is slowing down on Covid-19 relief programmes, many consumers are reining in their spending, especially as inflation is hitting prices generally and energy prices are climbing in time for the winter. The IMF now predicts global growth of 5.9%, 0.1% lower than the previous month. As demand continues to increase in developed nations, developing nations are still being impacted by the Delta variant. The health of the West Midlands private sector continued to strengthen in September, with ongoing improvements in demand underpinning the growth of sales, output and employment, but global risks still threaten recovery.

  • In England the percentage of people testing positive for coronavirus (COVID-19) increased in the week ending 2 October 2021 to an estimated 786,300 people, equating to around 1 in 70 people.
  • The International Energy Agency Global outlook report for 2021 has warned that continued under-investment in green energy could lead to increased periods of turbulence in the energy market. Energy prices throughout UK, Europe and Asia have hit record highs in recent weeks and inflation is hitting prices in many countries.
  • The paper also recommends that Europe could reduce its reliance on Russia by increasing its use of renewables. Currently, Europe receives 60% of its energy from Russia and is highly dependent on Gazprom.
  • Since the start of 2021, the gas system average price has been steadily increasing. The price has more than doubled since the start of the year, with an increase of 213% since 1st January 2021, and an increase of 71% since 1st August 2021. In the latest week, from 26th September to 3rd October, the system average price (SAP) in the preceding seven-day average increased by 2% to 5.785 pence per kilowatt-hour.
  • 136 countries have signed up to a historic deal to enforce a corporate tax rate of at least 15%, as a fairer system to ensure large companies pay their fair share of tax.
  • UK job vacancies have hit a 20-year record high, with vacancies hitting 1.1 million between July and September of this year, the highest levels since records began in 2001.
  • The Bank of England has announced that it expects inflation to rise to at least 4% by the end of the year. This will offset any wage rises for those lucky enough to receive them. Many people however will see the living standards fall as their wages remain the same and inflation continues to increase.
  • Consumer spending is slowing. This is likely due to the expected inflation rises, as well as rapidly increasing energy prices in the build-up to winter when consumers will need to heat their homes.
  • GDP of 0.4% in August 2021. This is largely a result of strong growth in accommodation which grew 9%. Arts, entertainment and recreation was the second-largest growth in services at 8.5% in August 2021.
  • A BBC report looking into gender pay gaps has found that there has been no improvement in the pay gap in 2020-21 comparative to the year before.
  • A record-breaking 12,000 social enterprises were created last year, according to the No Going Back: State of Social Enterprise Report 2021 produced by Social Enterprise UK.
  • The WMCA set out a package of measures to help the region’s unemployed gain skills needed to get back into work following the removal of the Coronavirus Job retention Scheme this month, and the region’s slow recovery from the shock of Covid. The WMCA is stepping in with £25 million worth of training to support the unemployed in returning to employment.
  • A ‘one stop’ shop was launched last week to give people the skills needed to land thousands of jobs at next summer’s 2022 Commonwealth Games in Birmingham.
  • According to a government report that came out ahead of the Birmingham Tech Week, the West Midlands has been named as having the fastest-growing tech sector and is expected to create an extra 52,000 tech roles by 2025. Between, 2014 and 2019 the Tech sector has grown by 7.6% a year, the fastest region in the UK. Going forward it is expected to generate at least £2.7 billion by 2025.
  • The growth figures published as part of the Department of Digital, Culture, Media and Sport (DCMS) Assessing the UK’s regional digital ecosystems report, highlights the size and speed of the sector’s growth in the region have far outpaced any other region, including London.
  • Researchers at CityREDI / WMREDI have built a “typical” student spending profile and then calculated regional multipliers from spending a “typical” £1 in each region. As such, for each £1, the average region adds £0.72 in its GVA. This masks significant variation with the best performer (Eastern Scotland) generating £0.8 and the worst (East Yorkshire and Northern Lincolnshire) generating £0.68.
  • 143,000 students in West Midlands generate more jobs for the region than the 180,000 students do for Inner London. Looking at the shares of the local economy, we see that student expenditure is responsible for more than 4% of GVA and jobs in the West Midlands.
  • Over a quarter of businesses (27.7%) that contacted the Growth Hub over the last year were referred to one of the nine regional university partners. They were mainly referred to specific university business support programmes (81.6%) that provide specialised support such as the adoption of new technologies and processes, skills development, and business leadership.
  • In March 2021 there were 148,630 enterprises in the WMCA (3 LEP) area, a decrease of 2.0% (-3,005 enterprises) compared to the March 2020 snapshot, while the number in the UK increased by 0.6%.
  • WMCA (3 LEP) area had a higher proportion of enterprises with turnover over £5m at 2.6% (3,825) compared to the UK at 2.4%. The WMCA (3 LEP) area was also above the UK proportions with turnover between £1m – £4.99m at 7.4% (11,005) of enterprises, while the UK average was 7.0% and enterprises with turnover between £250,000 – £999,999 with 21.6% (32,030) of the WMCA (3 LEP) total, while the UK stood at 20.2%.
  • In the WMCA (3 LEP) area, the sector with the highest proportion of enterprises was the business professional and financial services which accounted for 39.1% of the business base; matching the UK proportion. Retail accounted for 17.1% (25,400) of the WMCA (3 LEP) business base, which was above the UK average of 15.0%. This is followed by construction at 13.5% (20,045), below the UK average of 14.7%.
  • In the year to Q2 2021, the West Midlands region’s export value was worth nearly £26.2bn, a decrease of £1.3bn (-4.9%) since the year ending Q2 2020. The UK decreased by 3.5% to £302bn worth of exports in the year ending Q2 2021.
  • In the year ending Q2 2021, the West Midlands imported nearly £32.9bn worth of goods. This has increased by nearly £1.4bn (+4.4%). While the value of all UK imports increased by 1.3% to £441.3bn. The West Midlands had a trade deficit of £6.7bn in the year ending Q2 2021.
  • In the year ending Q2 2021, the largest value export for a SITC section in the West Midlands was machinery and transport at £17.8bn. This SITC section accounted for 68% of the total exports value; of which 61.2% (£10.9bn) were non-EU exports. Compared to the year ending Q2 2020, the value of these exports has decreased by £1.1bn (-5.8%), but the quarter-on-quarter decline is much more modest.
  • The West Midlands Business Activity Index increased from 55.2 in August 2021 to 56.3 in September 2021. Firms indicated that further recovery in demand and expanded capacities supported the rise in output. The overall UK Business Activity Index increased from 54.8 in August 2021 to 54.9 in September 2021. Out of the twelve UK regions, the West Midlands region was second highest for the Business Activity Index in September 2021, only behind Wales.
  • The West Midlands Future Activity Index decreased slightly from 77.2 in August 2021 to 76.8 in September 2021, with firms continuing to forecast output growth for the next 12 months. Business confidence stemmed from hopes that the pandemic will be contained and further easing of travel restrictions. Optimism was also reported from firms due to new business enquires and product diversification.
  • The West Midlands Input Prices Index decreased from 78.3 in August 2021 to 78.0 in September 2021. The overall rate of input price inflation was steep and one of the strongest seen in the series history (January 1997). Firms reported that fuel, transportation, staff and material costs all increased.
  • The number of payroll employees in the UK showed another monthly increase, up 207,000 to a record 29.2 million in September 2021, returning to pre-COVID-19 (February 2020) levels.
  • The number of UK job vacancies from July to September 2021 was a record high of 1,102,000, an increase of 318,000 from its pre-pandemic (January to March 2020) level; this was the second consecutive month that the three-month average has risen over one million. The experimental single-month vacancy estimates recorded almost 1.2 million in September 2021, which is a record high.
  • The latest Labour Force estimates for June to August 2021 show the UK employment rate increased by 0.5 percentage points on the quarter, to 75.3%. and the unemployment rate decreased by 0.4 percentage points, to 4.5%. The economic inactivity rate is down 0.2 percentage points on the previous quarter, to 21.1%.
  • From June to August 2021, reports of redundancies in the three months prior to interview decreased by 0.2 per thousand on the quarter to 3.6 per thousand employees for the UK, similar to pre-COVID-19 levels.
  • There were 180,625 claimants in the WMCA (3 LEP) area in September 2021. Since August 2021, there has been a decrease of 1.5% (-2,685) claimants in the WMCA (3 LEP) area, less than the UK decrease of 3.0%.
  • There were 33,405 youth claimants in the WMCA (3 LEP) area in September 2021. Since August 2021, there has been a decrease of 2.9% (-980) youth claimants in the WMCA (3 LEP) area, below the UK decrease of 3.8%.
  • In total, the WMCA (3 LEP) area had 91,100 employments furloughed on the 31st August 2021. This reflects a 5.3% take-up rate of eligible employments for the scheme, compared to the UK-wide rate of 4.6%. When compared to 31st July 2021, the number of employments furloughed in the WMCA (3 LEP) area decreased by 15,200 (-14.3%, UK -16.6%).
  • For the UK, the number of employments on furlough peaked at 8.9 million on 8th May 2020. This fell to 2.4 million on 31st October, rose again to 4.9 million employments on furlough at 31st January 2021. However, the number of employments on furlough has fallen since January and the latest provisional figures show that as the scheme is coming to an end, the number of employments on furlough was 1.3 million on the 31st August 2021. Since the start of the scheme, a total of 11.7 million jobs have been put on furlough for at least part of the duration of the scheme.
  • There has been a total of 539,300 claims made from 151,400 individuals in the WMCA (3 LEP) across all SEISS grants; the total claims reached a value of nearly £1.38bn. At a West Midlands regional level, there were approximately 258,000 of the population eligible for the fifth grant of the SEISS, which is a take-up rate of 32% based on the total number of claims of 83,000. This can be split further by gender and there was a total potentially eligible male population of 184,000 for the fifth grant of the SEISS, which equates to a take-up rate of 33%, which is based on the total number of claims of 62,000. There were 74,000 eligible female population for the West Midlands region with a take-up rate of 28% based on the total number of claims of 21,000.
  • According to Springboard, in the week to the 2nd October 2021, the volume of overall retail footfall in the UK decreased by 3% from the previous week (week to 25th September 2021). This decrease in overall footfall in the UK was because of an 8% week-on-week fall in high street footfall. Meanwhile, retail parks and shopping centre footfall increased slightly from the previous week by 1% and 2%, respectively.
  • 2% of trading businesses in the West Midlands reported profits had decreased by at least 20%. However, 44.9% of trading businesses in the West Midlands reported that profits had stayed the same and approximately 11% reported their profits had increased by at least 20%.
  • Businesses were asked in the last two weeks, had their businesses exporting or importing goods or services have been affected when compared to normal expectations for the time of year. 57.1% of West Midlands businesses who were exporting reported that they had not been affected and 61.0% reported that importing had not been affected.
  • 1% of responding West Midlands businesses reported that prices increased more than normal, 37.9% reported that prices did not change any more than normal.
  • 0% of West Midlands businesses reported that vacancies were easier to fill. 22.4% of West Midlands businesses reported there was no difference in the ability to fill vacancies and 46.2% reported vacancies were more difficult to fill.
  • 21% of responding West Midlands adults reported in the past seven days they had worked at home because of COVID-19 (29% overall working population), while 19% of West Midlands adults had not been able to work from home (22% overall working population).

Download and view a copy of the West Midlands Economic Monitor

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.

This blog was written by Rebecca Riley, Business Development Director at City-REDI  / WMREDI, University of Birmingham.

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

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