West Midlands Economic Impact Monitor- 16th September 2022

Published: Posted on

In a truly historic week, after reigning for 70 years, Queen Elizabeth II, the UK’s longest-serving monarch, died peacefully on 8th September. She is succeeded by King Charles III. Also, Liz Truss became the UK’s third female Prime Minister two days before the death of Her Majesty, succeeding Boris Johnson.

  • The System Average Price (SAP) of gas decreased by 16% in the week to 4th September it is now 223% higher than the equivalent level seen on 5th September 2021. It was 1575% higher when compared to the pre-Coronavirus baseline.
  • The Energy Price Guarantee (EPG) will raise household bills to £2,500 a year from 1st October from £1,971 currently. The new EPG will fix unit rates for domestic consumers for 2 years. The typical household bill will still be 83% higher than pre-crisis levels. The government has announced that it will provide ‘equivalent support’ to businesses over a period of 6 months. However, full details of this are yet to be announced.
  • According to data from 2020, the West Midlands has the highest rate of fuel poverty of any region in the UK, with the highest number of households being in fuel poverty in Wolverhampton (22.4%), Birmingham (21.8%) and Sandwell (20.8%).
  • According to Kantar, grocery price inflation hit 12.4% during the past month, a new record based on their data. This means that the average annual grocery bill will go from £4,610 to £5,181, an extra £572 a year.
  • 8% of responding WM businesses reported that exporting stayed the same in August 2022 when compared to August 2021. 54.2% of responding WM businesses reported that importing stayed the same in August 2022 when compared to August 2021.
  • 8% of WM businesses reported gas prices were fixed and expiring December 2022, 4.6% expiring by March 2023, 19.5% expiring after March 2023. 19.4% of WM businesses gas prices are variable. 13.1% of WM businesses reported electricity prices were fixed and expiring December 2022, 6.4% expiring by March 2023, 24.1% expiring after March 2023, 20.9% of WM businesses electricity prices are variable.
  • Many businesses are struggling to absorb major increases in the costs of electricity, gas and food, but against the backdrop of the cost-of-living crisis, they feel unable to pass on cost increases to customers.
  • Employees working from home are taking the decision to move to working back in the office to reduce their domestic energy bills.
  • There has been a continued increase in companies seeking energy reduction grants to install solar panels / LED lighting / new boilers.
  • Repowering the Black Country and the WM Combined Authority have announced the WM Industrial Energy Taskforce. The taskforce will build on the work already underway to identify specific short-term measures government and industrial partners can take to mitigate the immediate impacts of industrial energy cost increases.
Purchasing Managers Index
  • WM Business Activity Index decreased from 50.3 in July 2022 to 49.3 in August 2022, indicating a quicker deterioration in demand conditions leading to a renewed fall in business activity (below the 50-growth mark, although marginal). Firms showed that business activity contracted due to reduced client purchasing, consumers reducing expenditure, economic uncertainty, and product availability issues
  • The WM Future Business Activity Index decreased from 68.3 in July 2022 to 67.8 in August 2022. Firms in the WM remain optimistic for the upcoming year; however, the degree of optimism was at its second-weakest level since October 2020 and below its historical average as firms reported inflation concerns, recession fears and energy price volatility.
  • The WM Export Climate Index decreased from1 in July 2022 to 48.5 in August 2022, indicating weakening in trade prospects since mid-2020.
  • The WM Employment Index decreased from 54.1 in July 2022 to 53.5 in August 2022 – but still an 18 month increase for job creation.
  • The WM Prices Charged Index increased marginally from 65.9 in July 2022 to 66.0 in August 2022 – although this is a contrast to the slowdown in cost inflation, there was a quicker increase for prices charged. The overall rate is the second lowest in 2022 so far.
Labour Market
  • For the UK, early estimates for August 2022 indicate that the number of payrolled employees rose by 2.8% (+803,000) compared with August 2021; and by 2.5% (+718,000) since February 2020.
  • The UK employment rate for May to July 2022 for people aged 16 to 64 years decreased by 0.2 percentage points (pp) on the quarter to 75.4% and is still below pre-coronavirus pandemic levels. Full-time employees and self-employed workers increased over the latest three-month period, while part-time employees decreased.
  • The UK unemployment rate for May to July 2022 decreased by 0.2pp on the quarter to 3.6%, the lowest rate since May to July 1974.
  • The UK economic inactivity rate increased by 0.4 percentage points on the quarter to 21.7% in May to July 2022. This increase in the latest three-month period was largely driven by those aged 16 to 24 years and those aged 50 to 64 years. Looking at economic inactivity by reason, the increase during the latest three-month period was driven by those inactive because they are students or long-term sick.
  • For the UK, the number of job vacancies in June to August 2022 was 1,266,000: a decrease of 34,000 from the previous quarter – the largest quarterly fall since June to August 2020. In June to August 2022, the total number of vacancies was 470,000 (+59.1%) above the January to March 2020 pre-coronavirus pandemic level and 215,000 (+20.4%) above when compared to same period in the previous year.
  • This fall in vacancies, the second quarterly fall in consecutive periods, may reflect uncertainty across industries, with an increased number of respondents reporting recruitment freezes. Although the rapid growth in vacancies seen in the summer of 2021 has slowed significantly, the elevated numbers of vacancies, alongside low levels of unemployment, indicate a historically tight labour market.
  • There were 145,285 claimants in the WMCA (3 LEP) area in August 2022. In the last month there has been an increase of 1.0% (+1,415) claimants in the WMCA (3 LEP) area, the UK also increased by 1.0
  • Overall, for the WMCA (3 LEP) area the number of claimants as a proportion of residents aged 16 – 64 years old was 5.5% compared to 3.7% for the UK in August 2022.
  • There were 25,210 youth claimants in the WMCA (3 LEP) area in August 2022. Since July 2022, there was an increase of 2.8% (+690) youth claimants in the WMCA (3 LEP) area, while the UK increased by 3.6%.
  • Overall, for the WMCA (3 LEP) the number of youth claimants as a percentage of residents aged 18- 24 years old was 6.4% compared to 4.5% for the UK in August 2022.
  • According to Lightcast, the WMCA area is mirroring national vacancy data, the number of job postings across the WMCA 3 LEP area decreased by 22,819 or -14% in August 2022. All 19 local authority areas recorded a drop in job postings.
Incomes of ethnic minorities: effects since 2010
  • The net monthly income of an average person of an ethnic minority before the Equality Act 2010 was introduced (, in 2009-2010) was 7.07% lower than the incomes of people of any other ethnicity.
  • Incomes of ethnic minorities increased on average by 9.53% after the Equality Act was introduced, while the rest of the population saw their incomes increase by 5.33%.
War in Ukraine – and wider implications
  • Ukraine has reported making significant territorial gains within the last week, taking more than 1,000sqkm (385 miles) of territory in its south and east from Russia.
  • Russia has completely halted gas supplies to Europe via a major pipeline, stating that repairs need to be made. The Russian state-owned energy giant, Gazprom, said on the 1st of September that the restrictions on the Nord Stream 1 pipeline would last for three days. However, the pipe has still not been reopened in over 2 weeks now.
  • In 2021, the UK imported £10.3 billion of goods from Russia, which accounted for 2.2% of all goods imports, making Russia our 12th biggest importing partner. There were £3.0 billion of goods exports to Russia (0.9% of all goods exports), making Russia the UK’s 24th biggest exporting partner. The UK imported £5.2 billion of fuel from Russia in 2021 which accounted for 9.7% of all fuel imported.
  • Ukraine ranks #2 to export Oil – seeds & oleaginous fruits to the UK and Russia ranks #1 to export Refined Oil. According to Chris Mejia Argueta, one of the most alarming supply chain issues resulting from the Russia-Ukraine war is food shortages, particularly acute in low-income countries in Africa. Ukraine and Russia account for about a third of the world’s wheat and a quarter of barley production, not to mention some 75% of the sunflower oil supply — all critical commodities for keeping humans fed.
  • Bottlenecks in international freight remain high and are being accentuated by the Ukraine war and the shutdowns in China. The freight route across Russia, which for decades served as the main overland link between Europe and China, has become problematic as Beijing and other countries try to shield their economies from the snags caused by the sanctions on Moscow.
  • Potential options in the light of these changes are: (1) consider alternative sourcing – now is the time to either diversify partners or find alternative sourcing modes; (2) capitalize on new opportunities – to fill the gaps created by the volatility, creating new business models and potentially improving the lives of others; (3) understand that quantitative approaches can help, but there are challenges – while modelling can help optimize supply chain changes, there are limits to this approach given that most supply chain models assume a steady state, which is not applicable for redesigning something that is in transition; (4) accept that this is the new normalthe key to sustaining growth in uncertain times is developing best-in-class agile competencies.

Download and view a copy of the West Midlands Economic Monitor

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 it here.

This blog was written by Anne Green, Professor of Regional Economic Development 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, WMREDI or the University of Birmingham.

Sign up for our mailing list.

Leave a Reply

Your email address will not be published. Required fields are marked *