The West Midlands Combined Authority has a boost of £1.5bn for the “Trailblazer” devolution programme as part of the Budget announcements. The Deeper Devolution Deal plans include greater responsibility for affordable housing provision, public transport with the extension of the Metro between Dudley and Brierley Hill, and the retention of business rates.
Budget 2023
- Amongst the announcements on Budget Day were eight new ‘investment zones’, one of which is due to be the West Midlands region. The scheme, backed by £80m of investment over five years in each new high-growth zone, is designed to accelerate research and development in the UK’s “most budding industries”.
- Changes to pensions were announced also. The total amount that workers can accumulate in their pension savings before paying extra tax is to be increased. People are expected to be able to save up to £1.8m over a lifetime, up from £1.07m currently. This is intended to encourage high earners in the 50-64 age group to continue working rather than taking early retirement
- Changes to childcare were announced, with one- and two-year-olds becoming eligible for 30 hours of free childcare per week. However, only 20% of eligible families took up current support in 2021. There is also the ‘wraparound childcare pathfinder scheme’ which is aimed at parents of primary school-aged children.
Economy
- The UK, the US, and Australia have launched a new security partnership.
- Two banks in the USA, Silicon Valley Bank and Signature Bank, have collapsed in the biggest failure since 2008. The effects have reverberated around the global financial system with shares of banks in Japan, Germany, and Spain falling between 7% and 10%. There is a risk of wider contagion.
- As the OBR has pointed out, the UK will narrowly avoid entering a technical recession this year, but the economy will still shrink (-0.2% GDP).
- Inflation is now likely to fall further than forecast in the Autumn Budget to 2.9% by the end of the year. This is partly because wholesale gas prices rapidly reducing, with annual energy prices for the average household expected to fall below £2,200 by the end of the year.
- Disposable household incomes will fall by 5.7% over the next two financial years. This is lower than previously forecasted but is still the largest fall since records began in the 1950s.
- There will be no increase in the energy price guarantee cap, remaining at the £2,500 level, for the next 3 months.
- The WM Business Activity Index rose from 49.0 in Jan 2023 to 53.0 in Feb 2023. The WM Future Business Activity Index increased from 76.5 in January 2023 to 78.4 in February 2023.
- 50% of trading businesses reported that they were able to get the materials, goods or services they needed from within the UK in Jan 2023 without encountering any supply issues; a further 11% reported that they were able to get the materials, goods or services they needed but had to change suppliers or find alternative solutions to do so, with both percentages broadly stable when compared with December 2022.
- In Jan 2023, 12% of businesses with 10 or more employees experienced global supply chain disruption, down 3 percentage points (pp) from Dec 2022; the most commonly reported reason for this disruption was a shortage of materials (35%).
- Analysis from Kantar regarding inflation shows that grocery price inflation rose to 17.1% in the four weeks to 19th February 2023.
- Analysis of three surveys of firms conducted by the British Chambers of Commerce reveals that the biggest challenge facing firms across 2021 and 2022 has been increased costs. Labour, skills, and supply chain issues are also major concerns but ease slightly in mid-2022.
- Significant issues for firms working with the new TCA trading arrangements with the EU are those associated with red tape and bureaucracy, shipping/transport issues and delays, increased costs, and customs and border controls.
- Progress on the HS2 line beyond Birmingham has been stalled following rising costs. The line between Birmingham and Crewe has been delayed by two years following a doubling in costs of HS2 from £33bn to £71bn.
Labour market
- For the three months ending January 2023, the West Midlands (WM) Region employment rate (aged 16 – 64 years) was 74.0%.
- For the three months ending in January 2023, the WM Region unemployment rate (aged 16 years and over) was 4.5% (the highest rate with London across all regions).
- There were 145,560 claimants in the West Midlands Combined Authority 3 Local Enterprise Partnership (WMCA 3 LEP) area in Feb 2023. Since January 2023, there has been an increase of 2.6% (+3,725) claimants in the WMCA (3 LEP) area, and the UK increased by 2.7%. When compared to March 2020 (pre-pandemic figures), the number of claimants has risen by 23.8% (+27,970) in the WMCA (3 LEP) area, with the UK increasing by 21.6% over the same period.
- Overall, for the WMCA (3 LEP) 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 February 2023.
- There were 26,445 youth claimants in the WMCA (3 LEP) area in February 2023. Since January 2023, there was an increase of 3.9% (+985) youth claimants in the WMCA (3 LEP) area, while the UK increased by 3.6%. When compared to March 2020 (pre-pandemic figures), the number of youth claimants has risen by 17.1% (+3,865) in the WMCA (3 LEP) area, with the UK increasing by 11.3% over the same period.
- Overall, for the WMCA (3 LEP) area the number of youth claimants as a percentage of residents aged 18-24 years old was 7.0% compared to 4.8% for the UK in February 2023.
- The total number of online job adverts grew by 4% in the week to 3 March 2023, but was 20% lower than the equivalent period of 2022; with increases in 16 of the 28 job categories, and 10 of the 12 UK countries and English regions compared with the previous week.
- Current figures on job vacancies are less positive with UK job vacancies falling for the eighth time in a row. This continuing trend shows the correction of the oversupply of vacancies following the coronavirus pandemic, where there were more advertisements than people searching for work.
- The unemployment outlook in Birmingham is not positive with the Centre for Cities Unemployment Tracker noting that the city has the highest claimant count rate at 6.8%. However, in the WM as a whole, unemployment fell by 0.4pp to 4.5% and employment was up by 0.3pp.
- Eurostat shows that, in the EU, employed non-nationals are more likely to be over-qualified than nationals for their job. The over-qualification rate for national citizens is 20.8% compared to 32.0% for citizens of other EU countries, and 39.6% for non-EU citizens.
- In the EU, the majority of employed people aged 15-64 years were men (54% men compared with 46% women). The share of female part-time workers aged 15-64, in the third quarter of 2022, was higher (28%) than the share of men (8%). However, the gender gap for income across the EU was narrower in rural areas than in cities.
Social Trends
- Strike action has continued with teachers, junior doctors, civil servants, London Underground, university staff, and journalists striking over pay and employment conditions. The most affected week will be from Monday 13th until Saturday 18th March 2023.
- 3 in 10 (27%) adults experienced shortages of essential food items that were needed on a regular basis in the past two weeks; an increase from 18% in the previous period
- When asked about the important issues facing the UK today, the most reported issues continue to be the cost of living (93%), the NHS (84%), the economy (74%) and climate change and the environment (61%).
- In the latest period, 4 in 10 (40%) adults reported that industrial action was an important issue, while 1 in 4 (25%) adults had been impacted by industrial action.
International Women’s Day
- The Global Entrepreneurship Monitor 2020/2021 observes that inclusiveness in entrepreneurship is crucial to reap the benefits that new businesses bring to the economy and society (employment, innovation, income, new products and services). To place an economic value on this, the Alison Rose Review of Female Entrepreneurship notes that the UK economy misses out on 1.1 million new businesses and £250 billion of new value-added that could be realized if women start and scale new businesses at the same rate as men in the UK
- Work by the London School of Economics has highlighted that this gender pay gap convergence phenomenon is skewed by a specific group of couples the 15% of working couples – those women who work with their husbands and casts doubt on the interpretation of women conforming to earnings norms. They found that the distribution drop happens when a couple run a business together, works in the same large firm, or has similar occupations, and are likely to have similar earnings, either because they are in comparable jobs or for tax purposes.
- According to the Institute for Fiscal Studies, in the UK the average working-age woman earned 40% less than the average working-age men in 2019, and 19% less per hour. Studies suggest that well-paid paternity leave provision and affordable childcare are key to addressing gender inequalities. This will also address issues of male-dominant workplaces and women being less visible in the workplace because of flexible working which has detrimental effects on women’s promotions and opportunities for progression.
- Research shows that women start their careers with as much ambition as men on average (Abouzahr al, 2017), and in an international survey by The New York Women’s Foundation, 59% of women stated that ambition was essential to a successful career. Offering the opportunity for a greater flexible and agile working environment, especially in senior positions, could help women’s work progression, especially, as it may lessen the time spent working part-time which appears to be the largest detriment to a woman’s career progression.
- The Centre for Progressive Policy (Franklin and Hochlaf, 2021) found that if women had access to adequate childcare services, and were able to work the hours they wished, it would increase their earnings by £7.6bn to £10.6bn per annum- potentially generating up to £28.2bn in economic output per annum.
- Women often miss out on progression opportunities because processes around hiring and progression are often quite opaque and informal, in many cases with job opportunities and sponsorships happening without women having access to the mechanisms of how they work (Jones, 2019).
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This blog was written by Anne Green, Professor of Regional Economic Development at City-REDI / WMREDI, University of Birmingham.
Disclaimer:
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.