West Midlands Economic Impact Monitor – 26 April 2024

The forecast for global growth five years from now—at 3.1%—is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025, with advanced economies returning to their inflation targets sooner than emerging markets and developing economies. Economic momentum is set to return to all parts of the UK between 2024 and 2027, but London and the South East are forecast to see faster GVA growth than the UK average.

Economy

UK employment is set to grow by 1.1% annually but London (1.5%), the South East (1.3%), and the South West (1.2%), are expected to exceed that.
All other locations are forecast to see employment grow at a slower rate than the UK average.
London and the South East accounted for 39% of overall UK Gross Value Added (GVA) in 2023, compared to 36% in 2005, and EY forecasts this will rise to 40% by 2027.
Although economic activity has picked up since the start of the year, the outlook remains weak by historical standards. NIESR forecast GDP to grow by 0.4% in the first quarter of 2024.
The EY report indicates that the growth gap is being exacerbated by the UK’s post-pandemic rise in labour market inactivity, with the highest levels found in Northern Ireland (25.7%), the North West (22.9%) and Wales (22%).
More recently, there has been an increase in the flow of asset finance in 2023, but other types of external finance have fallen including bank lending and equity finance, but these remain high compared to historical levels.
The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.8% in the 12 months to March 2024, unchanged from February.
The largest downward contribution came from food, with prices rising by less than a year ago, while the largest, partially offsetting, upward contribution came from motor fuels, with prices rising this year but falling a year ago.
Producer input prices fell by 2.5% in the year to March 2024, down from a revised fall of 2.2% in the year to February 2024.
Producer output (factory gate) prices rose by 0.6% in the year to March 2024, up from a rise of 0.4% in the year to February 2024.
More than one in five (22%) trading businesses reported that their turnover had decreased in March 2024 compared with February 2024, while 16% reported their turnover had increased; these figures are broadly stable with February 2024.
Consumer behaviour indicators showed increased activity in the latest week, with aggregate UK spending on credit and debit cards increasing by 1% compared with the previous week and transactions at Pret A Manger stores increasing in 9 of the 10 location categories; meanwhile, overall retail footfall remained broadly unchanged.
The total number of online job adverts on 12 April 2024 decreased by 2% when compared with the previous week; this was 19% below the level seen for the equivalent period of 2023.
British Business Bank launched its Midlands Engine Investment Fund II, to unlock additional funding to help small businesses within the Midlands prosper and thrive. The £400m fund will follow the success of the first Midlands Engine Investment Fund, which helped 739 small businesses and created over 4,000 jobs.
HM Revenue and Customs Value Added Tax returns data shows in March 2024, 5% more firms reported a decrease than an increase in turnover on the previous month, falling 7 percentage points (pp) from the previous month.

West Midlands Combined Authority (WMCA) GVA

Continuing the economic recovery following the Covid-19 pandemic, the WMCA area total GVA increased from £66.2bn in 2021 to £68.9bn in 2022. This equated to a 4.1% (+£2.7bn) annual increase which matched the UK growth rate. Compared to 2017, the latest WMCA GVA figure is 1.5% lower (-£1.0bn), while for UK-wide this has increased by 4.8%.
In 2022, out of the ten Combined Authorities, the WMCA had the second highest GVA, behind Greater Manchester Combined Authority (£81.5bn) down to Tees Valley with the lowest (£14.4bn). In terms of the latest annual percentage change, the WMCA was the fourth lowest Combined Authority with the Nort of Tyne the highest (+8.2%), down to Cambridgeshire and Peterborough and North East (both +2.6%).
In 2022, GVA per head in the WMCA area was £23,318. This was an annual increase of 2.8% (+£640) while the UK increased by 3.2%. When compared to 2017, GVA per head has decreased by 3.6% (-£878) while for the UK there was an increase of 2.3%.
Out of the ten Combined Authorities, the WMCA came in among the middle, with the West of England the highest at £36,511 down to the North East with the lowest at £19,303.

Midlands and West Midlands Business

The latest Institute of Chartered Accountants in England and Wales (ICAEW) Business Confidence Monitor reveals the West Midlands was the only region to see confidence fall, reaching its lowest level for a year, but remains positive and above its historical norm.
2% of responding West Midlands businesses reported that turnover in March 2024 had increased when compared to the previous calendar month. 40.2% of West Midlands businesses reported turnover had stayed the same. However, 18.1% had reported that turnover had decreased.
The number of companies in the Midlands going into administration surged by almost 40% in the first quarter of the year, reflecting the challenges faced by businesses in the region.
1% of responding West Midlands businesses reported that domestic demand for goods and services in March 2024, when compared to the previous month, had increased. 48.3% reported the domestic demand had stayed the same, and 12.0% of West Midlands businesses reported the domestic demand for goods and services had decreased.
2% of responding West Midlands businesses reported the prices of goods and services brought in March 2024, when compared with the previous month, had increased. 63.6% reported the prices had stayed the same and 1.1% reported a decrease.
1% of responding West Midlands businesses reported the main concern in May 2024 will be a falling demand for goods and services.

West Midlands Purchasing Manager Index (PMI)

The West Midlands Business Activity Index decreased from 53.1 in February 2024 to 52.8 in March 2024. This reading still indicates an increase in business activity but was restricted due to fading demand.
The UK Business Activity Index decreased from 53.0 in February 2024 to 52.8 in March 2024.
Out of the twelve UK regions, the West Midlands was the fourth highest for business activity in March 2024.
The West Midlands Future Business Activity Index increased from 76.8 in February 2024 to 79.7 in March 2024, the latest reading was the highest recorded in 26 months. Optimism was linked to new clients, expansion plans, advertising and investment.
Out of the twelve UK regions, the West Midlands was the highest for the Future Business Activity Index in March 2024.

WMCA Labour Market

Overall, for the WMCA area, the economic activity rate was 75.6% in 2023, an increase of 1.7 percentage points (pp) since 2022. The UK economic activity rate was 78.7% and increased at a slower rate of 0.4pp.
The WMCA area employment rate was 70.5% in 2023, this was an increase of 1.3pp since 2022. While the UK employment rate increased by 0.2pp to 75.7%.
The WMCA area economic inactivity rate was 24.4% in 2023, a decrease of 1.7pp since 2022. The UK economic inactivity rate decreased by 0.4pp to 21.3%.
For the WMCA area, 41.6% (758,500) of the working-age population had RQF4+ qualifications in 2023, an increase of 15.6% (+102,100) since 2022. While for the UK, 47.1% were qualified for RQF4+ levels, an annual increase of 5.9%.
For the WMCA area, 9.0% (164,000) of the working-age population had no qualifications in 2023, a decrease of 10.9% (-20,000) since 2022. While for the UK, 6.6% had no qualifications, an annual decrease of 2.9%.
There were 128,625 claimants in the WMCA area in March 2024. Since February 2024, there has been an increase of 2.6% (+3,200) claimants in the WMCA area, while the UK increased by 1.9%.
When compared to March 2023 claimants have increased by 3.8% (+4,725) in the WMCA area, with the UK increasing by 4.4%.
Overall, for the WMCA the number of claimants as a proportion of residents aged 16-64 years old was 7.0% compared to 3.9% for the UK in March 2024
There were 25,275 youth claimants in the WMCA area in March 2024. Since February 2024, there has been an increase of 2.4% (+600) of youth claimants in the WMCA area, while the UK increased by 2.1%.
Musculoskeletal health remains the most common health condition reported by those no longer working, in over 70% of cases it is listed as a cause. This has been a similar picture for over a decade and yet we seem to be moving little as employers to adapt or prevent its impact on losing people from the workplace, yet small changes can have a big impact on keeping people in work.

Aerospace

Midlands insight report looking at Aerospace in the Midlands found there were 524 individual firms, 36,500+ employees, and 595 sites in the region, generating £5.3bn GVA.
Companies and research bodies in the Midlands were awarded £763m in national, European and regional aerospace R&D grants between 2013/14 and 2021/22.
UK national funding has been by far the largest source of support, driven by awards from the UK’s Aerospace Technology Institute (ATI).
ATI programmes awarded £655m to Midlands organisations between 2013 and 2022 – 41% of all ATI funding and significantly more than any other region.

Society

FareShare Midlands takes good quality surplus food from the food industry and redistributes it to more than 550 Charity Members across the region. 96% of FareShare Midlands Charity Members are seeing the effects of the cost of living crisis. 70% of Members are seeing more families with children among those new to their services.  3 million children are living in poverty and food insecurity in the UK. 139,000 children are living in poverty in Birmingham.
The most commonly reported issues were the cost of living (87%), the NHS (86%) and the economy (72%). Housing (58%), climate change and the environment (57%), crime (56%), immigration (52%), education (48%) and international conflict (47%) were other commonly reported important issues facing the UK today.
25% of adults reported they had to borrow more money or use more credit than usual compared to a year ago; this proportion was higher among adults aged 30 to 49 years (34%) compared with those aged 70 years and over (10%).
When asked about the areas of their life in which they had used AI in the past 12 months, adults reported they had used AI for their home (42%), finances (29%), the way they travel (27%), work or education (26%); 27% of adults reported they had not knowingly used AI.

West Midlands Economic Impact Monitor 26 April 2024.

This blog was written by Alice Pugh, Data and Policy Analyst 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.