This week has seen the first Labour Party Conference since the General Election in July 2024. Looking ahead to the Chancellor’s first budget in October, Rachel Reeves announced there would be no increase in income tax, national insurance or VAT, refusing to return to austerity. There was an announcement of the return of industrial strategy. Reeves also announced a new measure to target tax dodgers and close the £39.8bn shortfall between the amount of tax owed and that collected.
Economic Outlook
- Global output growth has remained resilient, and inflation has remained moderate, with output growth being relatively robust in many G20 countries, including the UK.
- Real wage growth is now supporting household incomes and spending, though purchasing power has yet to return fully to pre-pandemic levels in most countries.
- Global GDP growth is projected to stabilise at 3.2% in 2024 and 2025, with further disinflation, improving real incomes and less restrictive monetary policy in many economies helping to underpin demand.
- Inflation is projected to be back to target in most G20 countries by the end of 2025.
- Labour market pressures are anticipated to ease as the number of job vacancies continues to decline from peak levels during the pandemic.
- There still remain significant risks, particularly around persisting geopolitical and trade tensions, which continue to damage investment and raise import prices.
- The UK economy grew 0.7% in Q2 2023, the second consecutive quarter of growth after a technical recession. However, this figure was aided by string levels of government spending, which may be masking ongoing weaknesses in the UK GDP, as household consumption has remained low and business investment has declined.
- However, rises in consumer confidence, following strong wage growth higher than inflation, will be key to economic growth over the following year.
- Whilst wage growth is now positive in real terms, wage pressures still remain from previous years of inflationary pressures. The easing of inflation though could continue to lead to the easing of restrictive monetary policy, which could further ease pressures on income and spending.
- Overall retail footfall in the week to 15 September 2024 was broadly unchanged when compared with both the previous week and the equivalent week of 2023; meanwhile, retail park footfall increased when compared with the previous week but decreased when compared with the equivalent week of 2023 (MRI OnLocation).
- Approximately one in five (20%) trading businesses reported an increase in the prices of goods or services bought in August 2024 when compared with July 2024, while less than 1 in 10 (6%) reported an increase in the prices of goods or services sold; these are the lowest proportions reported since these response options were introduced in March 2022.
- More than a quarter (26%) of trading businesses reported a decrease in their turnover in August 2024 compared with July 2024, up 3 percentage points from last month and the highest proportion reported since January 2024; in contrast, 14% reported an increase in their turnover, remaining broadly stable from last month.
- The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.1% in the 12 months to August 2024, unchanged from July.
- Core CPIH (excluding energy, food, alcohol and tobacco) rose by 4.3% in the 12 months to August 2024, up from 4.1% in July; the CPIH goods annual rate fell from negative 0.5% to negative 0.9%, while the CPIH services annual rate rose from 5.7% to 5.9%.
- The NatWest UK regional growth tracker has found that the West Midlands (ITL) is expanding, but at a slower rate than the trend over the past six months, as of the 3 months to August 2024.
- The West Midlands has one of the highest growth rates in Future activity, just below the South East, it has had the softest rise in new work, with the increase in new work only marginal and slower than the three months to July.
- The West Midlands, alongside the East Midlands, were the only two regions to see a decrease in workforce numbers over this period, though in the West Midlands, this was only a marginal decline. In terms of inflation, businesses in the West Midlands and South East recorded the lowest levels of cost rises.
Impact of funding allocations, cuts and changes to institutions
- City-REDI and partners have won funding to look at funding allocations and inequalities. The findings could help shape the future of public funding in England, leading to more targeted and effective investments in areas that need it most.
- Research by City-REDI into the impact of Birmingham City Council funding cuts has found that although one might assume that the poorest will be hit hardest by tax and fiscal shocks, the results from modelling are more nuanced. They indicate that while lower-income households are hit harder than higher-income households it is those with incomes of £14,500 to £23,500 that will be the most impacted – seeing their real incomes fall -0.48%. The analyses show that council tax rises are a less regressive way of addressing the budget deficit than transfer cuts. This work was carried out using the Socio-Economic Impact Model for the UK (SEIM-UK): a multi-region input-output model that is a powerful tool for evaluating changes in the national or regional economy, which can be used for partners’ projects and assessing change and shocks. After years of austerity and cuts to council budgets what is clear is that this is not just an issue for Birmingham City Council. According to a survey by the Local Government and Information Unit, 9% of councils surveyed were likely to declare effective bankruptcy in the next 12 months.
- The work of the Greater Birmingham and Solihull Local Enterprise Partnership (GBSLEP) demonstrates the power of collaborative partnerships which has enabled evidence-based, locally informed investment and project decisions to be made for the benefit of all our communities. GBLSEP was able to take moderate amounts of government funding to leverage substantial investments from both the public and private sectors. For every £1 the GBLSEP spent, £3 was generated – making public money go further. Find out more in our report about the GBSLEP – From Vision to Legacy.
Impact of PhDs
- Education and teaching are seen as social multipliers and PhD holders help share knowledge and research that is created. Each research project has an impact on a sector, a place, and a person. Directing these impacts to address the important challenges facing a locality, community, business, sector and/or group of people demonstrates how universities, through PhD funding, can make a difference in their place.
- Funders and providers should develop more explicit links outside of academia, particularly with industry outside of STEM; support greater opportunities for student career development; and to improve the work-life balance of students in order to maximise the economic, social and civic impacts of PhDs.
- University leaders and directors of research institutes should work strategically to ensure the research addresses challenges or supports specific sectors important to their local area, enabling students to gain a broader experience and access to potential employer networks. Embedding doctoral training to support the needs of the local area is an important part of a civic university.
Impact of Long COVID
- Long COVID sufferers with symptoms lasting for more than 28 weeks, which is beyond the maximum period of statutory employment protection in the UK, have a higher risk of employment exit compared to those without COVID symptoms.
- Working zero hours (sickness absence) is increased among those with Long COVID 5-28 weeks, similar to those with short COVID. But those with Long COVID 29+ weeks are not more (or less) likely to be temporarily absent from work than those with no COVID symptoms.
- Having Long COVID (5-28 weeks or 29+ weeks) is not associated with reduced working hours. Moreover, if still in work, those with Long COVID 29+ do not work less (or more) than they did before the pandemic.
- Comparing the mental health across the study groups shows large negative associations with Long COVID compared to those with no COVID symptoms – and more so on average for those who experienced symptoms for 29+ weeks. People with Long COVID for 29+ weeks seem to ‘buffer’ the low mental well-being found in group comparison which is likely to point to adaptations to live and work with Long COVID.
- For those with Long COVID 5-28 weeks, the negative impact on mental health is mediated by earnings which hints at possible job characteristics associated with higher/lower income that facilitate workplace adaptions (or not).
Creative industries and meaningful work
- Work by City-REDI argues that ‘meaningfulness’ continues to attract new recruits, despite changes in production foundations. The concept of ‘meaning’ shifts with these contexts.
- While many studies focus on meaningful work as a personal relationship between workers and their labour conditions, this work examines how ‘meaningfulness’ evolves within neo-bureaucratic frameworks.
- The loosening grip of neo-bureaucracy may be disrupting television production, with major broadcasters trying to control the market by hiring familiar freelancers on long-term contracts, yet losing control as familiarity diminishes.
- At the same time, freelancers face increasingly precarious job markets, initially struggling to integrate into networks and finding work sporadic. As the television industry continues to evolve, questions remain about what attracts staff to an industry that promises meaningfulness but is also marred by precarity. Despite the intense pressures, new recruits remain drawn in by the promise of meaningful work.
West Midlands Economic Impact Monitor – 26 September 2024
This blog was written by Anne Green, Professor of Regional Economic Development and Co-Director, Rebecca Riley, Professor for Enterprise, Engagement and Impact and Co-Director City-REDI / WMREDI, and Alice Pugh, Policy and Data Analyst 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.