West Midlands Economic Impact Monitor – 27 June 2024

This month, the World Bank has recommended global cooperation to safeguard trade, support green and digital transitions, deliver debt relief, and improve food security.

Economy and Business

Despite an improvement in near-term prospects, the global outlook remains subdued by historical standards. In 2024-25, growth is set to underperform its 2010s average in nearly 60 percent of economies, comprising over 80 percent of the global population.
About 22% of trading businesses reported decreased turnover in May 2024 compared to April 2024, while 17% reported an increase and 52% reported no change.
Online job adverts increased by 1% from the previous week but were 20% lower than the same period in 2023.
24% of trading businesses reported higher input prices in May 2024 compared to April 2024. About 11% of businesses expected to raise prices in July 2024.
Only 6% of businesses with 10+ employees experienced supply chain disruptions in May 2024. 22% of businesses with 10+ employees reported worker shortages in early June 2024.
Consumer Price Inflation: CPIH rose by 2.8% in the 12 months to May 2024, down from 3.0% in April. CPI rose by 2.0% in the same period, down from 2.3% in April.
Core Inflation: Core CPIH (excluding energy, food, alcohol, and tobacco) rose by 4.2% in the 12 months to May 2024. Core CPI rose by 3.5% in the same period.
Producer input prices fell by 0.1% in the year to May 2024, while output prices rose by 1.7%. Monthly, producer input prices showed no change, and output prices fell by 0.1%.
Average UK private rents increased by 8.7% in the 12 months to May 2024. Average house prices increased by 1.1% in the 12 months to April 2024. In 2022, the economic output per hour in the WMCA area was £34.50. This was a 1.2% increase (+£0.40) from 2021, slightly lower than the UK’s 1.5% growth. Compared to 2019, the WMCA area’s output per hour grew by 6.5% (+£2.10), while the UK’s grew by 8.5% (+£3.10).
In 2022, the economic output per job in the WMCA area was £53,020. This was a 2.0% increase (+£1,054) from 2021, slightly lower than the UK’s 2.2% growth. Compared to 2019, the WMCA area’s output per job grew by 5.4% (+£2,721), while the UK’s grew by 7.6%.
The UK’s economic output per job was £61,729 in 2022, meaning the WMCA area was £8,709 behind.
The West Midlands Business Activity Index dropped from 55.5 in April 2024 to 54.2 in May 2024. Despite the drop from a 25-month high, this marks the eighth straight month of business growth, driven by higher demand, new clients, and better economic conditions.
The UK’s Business Activity Index also fell, from 54.1 in April 2024 to 53.0 in May 2024.
Among the twelve UK regions, the West Midlands tied with London for the third highest business activity in May 2024.
The West Midlands Future Business Activity Index rose from 78.7 in April 2024 to 80.5 in May 2024, reaching its highest level since May 2021. Optimism was fuelled by hopes for better economic conditions, increased tourism, marketing efforts, and new business.
In May 2024, the West Midlands had the highest Future Business Activity Index among the twelve UK regions.
In the year ending Q1 2024, the West Midlands exported £35.4 billion worth of goods and imported £42.1 billion, resulting in a trade deficit of £6.7 billion. This deficit decreased from £11.1 billion in the previous year.
Compared to the previous year, the West Midlands’ exports increased by £3.8 billion (+11.9%) to £35.4 billion, the highest percentage increase among UK regions. In contrast, UK exports overall decreased by 5.9% to £360.7 billion.
The West Midlands made up 9.8% of the UK’s exports, ranking third after the South East (11.4%) and London (10.7%).
In the year ending Q1 2024, the West Midlands imported £42.1 billion worth of goods, a decrease of £616 million (-1.4%) from the previous year. UK-wide, total imports fell by 8.7% to £579.3 billion.

Labour market

In the West Midlands, 73.9% of people aged 16-64 were employed in the three months ending April 2024, up 0.4% from the previous quarter but down 1% from the previous year. The UK employment rate was 74.3%, down 0.5% from the previous quarter and down 1.1% from the previous year. The West Midlands had the fifth highest employment rate, with the South East highest at 78.3% and Wales lowest at 68.9%. The West Midlands unemployment rate was 5.1%, up 0.9% from the previous quarter and 0.1% from the previous year. The UK unemployment rate was 4.4%, up 0.4% from the previous quarter and 0.5% from the previous year.
In the West Midlands, 22.1% of people aged 16-64 were economically inactive in the three months ending April 2024, down 1% from the previous quarter but up 1.1% from the previous year. The UK economic inactivity rate was 22.3%, up 0.3% from the previous quarter and 0.8% from the previous year.
Between March 2023 and March 2024, workforce jobs increased in 9 of the 12 UK regions. Scotland saw the largest increase with 168,000 new jobs. London had the highest percentage of service-based jobs (92.9%), while the East Midlands had the highest percentage of production sector jobs (12%). The West Midlands saw a decrease of 39,400 jobs (-1.3%), with service-based jobs making up 82.3% of its workforce. Comparing May 2024 to May 2023, the number of payrolled employees increased by 0.7% in the West Midlands, matching the East Midlands and the East, and was slightly above the UK-wide growth rate of 0.6%.

Impact of Austerity

An investigation has found that Birmingham Council’s financial issues, including equal pay disputes and a botched IT rollout, were exacerbated by significant austerity measures, with £1 billion cut from central funding since 2010. This has led to increased service demands and costs, pushing the council towards financial instability.
1 in 10 councils across the UK risk bankruptcy in the 2024/25 financial year. Local authorities in England, which collect less than 5% of taxes locally compared to higher percentages in other European countries, are heavily dependent on central government grants, which have been reduced by around 40% in real terms under austerity.
Evidence indicates that austerity, initially intended as a short-term measure, has become a long-term issue for local authorities, forcing them into risky financial behaviours such as speculative investments in commercial property. Birmingham’s financial crisis is set to worsen as the government plans further cuts to local government funding.

SME Finance

The SME finance gap has been recognized as a barrier to growth since the 1931 Macmillan Committee report, with governments addressing this gap through various interventions.
The European Union’s Structural Funds have significantly contributed to regionally-based SME finance funds since 1995, with €18.5 billion allocated for SME growth and competitiveness in the 2021-27 ESIF programme.
Large-scale funds with a mix of finance types are crucial for operational efficiency and meeting diverse business needs, adapting to market conditions like economic shocks.
Long-term investment approaches are vital for early-stage ventures, with awareness of economic cycles and flexible investment periods essential for success.

Impact of COVID-19 on Remote Work

The pandemic accelerated remote work adoption, particularly for high-skilled workers, raising questions about its effect on internal migration patterns and potential regional revitalization.
Post-pandemic research shows varied migration patterns, with some regions experiencing urban-to-rural shifts, while others see continued urban migration, indicating country-specific trends.
Remote work’s potential to rejuvenate rural and economically struggling areas is a topic for debate, with concerns about rising housing costs and resource competition from high-skilled migrants.

Homelessness

The UK has the highest homelessness rates in the developed world, with a significant increase over the past 14 years, particularly in the West Midlands.
Homelessness creates a substantial financial burden, with Birmingham having the highest temporary accommodation expenses outside of London.
The West Midlands region has the second-highest rate of households in temporary accommodation outside the Greater South East, with Coventry and Birmingham being the worst affected areas.
WMREDI has developed a Homelessness Prediction Tool to help policymakers in the West Midlands anticipate and mitigate future homelessness by using multiple data sources to predict risk at a fine spatial scale.
The tool considers household employment, household size, presence of dependent children, type of tenancy, and median income to assess homelessness risk, identifying Coventry North East and several Birmingham constituencies as high-risk areas.

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