West Midlands Economic Impact Monitor – 28 November 2024

This month the International Monetary Fund (IMF) forecasts stable but underwhelming global growth. US upgrades offset downgrades for European economies and emerging markets impacted by conflicts, weather events, and commodity disruptions. The UK’s Invest 2035 plan is under consultation. It focuses on tackling growth barriers and creating high-quality jobs in high-growth sectors, with a modern industrial strategy set to launch in spring 2025.

Global, national and regional economic trends

Emerging Asia Strength: Surging semiconductor and AI-driven electronics demand and investments in China and India are driving growth in emerging Asia.
Medium-Term Growth Outlook: Global growth is projected to reach 3.1% in five years; this is below pre-pandemic averages.
Inflation Trends: Global disinflation is ongoing, but elevated services price inflation highlights the need for targeted monetary policy and structural reforms.
UK Retail and Redundancies: Retail footfall rose by 4% in mid-November 2024 compared with the previous week, while potential redundancies were 19% lower than the same period in 2023.
UK Energy Prices: Gas prices increased by 9% in mid-November 2024 compared to the prior week, while electricity prices remained stable but rose 3% year-on-year.
Business Turnover and Challenges: 16% of UK businesses reported increased turnover in October 2024, but 22% expect a decrease in December, with economic uncertainty cited as a major challenge.
Worker Shortages: In early November 2024, 8% of UK businesses reported worker shortages, consistent with early October levels.
Consumer Price Inflation: UK CPI rose by 2.3% in the year to October 2024, with housing and household services driving the increase; core CPIH excluding volatile items rose by 4.1%.
Producer Price Inflation: Producer input prices fell by 2.3% annually in October 2024, with crude oil being the largest contributor to declining input costs.
Factory Gate Prices: Producer output prices fell by 0.8% annually in October 2024, driven by lower refined petroleum product prices.
UK Business Expectations: 14% of businesses expect performance to decrease in the next 12 months, an upward trend since July 2024, with taxation concerns rising.
Fuel Prices: Annual growth in automotive fuel prices stabilised by mid-November 2024 but remained 2 percentage points lower year-on-year.
UK Port and Flight Activity: Ship visits to UK ports fell 7% year-on-year in mid-November 2024, while flight numbers rose 3% compared to the same period in 2023.
Infrastructure and Devolution: High Speed 2 (HS2) construction is progressing, enhancing connectivity to London. The WMCA has secured unprecedented control over devolved spending areas, including adult skills.
Innovation Recognition: The West Midlands ranked third in the European Capital of Innovation Award, recognising its legacy in digital technology and healthcare and earning €100,000 for future initiatives.
West Midlands Futures Project: A long-term economic vision addresses six regional “Grand Challenges,” emphasizing leadership, innovation, market-shaping, equity, and integration of economic and urban development strategies.

Autumn Budget 2024

Budget Highlights – Personal Finances: Minimum wage will rise to £12.21/hour in April 2025. Private school fees will face VAT from 2025, and non-domicile tax status will be abolished.
Business Taxes and Support: National Insurance thresholds for businesses will lower, while Employment Allowance increases to £10,500. Corporation tax remains at 25%.
National Insurance – From April 2025 businesses will have to pay national insurance on worker’s earnings over £5,000, down from £9,100 currently, with the rate employers pay increasing from 13.8% to 15%.
Energy, Health, and Education: £3.4bn allocated to retrofit homes for energy efficiency, NHS budgets increase by £22.6bn, and £6.7bn is allocated for education, including rebuilding 500 schools.
Interest Rates and Inflation: Interest rates were reduced to 5% in 2024, the first cut since 2020, but remain high. CPI inflation is expected to drop to 2.6% by 2025.
Devolution and Investment: The West Midlands Combined Authority secured a single settlement for spending control, while 133 foreign direct investment (FDI) projects created 7,581 jobs in 2023-2024.

Business activity

Business Activity: The West Midlands Business Activity Index dropped to 50.0 in October 2024, ending a 12-month expansion streak. Demand weakness and uncertainty surrounding the Budget contributed. UK-wide, the index also declined slightly.
Future Business Outlook: Confidence rose with the Future Business Activity Index increasing to 71.0, signalling hope for demand recovery and successful product launches despite remaining below long-term averages.
Employment and Business Capacity: Employment in the West Midlands declined for the ninth consecutive month, with job shedding at its steepest in nearly four years. Outstanding business volumes also fell for the 23rd consecutive month.
Prices: Input costs eased slightly due to lower energy and steel prices but remained pressured by rising costs of electronic components, food, and insurance. Selling price increases were moderate.
Enterprise Births and Deaths: In 2023, the WMCA area saw 14,080 enterprise births (-8.8% year-on-year) and 14,630 deaths (-1.6%), reflecting challenges in enterprise sustainability compared to national trends.
Trade and Exports: Favourable export conditions continued for the 10th month, driven by stronger expansions in China and the US. However, key European markets remained in contraction.
Business Challenges: 26.1% of West Midlands businesses reported competition impacting turnover, with 20.7% expecting turnover to increase in December 2024. Falling demand remains a key concern.
Supply Chain and Trade Activity: 81.3% of businesses secured necessary materials domestically, while 4% reported global supply chain disruptions, with the Middle East conflict cited as a major factor.
Worker shortages: Worker shortages affected 13.6% of businesses, and 15.5% faced recruitment challenges. Only 13.0% expected employee numbers to increase by December 2024.

Business Growth: AI and Innovation Skills

Business Growth Roadmap: The Business Commission West Midlands (BCWM) highlights five levers for growth, including AI, digitization, and innovation, alongside closer collaboration between businesses and educational institutions.
AI and Skills Demand: AI and digital skills are crucial for business growth according to the Business Commission West Midlands Final Report. 52% of surveyed firms are planning increased investment in technology and AI, and 64% emphasise stronger links with education.
Innovation Trends: 36% of businesses anticipate boosting research and development efforts, and 58% plan to diversify products and services within the next year, driven by innovation and skill needs.
Innovation Skills Framework: Effective innovation requires a mix of conceptual, evaluative, technical, relational, and self-reflective skills, plus technical and soft skills like adaptability and creativity.

Labour Market

Regional Labour Market Insights: The West Midlands employment rate (73.9%) grew by 1.2 percentage points since June 2024, but unemployment (4.5%) remains slightly above the UK average (4.3%).
Claimant Count Increase: October 2024 saw a 23.9% annual rise in claimants within the West Midlands Combined Authority (WMCA), reaching 8.3% of working-age residents, compared to 4.2% nationally.
Youth Claimant Trends: Youth claimants (aged 18-24) in the WMCA increased by 13.5% year-on-year, representing 9.5% of the age group, the highest among combined authorities in the UK.
Economic Inactivity Rates: The West Midlands’ economic inactivity rate is 22.5%, slightly above the national average of 21.8%, reflecting challenges in engaging certain workforce segments.
Payrolled Employees Growth: The West Midlands experienced a 0.5% annual increase in payrolled employees, outperforming London (-0.1%) but trailing Northern Ireland (1.1%).
Skills for Growth: Universities, acting as connectors, play a vital role in bridging skills, research, and innovation needs, with targeted training for advanced digital and innovation-related competencies essential for regional progress.

Birmingham Economic Review 2024

Economic Growth and Contribution: the Greater Birmingham economy grew by 9.7% in gross value added (GVA) since 2021, contributing £60.78bn in 2022. UK economic growth is projected to increase modestly over the next three years.
Demographics and Skills Deficits: Birmingham has a young and diverse population, with 22.1% under 15 years old and over half identifying as ethnic minorities. However, the region lags in skills attainment, with 6.5% of working-age residents having no formal qualifications.
Economic Growth and Business Confidence: The UK economy is forecasted to grow by 1.1% in 2024, with Greater Birmingham contributing £60.78bn GVA in 2022, marking a 9.7% increase since 2021. Business confidence is high, with 65% expecting turnover growth in 2024.
Population and Diversity: Birmingham has a young and diverse population, with 22.1% under 15 and 51.4% identifying as Black, Asian, or Minority Ethnic.
Skills and Economic Inactivity: Skills attainment remains below average, with a 43.2% rate of RQF 4+ qualifications compared to 46.7% nationally. Economic inactivity has declined but is still higher than pre-pandemic levels at 23.7%.
Earnings and Child Poverty: Median weekly earnings rose 9.2% in 2023, outpacing the UK average, but over a third of Birmingham’s children live in relative poverty.
Infrastructure Development: HS2 construction progresses, with new funding for London tunnelling. Plans include upgrading the Trans-Pennine rail line and extending the affordable homes budget by £500m.

West Midlands Regional Economic Development Institute (WMREDI) Final Report

Purpose and Creation: WMREDI was established to bridge the gap between academic research and practical policy in the West Midlands, fostering collaboration among universities, businesses, and policymakers to address regional economic challenges.
Theories and Frameworks: Anchored in a “theory of place” and “theory of change,” WMREDI focused on tailoring strategies to the region’s unique assets, challenges, and opportunities, emphasising localized economic and social factors.
Collaborative Model: WMREDI’s model brought together universities, local authorities, businesses, and LEPs through shared governance and a collaboration agreement, enabling resource pooling, data sharing, and coordinated projects.
Key Achievements: WMREDI contributed to the West Midlands Local Industrial Strategy, supported productivity, skills, and innovation growth, and informed policy during the COVID-19 pandemic and Brexit, addressing challenges like resilience and regional disparities.
Legacy and Future: Although its funding ended in 2024, WMREDI’s collaborative approach and insights provide a model for other regions, with City-REDI continuing its mission to deliver policy-relevant research and strengthen regional economic resilience in the West Midlands and beyond.

Supporting Refugees

Community Sponsorship Scheme (CSS): The CSS empowers volunteers to support refugee integration through practical and emotional assistance, fostering social capital and facilitating navigation of essential systems.
Volunteers and Integration: Relationships between volunteers and refugees evolve from weak ties (practical support) to strong ties (deep care), providing critical emotional security and a sense of belonging for refugees.
Challenges in CSS Implementation: While effective, CSS is limited by the socio-economic backgrounds of volunteers and their capacity to address complex issues like employment and immigration, requiring specialist support.
Resettlement Context Matters: Refugees in diverse areas benefit from co-ethnic networks, while those in less diverse regions form deeper bonds with sponsors, highlighting the importance of tailored integration approaches.
Future Improvements: Enhancing CSS impact requires specialised services to complement volunteer efforts, context-sensitive programmes, and further research on long-term outcomes for refugees across different resettlement methods.