West Midlands Economic Impact Monitor – 3 April 2025

Concerns about geopolitical risks and further fragmentation of the global economy are leading to policy uncertainty and a weakening of business and consumer sentiment. In the Spring Statement the UK Chancellor of the Exchequer announced welfare reforms and civil service cost cuts, alongside an increase in defence spending.

Businesses and households are facing increasing bills from April 2025. The West Midlands Employment Index is showing the fastest rate of job shedding in over four years but the West Midlands Future Business Activity Index displays an increase in confidence.

Global outlook

The latest OECD Economic Outlook Interim Report highlights that recent activity indicators point to a softening of global growth prospects. Business and consumer sentiment have weakened in some countries. Inflationary pressures continue to linger in many economies. Policy uncertainty has been high and significant risks remain. Further fragmentation of the global economy is a key concern.
Global GDP growth is expected to moderate from 3.2% in 2024 to 3.1% in 2025 and 3.0% in 2026, with higher trade barriers in several G20 economies and increased policy uncertainty weighing on investment and household spending.

National outlook – Spring Statement, March 2025, and OBR forecasts

In her first Spring Statement the Chancellor of the Exchequer has made a number of policy announcements, with more announcements around departmental spending in June following a Spending Review.
With regard to welfare reform, incapacity benefits under universal credit will be halved and cut for new claimants, with Incapacity Benefits being frozen in cash terms for existing claimants at £97 per week from April next year, with a potential top-up payment for those with the most severe conditions.
There will also be a stricter eligibility test for personal independence payments (PIPs), the main disability benefit, from November 2026.
Those aged under 22 will no longer be able to claim the incapacity benefit top-up of universal credit.
In public services, a target has been set by the Chancellor for government departments to reduce administrative costs by 15% by 2030.
10,000 civil service jobs are anticipated to be cut, including staff working in HR, policy advice, communications and office management.
Defence spending, which was expected to rise to £2.9bn next year, is to increase by a further £2.2bn.
From April 2025 households face increasing bills for water, energy and council tax, alongside rises in additional costs around car tax, broadband, phone and TV licence bills and stamp duty.
The Office for Budget Responsibility forecasts nearly 4 million additional people will be expected to pay income tax and 3 million more will be shifted into the higher rate of tax, as a result of the threshold being frozen.
The Office for Budget Responsibility (OBR) has highlighted in their economic and fiscal outlook for the Spring Statement that the outlook has become more challenging since the Autumn Budget. In the second half of the 2024 financial year domestic output has stagnated and business and consumer confidence has trended downwards. These pressures have largely arisen due to a worsening of geopolitical risks since the previous forecast in October 2024.
Against this more challenging backdrop, real GDP growth is expected to fall to 1% this year, halving from the October forecast. However, growth will recover to average around 1.75% over the rest of the decade.

Regional outlook

The UK regional economic gap is set to widen over the next three years. Steady economic growth is expected for all parts of the UK between 2025 and 2028, but the Midlands, North of England, Scotland and Wales are forecast to see slower-than-average GVA growth. The EY UK Regional Economic Forecast expects UK GVA to grow 1.6% between 2025 and 2028. The West Midlands is expected to grow by 0.6% in 2025, and an average of 0.5% between 2025-2028.

Regional trade in goods

In 2024, the West Midlands region exported £35.3bn worth of goods and imported £42.7bn. This represents a trade in goods deficit of £7.4bn, a decrease from the trade deficit in 2023 which was £7.6bn.
Since 2023, the West Midlands region goods exports increased by £336m (+1.0%) to £35.3bn in 2024, the third highest percentage increase across all UK regions behind the North East and Northern Ireland (both increasing by 1.1%). Conversely, UK exports decreased by £20.8bn (-5.6%) in the same period.
The West Midlands accounted for 10.1% of UK exports – third highest (after the South East and London).
In 2024, goods imports to the West Midlands area region were worth £42.7bn, an increase of £213m (+0.5%) since 2023. UK-wide total imports decreased by 3.5% to £577.2bn.
The largest SITC section for goods exports and imports in the West Midlands region was machinery and transport.

Business activity in the West Midlands

The West Midlands Business Activity Index increased from 47.2 in January 2025 to 48.7 in February 2025. Some companies linked a decline in activity to price pressures and the loss of existing clients, but other firms pointed to an expected recovery in new contract wins.
The UK Business Activity Index decreased from 50.6 in January 2025 to 50.5 in February 2025.
The West Midlands Future Business Activity Index increased from 69.8 in January 2025 to 74.3 in February 2025, the highest level of confidence since August 2024 and the highest level of all UK regions in February 2025. Optimism was linked to advertising, investment, tourism and the planned launch of new products.
The West Midlands Employment Index decreased from 42.4 in January 2025 to 40.9 in February 2025, the fastest rate of job shedding in nearly four-and-a-half years. This was linked to some staff leaving in search of higher pay, while others reported cutbacks due to the upcoming increase in employer payroll expenses and attempts to control costs.

Labour market and claimant count indicators

For the three months ending January 2025, the West Midlands Region employment rate (aged 16–64 years) was 74.0%. Since the three months ending October 2024, the employment rate increased by 0.1 percentage points (pp). When compared to the same period in the previous year, the employment rate was 0.9pp higher. The UK employment rate was 75.0%, an increase of 0.1pp when compared to the previous quarter and 0.3pp higher when compared to the same period in the previous year.
For the three months ending January 2025, the West Midlands Region unemployment rate (aged 16 years and over) was 4.5%, which has increased by 0.1pp since the previous quarter and an increase of 0.2pp when compared to the previous year. The UK unemployment rate was 4.4%, an increase of 0.1pp from the previous quarter and an increase of 0.3pp when compared to the previous year.
For the three months ending January 2025, the West Midlands Region economic inactivity rate (aged 16-64 years) was 22.4%, a decrease of 0.3pp since the previous quarter and a 1.1% decrease when compared to the previous year. The UK economic inactivity rate was 21.5%, a decrease of 0.2pp when compared to the previous quarter and a 0.6pp decrease from the previous year.
There were 149,790 claimants in the WMCA area in February 2025. Since January 2025, there has been an increase of 4.3% (+6,215) claimants in the WMCA area, while the UK increased by 5.1%. When compared to February 2024, claimants have increased by 19.4% (+24,365) in the WMCA area, with the UK increasing by 11.8%.
There were 27,265 youth claimants in the WMCA area in February 2025. Since January 2025, there has been an increase of 3.6% (+940) youth claimants in the WMCA area, while the UK increased by 4.7%. When compared to February 2024, youth claimants have increased by 10.5% (+2,590) in the WMCA area, with the UK increasing by 8.9%.

Digital skills shortages

A recent study on digital skills and the potential economic impact of digital skills shortages, using the newly updated Socio-Economic Impact Model for the UK (SEIM-UK) (a macroeconomic Multi-Regional Input-Output model) shows that digital skills shortages could cost the UK economy up to £27.6 billion and more than 380,000 jobs by 2030.
The digital skills shortage is not restricted to high-tech clusters but affects all regions across the UK and employment in high and low tech occupations.
Professional roles, which rely heavily on advanced digital skills, are the most affected by skills shortages.

Work Integrated Learning programmes in the Midlands space cluster

A study focusing on ‘Work Integrated Learning’ (WIL) programmes in the Midlands’ space cluster has examined how closer collaboration between academia and industry through WIL programmes, involving a range of innovative space education and industry collaboration initiatives, can impact workforce capabilities and sector performance.
The four case studies show how students gain practical, industry-relevant experience that complements their theoretical knowledge.
A common thread running through the four programmes examined is the crucial role of individual leadership in their inception, development, and ongoing success.
Based on the case studies recommendations include: (1) adopting a mixed approach to space education that integrates both specialised and interdisciplinary programmes, catering to the diverse needs of the sector; (2) providing hands-on experience with state-of-the-art facilities and equipment is important; (3) developing soft skills is essential for producing well-rounded professionals; (4) creating collaborative spaces that foster innovation and industry engagement can significantly enhance the learning experience and promote cross-pollination of ideas; (5) developing flexible partnership models with industry can create a more dynamic and responsive educational ecosystem; (6) engaging with the broader community through outreach programmes and public events extending the impact of space education beyond the classroom, so inspiring the next generation.

Working from home, job satisfaction, commuting and productivity

Analyses of Understanding Society data using job satisfaction to explore the relationship between working from home and employee productivity, shows that for women those who have greater autonomy over their work location and those who work sometimes from home, are more satisfied with their job.
Working from home has some, although limited positive relationship with job satisfaction, but it is the commute that matters the most and more so than other autonomy-enhancing aspects of the job.
For men, working from home or autonomy over work location does not show a relationship with job satisfaction. A number of autonomy-related aspects of the job are not relevant either. Yet, similar to women, there is a strong relationship between job satisfaction and commute satisfaction.
The results from the analyses suggest a need to focus on the detrimental impact of commuting on how well employees do on their jobs and on the links between transportation and work productivity.

The Procurement Act 2023 supporting social housing retrofitting goals

A joint Innovation Procurement Empowerment Centre project, funded by Catapult Connected Places and Innovate UK to empower councils and local authorities, is seeking to embrace innovative procurement practices.
The Procurement Act 2023 took full effect in February 2025, marking a major shift in how public sector contracts are awarded in the UK. With a focus on transparency, efficiency, and inclusivity, the Act is particularly significant for social housing providers looking to retrofit homes to improve energy efficiency and sustainability.
The Act presents a critical opportunity to overcome key barriers in retrofitting social housing across the West Midlands. By simplifying procurement processes, reducing administrative burdens, and improving supplier access, the Act is set to enhance regional supply chains and foster economic growth, and contributing to both housing quality and long-term net-zero goals as well as economic growth.

For further details read the full report.

This blog was written by Anne Green, Professor of Regional Economic Development and Co-Director, City-REDI, University of Birmingham.

Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.