West Midlands Economic Impact Monitor – 3 August 2023

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While in the UK July 2023 has not seen anything close to the all-time temperature record of 40.3°C set on 19th July 2022, over the last month extreme weather has dominated international news headlines, with record high temperatures in the southern part of the USA and in southern Europe in particular and flooding in parts of south-east Asia.

The Secretary of the World Meteorological Organization notes that this extreme weather is indicative of the “harsh reality of climate change and a foretaste of the future”. 

Global outlook 
  • Scientists expect July 2023 to be the hottest on record globally. The world’s hottest day occurred on 6th July and the 23 hottest days ever were recorded during the month. On 6th July the global daily average air temperature reached over 17 degrees for the first time. 
  • The latest World Economic Outlook update for July 2023 from the International Monetary Fund forecasts shows that global growth is projected to fall from an estimated 3.5% in 2022 to 3.0% in both 2023 and 2024. While the forecast for 2023 is modestly higher than predicted in the April 2023 World Economic Outlook (WEO), it remains weak by historical standards. 
National outlook 
  • Latest results from the ONS Business insights and impact on the UK economy suggest that business conditions continue to remain challenging, however, estimates show signs of improvement for some measures; examples include fewer businesses reporting energy prices as their main concern. 
  • Around two-thirds (67%) of businesses reported some form of concern for their business when looking ahead to August 2023, which, although broadly stable with July 2023, is the lowest percentage reported since late February 2022. 
  • Fewer than 1 in 10 businesses (9%) reported energy prices as their main concern for August 2023, the lowest proportion since the question was first introduced in February 2022; more commonly reported concerns included falling demand for goods and services (16%) and inflation of goods and services prices (16%), although 24% of businesses reported having no concerns for their business. 
  • Around 1 in 8 (13%) businesses were experiencing worker shortages in mid-July 2023, with 38% of those businesses reporting that employees were working increased hours as a consequence; these percentages were 29% and 53%, respectively, for businesses with 10 or more employees. 
Regional economic outlook 
  • The West Midlands Business Activity Index decreased from 54.2 in May 2023 to 52.6 in June 2023, although it remained above the 50-growth mark for the fifth month in a row. The rise in business activity was linked to better-than-usual weather, new clients and demand resilience. The slowdown reflected signs of economic deceleration. 
  • The UK Business Activity Index decreased from 54.0 in May 2023 to 52.8 in June 2023. 
  • Out of the 12 UK regions, the West Midlands was the fourth highest for business activity in June 2023. 
  • The West Midlands Future Business Activity Index decreased from 78.5 in May 2023 to 74.4 in June 2023. Despite slipping to a six-month low, firms remained confident that output will increase over the year. Optimism in West Midlands firms was linked to predictions of demand conditions to remain favourable, hopes of geopolitical issues diminishing and the launch of new products and services.  
  • Out of the 12 UK regions, the West Midlands was the second highest for Future Business Activity in June 2023. 
Business births and deaths 
  • The number of business creations (business births) in the UK in Quarter 2 (Apr to June) 2023 was 77,095. This figure is 14% lower than the number of business creations in Quarter 2 2022. It is the second-lowest number of business creations in the second quarter since the start of this series in 2017. 
  • The number of business creations in the UK decreased in 14 out of 16 industry groups during this quarter, compared with Quarter 2 2022. The most significant decrease came in the transport and storage industry, where business creations were down by 59%. Within transport and storage, the two main industries driving the decrease were freight transport by road (down 53%) and unlicensed carriers (down 83%). 
  • The number of business creations in the WMCA 7-MET area in Quarter 2 (Apr to June) 2023 was 3,240. This figure is 18% lower than the number of business creations in Quarter 2 2022 and is the lowest number of business creations in a second quarter since 2018 (excluding 2020 Q2 as a majorly Covid-affected quarter). Births have fallen between Q2 2022 and Q2 2023 across all WMCA local authority areas, with the highest proportion in Wolverhampton (-28%) and Walsall (-26%). 
  • The number of business closures (business deaths) in the WMCA 7-MET area in Quarter 2 (Apr to June) 2023 was 3,500. This figure is 16.5% lower than the number of business deaths in Quarter 2 2022, reflecting a considerable (and positive) fall in business closures in the region, from recent highs. Deaths have fallen between Q2 2022 and Q2 2023 across all 7 of WMCA local authority areas.
Logistics and distribution 
  • ONS statistics indicate that the number of business premises used for transport, logistics and warehousing in the UK has almost doubled in the last decade. The UK’s exit from the EU and the Covid-19 pandemic accelerated the sector’s growth, with online shopping as a percentage of retail sales, new orders for the building of warehouses and job adverts in transport, logistics and warehousing all increasing substantially. 
  • In the WMCA area, the number of logistics and transport businesses grew by 196% between 2019 and 2022. 
  • The Golden Logistics Triangle is an area of the Midlands comprising around 289 square miles that is renowned for its high density of distribution facilities. It is within a 4-hour drive of 90% of the UK population. Easy access to the M1, M6 and M42 motorways makes it a prime location for logistics and distribution businesses. 
  • The WMCA area is located alongside strong road and rail transport links, as well as having one of the largest airports in the UK, Birmingham Airport, making it well-located for logistics, transport and distribution businesses. The WMCA area can increase market share and productive capacity by providing high-quality infrastructure and improving connectivity. 
  • As consumers become increasingly aware of the environmental impacts of their purchases, UK consumers are increasingly buying locally, so reducing the carbon footprint. This may mean an increase in demand for British-produced goods, increasing the need for freight services, which is where the WMCA area has a particular advantage given its central location. 
Regional labour market summary 
  • For the UK, the number of job vacancies from April to June 2023 was 1,034,000; this was a decrease of 7.6% (-85,000) from the previous quarter – the twelfth consecutive quarterly fall. From April to June 2023, total vacancies were down by 265,000 from the level of a year ago, although they remained 232,000 above their pre-coronavirus (January to March 2020) levels. 
  • The number of unique job postings across the WMCA 7 Met. area increased in June, for the second consecutive month, albeit marginally. Unique job postings increased by 693 or 0.5% from 140,670 in May to 141,363 in June. This is the first time since January 2023 that unique postings have increased month-on-month across the WMCA 7 Met. area. 
  • For the three months ending May 2023, the employment rate (aged 16–64 years) for the West Midlands region was 75.6%. Since the three months ending February 2023, the employment rate increased by 1.9 percentage points (pp). When compared to the same period in the previous year, the employment rate was 0.5pp higher. The UK employment rate was 76.0%, an increase of 0.2pp when compared to the previous quarter and an increase of 0.1pp when compared to the previous year.  
  • For the three months ending in May 2023, the West Midlands region unemployment rate (aged 16 years and over) was 5.0%, which has increased by 0.4pp since the previous quarter and an increase of 0.6pp from the previous year. The UK unemployment rate was 4.0%, an increase of 0.2pp from the previous quarter and 0.2pp higher when compared to the previous year.  
  • For the three months ending May 2023, the West Midlands region economic inactivity rate (aged 16 – 64 years) was 20.3% (a joint record-low rate for the region), a decrease of 2.4pp from the previous quarter and a decrease of 1.0pp when compared to the previous year. The UK economic inactivity rate was 20.8%, a decrease of 0.4pp from the previous quarter and a decrease of 0.3pp from the previous year. 
  • There were 125,600 claimants in the WMCA area in June 2023. Since May 2023, there has been an increase of 1.1% (+1,370) claimants in the WMCA area, while the UK increased by 1.5%. When compared to March 2020 (pre-Coronavirus pandemic), claimants have increased by 26.5% (+26,300) in the WMCA area, with the UK increasing by 22.3% over the same period.  
  • Overall, for the WMCA the number of claimants as a proportion of residents aged 16-64 years old was 6.8% compared to 3.7% for the UK in June 2023.  
  • Overall, for the WMCA area, the number of youth claimants as a percentage of residents aged 18-24 years old was 8.1% compared to 4.8% for the UK in June 2023.  
House prices 
  • House prices in the West Midlands are bucking a trend across the UK that has seen the sharpest fall for 12 years. Halifax said the annual UK fall in June of 2.6%, equating to around £7,500 being wiped off the average house price in cash terms, was the biggest since 2011. However, the West Midlands market appears to be relatively buoyant in comparison. 
  • The West Midlands was one of only two regions to show a rise in house prices in June compared to the same time last year, up 1.5 per cent to an average of £251,139. Only Yorkshire and the Humber also showed a rise, and that was by only 0.2 per cent. This chimes with data released by Government on house prices for May 2023, showing the West Midlands as having the largest monthly change at +0.5%. 

Download and view a copy of the West Midlands Economic Monitor

This blog was written by Anne Green, Professor of Regional Economic Development at City-REDI  / WMREDI, University of Birmingham.

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.

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