The long-awaited Levelling Up White Paper was published on 2 February, setting out 12 missions: living standards, R&D, transport infrastructure, digital connectivity, education, skills, health, well-being, pride in place, housing, crime and local leadership. Domestically, ‘partygate’ has been dominating the news agenda: on 31 January the Cabinet Office published Sue Gray’s Update Report on the ‘Investigation into Alleged Gatherings on Government Premises During Covid Restrictions’; the Metropolitan Police are investigating certain events further. Public trust in the Government has declined. Internationally, the US is sending more troops to Europe as fears continue to mount that Russia will invade Ukraine. China is facing an economic crisis as its real estate boom has ended, but in 2021 for the first time, total GDP in China surpassed that for the European Union.
- Tensions are ongoing with Russia, as troops continue to be sent to the border of Ukraine. The US is sending 2,000 troops from the US to Poland and Germany, and a further 1,000 already in Germany will go to Romania.
- There are heightened concerns about the future of Russian gas flows to the European nations
- For several months, Russia has been accused of intentionally disrupting gas supplies to leverage its role as a major energy supplier to Europe.
- China is also facing an economic crisis as its real estate boom has ended. However, China’s economy has surpassed the whole of the European Union for the first time. Figures released this week by the European Statistical Office showed that the GDP of the EU grew by 5.2% in 2021, regaining its pre-Covid size, with GDP for the EU totally $17tn. China’s GDP for 2021 expanded by 8.1%, according to figures released last month by the county’s National Bureau of Statistics, increasing GDP to $17.7tn. Most economic gains made by China were largely driven by strong industrial outputs and exports, but China’s ability to overtake the EU was also influenced in part by the withdrawal of the UK from the EU.
- The long-awaited Sue Gray report released this week identified behaviour at gatherings is “difficult to justify” given the public being asked by the government to “accept far-reaching restrictions on their lives” and that some of the events represent a “serious failure to observe” high standards for government and those expected of the public at the time. It identified “failures of leadership and judgment” by different parts of No 10 and the Cabinet Office at different times.
- The Levelling Up White Paper was released this week (see more details below).
- Nationwide Building Society has reported that there has been a further increase in house price rises, with house price growth having the strongest January start since 2005. The building society has said prices rose by 2% year-on-year. A deposit now constitutes a record percentage of an average first-time buyers’ salary, with a 10% deposit on a typical first-time buyer home equivalent to 56% of total gross annual earnings.
- The Levelling Up White Paper has highlighted medium-term ‘missions’ to provide clarity and consistency over levelling up policy objectives. There are 12 missions: living standards, R&D, transport infrastructure, digital connectivity, education, skills, health, well-being, pride in place, housing, crime and local leadership. These ‘missions’ sit under 4 overarching missions to:
- Boost productivity, pay, jobs and living standards by growing the private sector, especially in those places where they are lagging;
- Spread opportunities and improve public services, especially in those places where they are weakest;
- Restore a sense of community, local pride and belonging, especially in those places where they have been lost;
- Empower local leaders and communities, especially in those places lacking local agency.
- Each of the 12 ‘missions’ is Coinciding with the release of the White Paper the ONS has released a Subnational indicators Explorer, which includes indicators that are aligned with some of the metrics selected to measure the progress of levelling up within the LUWP.
- The National Audit Office has recommended that the government should outline how it intends to formally evaluate Levelling Up funds to ensure that the public is receiving the best value for money from government projects.
- The White Paper includes announcements on funding including that the UK Shared Prosperity Fund will amount to £2.6 billion and will be decentralised to local leaders with investments set to regenerate communities, boost people’s skills, and support local businesses.
- Alongside the upcoming revaluation in April 2023, the UK Government will explore with the Combined Authorities further flexibilities to enable them to raise their own funding through the business rates system to fund local priorities, whilst also considering the impacts on business.
- In relation to housing, communities and regeneration there is an intention to scrap the ‘80/20 rule’ which leads to 80% of government funding for housing supply being directed mostly at London and the South East. Wolverhampton to Walsall corridor is one of the two first (of 20) transformational regeneration projects to be undertaken with Homes England. A further £180m will also be available for locally-led brownfield projects.
- The White Paper has also announced three new Innovation Accelerators: major place-based centres of innovation, centred on Greater Manchester, the West Midlands, and Glasgow-City Region. These clusters of innovation will see local businesses and researchers in these areas backed by £100 million of new government funding to turbo-charge local growth, learning from the MIT-Greater Boston and Stanford-Silicon Valley models.
- The Research & Development (R&D) mission will see domestic public R&D investment outside the Greater South East increase by at least 40% by 2030, with these funds leveraging a huge increase in private investment in these areas too.
- The Government will invite the first nine areas to agree on new county deals and seek to agree further Mayoral Combined Authority (MCA) Deals, extending devolution across England. By 2030, every part of England that wishes to have a ‘London-style’ devolution deal will have one. The West Midlands will be at the forefront of devolution and a model for other MCAs. The WMCA will get a trailblazer deeper devolution deal: “We will open negotiations on trailblazer deeper devolution deals with the West Midlands and Greater Manchester combined authorities. These deals will act as the blueprint for other mayoral combined authorities (MCAs) to follow, with bids for more powers welcome.”
- Local Enterprise Partnerships (LEPs) are to be integrated with MCAs. LEPs will continue to play a vital role in supporting local businesses and the local economy. Where devolution deals cover part of a LEP, this will be looked at on a case by case basis.
- The White paper announced Education Investment Areas (EIAs) for Coventry, Dudley, Walsall, Sandwell. The West Midlands will also get one new specialist 16-19 maths school. There will be one New Pathfinder, in Walsall, which will bring together local delivery partners from DWP and DfE, including Jobcentre Plus, careers services, local employers, education and training providers, and local government to respond to intelligence about local employers’ skills needs, supporting people into work and identifying progression opportunities for people in part-time work.
- The White Paper has had a mixed reception but is generally seen as the first step to success. Issues such as the lack of clarity on budgets and bidding processes, and what is new funding, as well as gaps around rural areas, the environment and some of the challenges such as education attainment being a very stretching challenge in post-pandemic climate, have all raised concerns in commentators. However, there is a welcome focus on regeneration, housing, R&D and devolved budgets, and the 12 missions with measurable targets.
Levelling Up: International perspectives
- City-REDI research with CIPFA on Investing in Regional Equality- lessons from four cities has analysed the experiences of Fukuoka (Japan), Leipzig (Germany), Cleveland (USA) and Nantes (France) in overcoming significant social and economic inequalities in recent years.
- It points to the importance of shared political will and partnerships, clear strategy and vision, key players leading by example, investing for the long term, drawing on local knowledge and monitoring and evaluation, adapting national frameworks to address local needs and adequate and responsive funding alongside inculcation of monitoring and evaluation of policies.
- Applying these insights to the Levelling Up White Paper, investing for the long-term is a key theme. There have been numerous different funding pots in England over recent years and there has not been the opportunity to evaluate these seriously. It is clear that more precise interventions and better evaluation of the impact of policies in different places are necessary. The National Audit Office’s report published on 2 February was critical of how previous local economic growth policies have been evaluated. It found that the Department for Levelling Up, Housing & Communities “has a poor understanding of what has worked well in its previous local growth programmes because it has not consistently evaluated them”.
- Better joining up skills, public R&D investment and evaluation will be important in up-skilling people to work in new emerging sectors (such as the digital and creative industries and life sciences), and in improving productivity and reducing inequality.
- The EY latest regional economic forecast has found, that all English regions are expected to have regained their pre-pandemic level of GVA by the end of 2023, with only the West Midlands still below its pre-pandemic size by the end of 2022.
- According to EY’s analysis, the West Midlands, North West and London economies were the most affected by the initial impact of the pandemic, with 2021 seeing the West Midlands economy recover to just 94.5% of its 2019 size, the North West’s economy reaching 96.1% of its 2019 size, and London recovering to 96.4%.
- Despite this, business confidence in the West Midlands surged during January, according to the latest Business Barometer from Lloyds Bank. Confidence amongst firms in the region rose nine points during the first month of the year to 39%.
- However, businesses have again highlighted their concern regarding drastically increasing cost pressures and lack of governmental action. Many have shared that, during an already difficult trading period, they have seen energy costs rising, wages increasing, incoming business rates changes and National Insurance Contributions increases incoming.
- The BBC has launched a Birmingham hub as part of a push to have 1,000 apprentices by 2026. Two hundred apprentices started with the BBC earlier this month in a variety of production, journalism, technology and business support roles. They will each get training and on the job experience.
- More the 290,000 more homes and businesses across the Midlands are set to receive a major broadband boost, thanks to a £86m investment by Openreach.
- Coventry is set to become the first all-electric bus city in the UK. A fleet of 130 zero-emission double-decker buses will be introduced next year as part of a £140m project to make Coventry the UK’s first all-electric bus city.
Economic and social indicators
- Evidence from the latest Business Insights and Conditions Survey (which was live between 10th January to 23rd January 2022) showed that 26% of responding West Midlands businesses reported that turnover over the last two weeks when compared to normal expectations for the time of year had decreased, while 52% of West Midlands businesses reported turnover had not been affected and approximately 10% reported turnover had increased. Excluding “not sure” responses, 50.3% of responding West Midlands businesses reported that Covid-19 was the main reason for the change in the business turnover and 12.6% reported that the “end of the EU transition period” was the main reason.
- Excluding “not sure” or “not applicable” responses, 36.6% of West Midlands businesses reported the prices of materials, goods or services brought over the last month compared with normal price fluctuations had increased more than usual.
- 39.5% of responding West Midlands businesses reported currently experiencing a shortage of workers. Due to the shortage of workers, 66% of West Midlands reported employees were then working more hours.
- Evidence from the Social Impacts of the Coronavirus survey showed that 65% of West Midlands adults reported the cost of living had increased over the last month.
- According to latest ONS infection survey data (29th January 2022), it is estimated 2,633,100 people in England had Covid-19 (95% credible interval: 2,544,100 to 2,725,100), equating to around 1 in 20 people.
- The UK is now one of the countries with the lowest rate of infection, albeit the number of infections remains high. Areas of Europe where there is greater vaccine hesitancy and a slower rate of vaccine uptake appear to be suffering the most from the highest rates of infection.
- City-REDI research analysing the literature on STEM assets (i.e. physical facilities dedicated largely to the translation, development and transfer of scientific, technological or engineering innovation, knowledge and expertise which relates to new or improved business processes, products or services) and regional growth highlights that the main theme in the literature is ‘Innovation’ and the key players are ‘Universities’, ‘Entrepreneurship’ and ‘Incubators’, with activities taking place on the subjects are ‘knowledge’ and ‘technology transfer’.
- Research on homelessness has produced an index that measures the propensity of the inhabitants of Parliamentary Constituencies to experience housing difficulties and accumulate rent arrears. Coventry North East, Birmingham Ladywood, Birmingham Yardley, Birmingham Erdington and Birmingham Perry Barr are ranked highest on the index.
City-REDI / WMREDI has developed a resource page examing the impact of Coronavirus (COVID-19) on the West Midlands and the UK. It includes previous editions of the West Midlands Weekly Economic Monitor, blogs and research on the economic and social impact of COVID-19. You can view it here.
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.