This week we have seen infections from the Omicron variant rise to new highs. Plan B restrictions remain in place and the NHS and other frontline services are under strain. The hospitality and live events sectors have lost crucial income over the Christmas and New Year trading period. Concerns about inflation continue, including as a result of supply chain bottlenecks. Further rises in interest rates are expected in the coming months. From 1st January 2022 full customs controls have been introduced for goods moving between Great Britain and the EU.
- The European Central Bank has predicted that the new Omicron variant, and resulting social distancing restrictions, will likely undermine some of the economic progress that was being made and will bring great uncertainty, undermining previous forecasts for growth.
- The Chancellor has announced a £1bn fund to support businesses. Hospitality businesses and employees will be able to apply for cash grants of up to £6,000 per premises.
- The Statutory Sick Pay Rebate Scheme means businesses with fewer than 250 employees will be reimbursed Statutory Sick Pay (SSP) for Covid-related absences for up to two weeks per employee.
- According to latest ONS infection survey data (31st December 2021), it is estimated that 2,024,700 people in England had Covid-19 (95% credible interval: 1,951,200 to 2,096,300), equating to around 1 in 25 people.
- Many regional businesses are continually concerned about rising prices and the impact that persistent Plan B measures will have on economic activity. Plan B restrictions have led to some hospitality businesses requesting tax cuts and for furlough to be brought back. Midlands landlords have warned that some pubs and clubs, crippled by Covid, will not survive January.
- Regional business leaders are calling for the Government to set out their plan for proportionate support for impacted businesses in the short term and in the event that restrictions continue or tighten in 2022. A suite of tailored support measures required by businesses in light of the Government’s Plan B measures was set out in a document released on 14th December 2021 by the Greater Birmingham Chambers of Commerce: Plan B: A Blueprint for Business Support.
- From 1st January 2022 full customs controls have been introduced for goods moving between Great Britain and the EU, and for goods exported from Great Britain to Ireland.
- The UK currently imports five times the amount of food it exports to the EU. It is expected that there will likely be delays when importing goods from the EU as businesses adjust and streamline their business models to meet the new rules.
The West Midlands
- According to new figures from the Greater Birmingham and Coventry and Warwickshire Chambers of Commerce, around two-thirds of West Midlands firms are taking measures to reduce their environmental impact.
- The West Midlands Combined Authority (WMCA) has also awarded £9m in funding for job training packages, aimed at getting unemployed residents back into work quickly to support the region’s economic recovery. The funding is set to be delivered through the Sector Based Work Academy Program (SWAP).
- The latest Business Barometer from Lloyds Bank Commercial Banking notes that Midlands businesses remain upbeat despite an overall drop in confidence. But there remains uncertainty about the impact of Omicron on economic recovery.
- In final results from Wave 45 of the Business Insights and Conditions Survey 25.1% of responding businesses in the West Midlands reported that turnover over the last month had decreased when compared to normal expectations for the time of year. 49.5% of businesses reported turnover had not been affected and 15.7% reported turnover had increased.
- According to the Social Impacts of Coronavirus for 1st-12th December, in the West Midlands, 48% of adults reported they were very or somewhat worried about the effect Covid-19 was having on their life (56% GB). 44% of West Midlands adults reported that Covid-19 was affecting their life due to access to healthcare and treatment for non- Covid-19 related issues (43% GB).
- UK car production saw the worst November performance since 1984 despite a surge in demand for battery electric vehicles. The Society of Motor Manufacturers and Traders (SMMT) said November UK car production was the fifth consecutive month of decline, dropping 28.7% to 75,756 units, as a worldwide shortage of semiconductors continues.
- Businesses are continuing to have difficulty finding people with the right skills. Low candidate numbers and efforts to attract and secure workers are driving further steep increases in pay for both permanent and temporary staff.
- All regions saw a reduction in online job adverts between the 10th and 17th December 2021. The West Midlands online job adverts decreased by 7.7 percentage points.
- Overall retail footfall in the UK for the week to 18th December 2021 was below “normal” expectations at 81% of the level seen in the equivalent week of 2019. Shopping centre retail footfall was at 73% of the level seen in the equivalent week of 2019; this is the lowest relative level since the week of 25th July 2021.
- Agile responses to the health and economic impacts of Covid-19 have been seen partly to depend on targeted interventions at the local and regional level, but the crisis has revealed a number of weaknesses in the existing sub-national governance structure to respond.
- In the context of ‘levelling up’, there has also never been a better time for the region to lobby the government for more regional powers, having demonstrated its competency to work together to deliver effective regional interventions quickly in response to the pandemic. But there needs to be a strong, collective vision of what levelling up means for this region.
- R&D and innovation (RDI) have strong potential in levelling up to drive inclusive growth in UK regions.
- Private R&D investment per head in the West Midlands region (about £400) is 4-5 times greater than public R&D funding (£83) and the region could gain from increased public investment in R&D.
- Life sciences is one key area of strength that could be expanded with targeted investment, building on the region’s already labour pool and wide healthcare market. Well-targeted public R&D investment has the potential to catalyse new growth and further private sector investment in the narrower area of R&D-intensive life sciences. These jobs create significantly higher GVA (gross value added) per head than other sectors and strong local multiplier effects.
- New workers with higher education qualifications can improve and level up a region’s skills base and contribute significantly to regional economic and productivity growth. WMREDI analyses of Higher Education Statistics Agency data for the academic years 2015/16, 2016/17 and 2018/19 show remarkable regional differences in terms of both student attraction and graduate employment, with a clear North-South divide evident. Of the total 2018/19 university graduates who moved to a different region for work, 65.3% moved to London, the East of England, the South East and the South West.
- Graduates with a qualification in Arts, Humanities, and Education are far more likely than STEM and LEM (Law, Economics and Management) graduates to stay in the same region of study for work, while there is a converse picture among STEM graduates. The West Midlands displays one of the lowest retention rates of STEM graduates (42%) after the East Midlands (33.8%). The development of sectors with considerable potential for economic growth (such as the life sciences, low carbon, and digital industries) provides opportunities to improve graduate retention through creating high-quality jobs.
- 2021 saw continued changes in the provision of publicly funded business support, both nationally and regionally, to respond to the challenges faced by businesses because of the pandemic, and the UK leaving the EU.
- Demand for business support has increased since the start of the pandemic: across the GBSLEP area, there has been a 322% increase in the number of businesses supported by the Growth Hub. The Pivot and Prosper grant scheme is an example of a scheme to support businesses by focusing on pivoting their business model and innovating to seize new opportunities.
- A business support review undertaken by Metro Dynamics sets out how a more joined-up business support ecosystem might be created within the region by following four principles: (1) future-facing and focussed around a genuine, integrated customer journey; (2) a universal offer with a visible across the WMCA area; (3) the development of targeted premium products; and (4) a multi-level marketing campaign to drive uptake of the use of professional business support and advice.
- A detailed analysis of GBSLEP Growth Hub referrals to regional universities shows that between October 2019 and July 2021, 396 businesses were referred to university partners.
- Coventry University helped 115 of these businesses through Coventry University Services Ltd (CUS Ltd), a subsidiary company of Coventry University. CUS Ltd offers SME support, knowledge transfer partnerships and continuing professional development courses. Most of the support programmes provided by CUS Ltd are externally funded. It is hoped that future funding to continue this activity financed by the ERDF will be accessed from the Government’s Shared Prosperity Fund.
- Reflections on addressing the Covid-19 pandemic in Birmingham highlight the importance of direct engagement with different communities using trusted, authentic and knowledgeable technical experts. Engagement through the media and social media in multiple formats enabled two-way conversations, bringing together senior staff with citizens and their experiences to co-produce solutions.
- ‘NFT’ was Collins Dictionary’s Word of the Year in 2021. Non-fungible tokens (NFTs) are unique, virtual items that can be bought and sold on the blockchain. Each item is paired with a smart contract that is written in code, which outlines the item’s rules of ownership and contains a certificate of authenticity.
- NFTs can provide a more secure record of an item’s ownership and authenticity, so benefitting artists by addressing long-standing issues of provenance in the art world. Artists are able to establish and receive royalties every time their art changes hands. Hence NFTs are viewed as a way of rebalancing the power dynamics present within the dealership of art.
- NFTs hold significant environmental costs, however, due to the computer-intensive operations of blockchain networks, on which they are traded. These networks require huge amounts of computer power and energy.
- Debates on NFTs fit into broader discussions on ‘dirty data’. The use of the internet comes with its own carbon costs: cloud storage systems require large amounts of computer power and cooling units. ‘Dirty data’ habits (e.g. not deleting duplicate photos, passive streaming) potentially contribute as much in environmental impact as global international air travel, according to IET. Small changes to internet usage could dramatically reduce energy consumption. Investment in renewable and carbon-free technologies could reduce the carbon impact of our online usage.
The bi-weekly monitor brings together data and intelligence from the WMREDI partnership into one single source which can be shared and utilised in planning and responding to the challenge of the virus. This is a rapid review of the issues. It is not intended to be a comprehensive assessment but rather a practical report which places emphasis on emerging issues and the best data and intelligence we have to date.
The monitor is feeding into the regional recovery planning that can help the regional economy bounce back and quickly move forward once lockdown restrictions start to be lifted.
The work is being endorsed by political and business leaders a task force of experts are being set up through WMREDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.
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 that 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.