In this edition we look at the price of the UK’s 12 favourite Christmas dinner trimmings, the price of a traditional Christmas dinner (for a family of 4 or 5) has increased 17.6% from £32.93 in November 2021 to £38.72 in November 2022. However, despite the general gloom of cost-of-living an Ipsos report found that “Joy” in online conversations was the top emotion related to the holidays, with a slight uptick in joy-related mentions in 2022 vs 2021. So, we can expect shoppers to be savvier and reduce spending but expect to enjoy Christmas despite this.
Economic outlook
- People in the UK are expected to spend £20.1 billion this year on Christmas gifts, this is 21% (£5.5bn) less than 2021’s figure of £25.5 billion. This spend is also 33% lower than the 2019 pre-pandemic spend of £26.9 billion. Even during the lockdown over the 2020 Christmas period, UK spending was 21% higher at £24.3 billion.
- Research from the World Economic Forum indicates that 67% of executives from Small and Medium Entreprises (SMEs) cite survival and expansion as their main challenges.
- The latest Business Confidence Monitor by ICAEW shows business confidence is falling nationally as difficult economic conditions combined with political turmoil. The West Midlands (WM) has become even more negative and sits below the UK average.
- Halifax says house prices in the UK have fallen by 2.3% in November, the largest monthly fall since 2008.
- BBC’s Newsround has found that 72% of children are worried about the cost of living. 73% of children worry about their family having less money for things they need – with one in every five (22%) saying they are very worried. 1 in 7 (14%) of those who responded said that their family has used a foodbank.
- 1 in 6 (16%) adults experienced moderate to severe depressive symptoms; this is similar to rates found in summer 2021 (17%), however higher than pre-pandemic levels (10%). 32% of those experiencing moderate to severe depressive symptoms reported that they had to borrow more money or use more credit than usual in the last month compared with a year ago.
- There are several strikes announced over the Christmas period expected to be the worst strike action since 1989 with 2.4m days lost.
- The System Average Price (SAP) of gas increased by 33% in the week to 27th November 2022, it was 42% lower than the equivalent time period in the previous year 74% lower than the peak level recorded on the 28th August 2022. It was 424% higher when compared to the pre-Coronavirus baseline (February 2020).
- 45% of adults who pay energy bills said they found it very or somewhat difficult to afford in the latest period (lower than 47% in the previous week). This varies by 63% among those living in the most deprived fifth of areas compared with 35% among those living in the least deprived. Further analysis shows the proportion appeared to decrease with age, at 53% among those aged 16 to 29 years, 49% among those aged 30 to 49 years, 43% among those aged 50 to 69 years and 35% among those aged 70 years and over.
- 30% of those who are currently paying rent or mortgage payments reported that these payments have gone up in the last six months (lower than 34% in the previous period).
- A survey by Ipsos has found that globally 87% of people feel stressed about rising costs, and 55% are on average more stressed than last year. 47% of consumers expected costs to significantly impact their holiday shopping and 43% their celebrations.
- Data recorded by Xero shows that sales by small businesses decreased by 7% in October 2022 compared with September 2022 but were 5% higher than in October 2021. Retail sales fell by 5% compared with October 2021 and have decreased by 15% since the peak recorded in March 2022. Jobs in small businesses were broadly unchanged compared with the previous month and were 5% lower than in October 2021
- 2% of WM businesses reported experiencing global supply chain disruption in October 2022. In contrast, 48.6% reported none.
- 2% of WM businesses expect the main concern in December will be the inflation of goods and services.
- 5% of WM businesses reported that employees’ hourly wages in October 2022 had stayed the same. While 17.1% reported an increase and 1.3% reported a decrease.
- 2% of WM businesses reported currently experiencing a shortage of workers.
- 4% of WM businesses reported being affected by industrial action in October 2022.
Current labour market challenges
- The Open University’s 2022 Business Barometer reveals 68% of SMEs and 86% of large organisations are currently facing skills shortages. 78% of organisations reported that such shortages have led to reductions in output, productivity, or growth, whilst 72% said it leads to increased workload on other staff.
- The Federation of Small Businesses has warned that “the widespread labour shortage is limiting small firms’ ability to grow, as they also wrestle with a worsening energy crisis in the winter, rising interest rates and rampant inflation.”
- Nearly ¾ of UK companies responding to the annual CBI/Pertemps Employment Trends Survey thought that the UK has become less attractive to invest/do business in over the past five years.
- The 2022 Youth Voice Census Census of 11–30-year-olds points to a mental health emergency. 51% of young people aged 19+ suggested mental health challenges were their biggest barrier to accessing work now or in the future. 52% of respondents in work cited anxiety as their biggest barrier. It also indicates young people feel unprepared for future employment. Only 35% of those in education thought they understood the skills employers were looking for. Only 45% of respondents thought they could write a CV.
- The total number of unique online job postings in the UK from August to November 2022 was 5.38 million, a drop of nearly one million (-15.3%) compared to the same period in the previous year (6.35 million job postings). This decline in job openings is a result of the looming economic recession, accompanied by high inflation, rising interest rates and energy prices.
- The decline in the number of job postings was more pronounced in the South East (a decrease of 30.5% in 20thNovember 2022 relative to the previous year), followed by the East of England (-19.4%) and the West Midlands (-19.3%).
- The occupation categories that are currently in the highest demand in the West Midlands, account for over 70% of the total number of job adverts from August to November 2022.
- Recruitment and Employment Federation suggests that such shortages could cost £30-39 billion annually in real GDP from 2024 to 2027.
- When the supply of skills does not meet the skills that employers seek in the labour market (skills mismatches), there are negative effects on productivity, innovative performance, and the overall competitiveness of firms and countries.
- The availability of people with the appropriate skills is important and has become more challenging as a result of Brexit, as well as the consequences of the COVID-19 pandemic, partially reflected in early retirements and the increasing number of people reporting chronic health problems.
- Recommendations include: The visa regime could be restructured to facilitate the attraction of international talent; focus on retaining their current staff by, for instance, providing more flexible roles and working conditions, as well as developing upskilling and training opportunities; supporting employees and self-employed and unemployed adults to learn new skills, the Government could expand Skills Bootcamps – free, flexible courses of up to 16 weeks designed to develop up sector-specific skills and fast-track participants to a job interview
Birmingham Economy
- In May prior to the cost-of-living crisis, the baseline Oxford Economic scenario forecasted Birmingham’s GVA per job to grow to £64,923 by 2040 from £49,874 in 2020 – an average annual yearly growth rate of 1.33%, compared to the UK at 1.60%. The Birmingham GVA per head is predicted to grow to £30,605 by 2040 from £22,583 – an average annual yearly growth rate of 1.54%, compared to the UK at 1.87%.
- The city still has a strong employment performance in critical sectors, Professional, scientific, and technical (+31.2%) and Admin & Support (+28.9%), which have fuelled growth in the past and driven growth regionally. Overall total employment is set to increase by 10.9% between 2020 and 2040, whereas the UK will see a 6.7% increase.
- Income and Spending for Birmingham City Council (BCC) has dramatically changed between 2010/11 and 2019/20. BCC has three main sources of income, being Government Spending, Council Tax and Business Rates. Whilst Business Rates income has increased 59.6% over this period, Council tax has decreased by 10.7% and Government funding has decreased by 77.8%. This has reduced overall spending power for BCC by 36.3%, though per capita spending power has decreased by 40.8%.
- 32% of the funding available to local authorities between 2015/16 and 2019/20 has been competitive funding. This has created tensions between local authorities. Competing for the same pots of funding has made it increasingly difficult for councils to work in partnership.
- BCC saw a particularly large increase in business rates as it engaged in a trial with other West Midlands Combined Authority (WMCA) local authorities to retain 100% of business rates. Rates are based on the property valuation of the non-domestic space; however, the last valuation was in 2017 based on 2015 rateable values. Since then, the pandemic has led to significant decreases in non-domestic property values.
- Net service revenue spending for BCC has decreased by 26% between 2010/11 and 2019/20. Of the nine main spending streams, only two saw an increase in spending in real terms. The hardest hit was Planning and Development with an 84.4% decrease, Non-schools Education with 56.6%, and Housing with 44.6%.
- Inflationary pressures between 2014/15 and 2018/19 alone saw the BCC lose over £50m, as the cost of providing services becomes increasingly expensive.
- Birmingham, like much of the UK, has an ageing population. This is increasing the pressure on adult social care, as demand from people with long-term complex needs increases.
- Recommendations include – single pot funding, devolution of council tax to local authorities; review of business rates, corporate function to increase funding and collaboration to increase funding into the region.
Download and view a copy of the West Midlands Economic Monitor
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.
This blog was written by Rebecca Riley, Associate Professor for Enterprise, Engagement and Impact, City-REDI / WMREDI, University of Birmingham.
Disclaimer:
The opinions presented here belong to the author rather than the University of Birmingham.
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