West Midlands Impact Monitor – 27th April 2023

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This month US President Joe Biden has announced he will run for re-election in 2024, seeking a second Presidential term. War has returned to Sudan, potentially leading to a greater humanitarian crisis in the region. Overall key features of the economic outlook remain the cost of living crisis and inflation.

  • Latest data shows there has been a recovery in total GVA. The WMCA area total GVA increased from nearly £66.7bn in 2020 to nearly £71.0bn in 2021. This equated to a 6.4% (+£4.3bn) annual increase with the UK increasing by 7.2%.
  • WMCA GVA p/h increased from £22,677 in 2020 to £24,334 in 2021. This equated to a 7.3% (+£1,657) increase. There is still a shortfall against the UK of £6,109 (UK: £30,443) in 2021.
  • All sectors increased their GVA over the year with the highest value increase in advanced manufacturing from £711m (+8.8%) to £8.8bn, accounting for 12.4% of GVA.
  • Of the WMCA ten sectors, Business, Professional & Financial Services remains the largest in terms of GVA at £20.9bn (29.5% of the total, UK 35.3%).
  • The WM Business Activity Index fell from 53.0 in Feb 2023 to 52.7 in March 2023. Growth was linked to new work, greater client spending, higher footfall, and better demand conditions.
  • The UK Business Activity Index decreased from 53.1 in February 2023 to 52.2 in March 2023.
  • The West Midlands was the fourth highest for business activity in March 2023.
  • A net 2% of firms in March 2023 reported increased turnover on the previous month; the total number of online job adverts decreased by 3% in 14 April 2023.
  • There was no growth in transport indicators in the week to 16 April 2023, daily ship visits were down, car traffic in London and the number of UK flights were unchanged; compared with the same period last year, flights were 9% higher while ship visits were 19% lower.
  • The proportion of businesses reporting that their turnover had increased compared with the previous calendar month continued to climb in March 2023, to nearly one in five (19%).
Labour Market
  • Figures for the UK in March 2023 indicate that payrolled employees rose by 1.8% (+533,000) compared with March 2022. There was an increase of 7,000 employees aged under 25 years. The latest monthly change saw an increase of 0.1% (+31,000) to a total of 30.0m. Compared to Feb 2020, the increase in payrolled employees was 3.4% (+986,000).
  • In the period Dec 22 to Feb 23, reports of UK-wide redundancies increased by 0.3 per thousand employees, compared with the previous three-month period, to 3.2 per thousand employees. The redundancy rate is below pre-coronavirus pandemic levels.
  • The UK employment rate was estimated at 75.8% in the 3 months ending Feb 23; this was 0.2 percentage points (pp) higher than the 3 months ending Nov 22 and 0.8pp lower than before the pandemic (Dec 19 to Feb 20). The increase was driven by part-time employees and self-employed workers.
  • In the West Midlands (WM) region the employment rate (aged 16–64 years) was 73.7%. Since the 3 months ending Nov 22, the employment rate decreased by 0.8 percentage points (pp).
  • For the 3 months ending Feb 23, the WM economic inactivity rate (aged 16–64 years) was 22.7%, an increase of 0.7pp from previous quarter and an increase of 2.2pp when compared to the previous year, with the latter being the highest increase seen across all regions.
  • The employment rate in the WMCA area was 69.2%, compared with 75.5% for UK-wide. The rate decreased by 0.6pp when compared to 2021. In contrast, the UK employment rate increased by 0.8pp.
  • The economic activity rate in the WMCA area was 73.9%, compared with 78.3% UK-wide. This is a decrease of 1.2pp when compared to 2021.
  • The economic inactivity rate in 2022 the WMCA area was 26.1%, an increase of 1.2pp from 2021. Over the same period the UK remained at 21.7%.
  • The modelled unemployment rate in the WMCA area was 6.2%, compared with 3.6% England-wide, a decrease by 0.8pp when compared with 2021. For England there was a decrease of 0.9pp over the same period.
  • There were 125,690 claimants in the WMCA area in March 2023. Since Feb 2023 there has been an increase of 3.9% (+4,730) claimants in the WMCA area, while the UK increase was 3.3%. When compared to March 2020 (pre-pandemic figures), the number of claimants has increased by 26.6% (+26,390) in the WMCA area, with the UK increasing by 24.3% over the same period.
  • In WMCA area 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 March 2023.
  • There were 22,985 youth claimants in the WMCA area in March 23. Since Feb 23, there has been an increase of 3.8% (+835) youth claimants, while in the UK the increase was 3.3%. When compared to March 20 (pre-pandemic figures), the number of youth claimants has increased by 20.0% (+3,830), with the UK increasing by 14.0% over the same period.
  • Overall, for the WMCA the number of youth claimants as a percentage of residents aged 18-24 years old was 8.1% compared to 4.9% for the UK in March 2023.
  • Between 2020 and 2021, the value of the UK’s outward foreign direct investment (FDI) earnings increased nearly threefold, from £49.6 billion to £134.7 billion. The UK’s inward FDI earnings grew by a smaller amount, from £56.1 billion to £71.8 billion
  • In 2021, regions in the South and East tended to have relatively higher inward stock (position) values for financial and insurance industries, while those in the Midlands, Wales and the North of England tended to have higher inward stocks for manufacturing industries.
  • Between 2020 and 2021, WM outward earnings rose from £1.7bn to £4.9bn: more than double the scale of outward earnings. This means that domestic WM businesses are investing internationally at a larger scale in 2021 than in 2020. The WM accounts for 2.7% of total UK outward FDI.
  • Of total outward FDI in the region manufacturing made up 30.5%; Financial and Insurance 29%; Information and Communication 3.2%; Professional and Support 2.3%; Wholesale transportation and storage 8.8% and other 10.4%.
  • Of total inward FDI in the WM region manufacturing made up 41.8%; Financial and Insurance 11.3%; Information and Communication 6.5%; Mining and Quarrying 0.3%; Professional and Support 8.9%; Wholesale, transportation and storage 18.7%; other 11.3%.
Creative industries
  • There is a lack of workers with the right skills to make them employable; this may be characterised as a mismatch rather than a shortage.
  • Where industry and education collaboration has occurred, it has been very successful in developing effective and specific courses. There is a need to foster that collaboration at a more general level within regions to focus the contribution universities and Further Education (FE) colleges can make.
  • The development of more modular, flexible courses would also cater for the lack of talent in more senior positions but may require agility beyond Higher Education institutions (HEIs) and be better served by colleges or independent training providers.
  • In the West Midlands, we find an undervaluing of the creative industries in policy and an apparent reticence in the video games industry to appear visible and accessible.
  • This contrasts with the position in Wales: where there is strong regional leadership, we can see closer alignment between industry needs and policy provision. Creative Wales is an example of what a network that connects industry, education and government could look like.
Retention and Migration of Graduates
  • The West Midlands graduate retention rate stands at 44%, the average characteristics of graduates of the five universities in Birmingham who work in the WMCA area differ markedly from those who left Birmingham to access jobs elsewhere in the UK or in other countries.
  • The likelihood of staying locally for work is lower for younger graduates (aged 24 years and under), who account for 60.4% of the Birmingham graduates employed relative to nearly 70% of those who migrated elsewhere for work. First-degree holders exhibit a lower propensity to stay for employment than those with other qualification levels.
  • Of the total number of Pakistani and Bangladeshi graduates who studied in Birmingham, 73% remained in the area after finishing their course. They comprise 17.2% of the Birmingham graduates who work in the area, which is 12.3pp higher than the respective share of those who found a job in other areas (4.9%).
  • Explanations for this pattern relate to the concentration of specific ethnic minorities in the West Midlands, their lower average socio-economic and educational background, and cultural attitudes to long-distance moves. Graduates with parents in highly skilled employment are more likely than others to be geographically mobile. In a similar vein, academic performance is negatively correlated with the probability of staying in the location of study, as Birmingham graduates with a first-class or upper second-class degree have a greater chance of relocating to other regions/countries for employment.
  • The probability of staying local is considerably higher for Birmingham graduates with a degree in Arts, Humanities, and Education than those with STEM (Science, Technology, Engineering and Mathematics) and LEM (Law, Economics and Management) qualifications. Finally, the Public Admin, Education and Health sectors in the area absorb a large number of Birmingham graduates (57.9%) relative to those who move to other locations (41.6%).
  • Increasing graduate retention in the West Midlands could be achieved by improving the opportunities in sectors with growth outlooks that are adaptive to future skills needs. In this context, investing in growing sectors (such as advanced manufacturing, life sciences, low-carbon, high-tech and digital industries) can create good jobs in the West Midlands, both to retain and attract university-educated talent to the area.
Cost of living and doing business
  • Between April 2022 and March 2023, the Trussell Trust gave out almost 3m food parcels, with more than a third being provided for children. This is a 37% increase in the number of food parcels provided the year before, and double the numbers in 2017/8.
  • In March 2023, the average proportion of gross income spent on rent in the UK was 26.8%; this ratio is comparable with that of March 2022, but the data indicate that rent is now less affordable than it was in 2019 though it has been broadly stable for the last two years.
  • In April 2023 both the System Average Price (SAP) of gas and System Price of electricity fell when compared with the previous week, by 9% and 12%, respectively. Both were 46% lower than the equivalent period last year.
  • Almost 2 in 5 (38%) trading businesses reported an increase in the prices of goods or services bought in March 23 compared with February 23; however, the proportion of businesses reporting higher prices compared with the previous month has steadily fallen from a peak of 48% in September 2022.
  • Approximately 1 in 6 (16%) trading businesses reported an increase in the prices of goods or services sold in March 23 compared with Feb 23; in comparison; 62% of businesses reported prices stayed the same.
  • More than half (53%) of businesses with 10 or more employees reported their staffing costs had increased in the last 3 months to early April 23; in comparison, 58% reported they expect their staffing costs to increase over the next 3 months, higher than the 52% of businesses that expected higher costs in Jan 23.
  • Retail sales volumes are estimated to have fallen by 0.9% in March 2023, following a rise of 1.1% in February 2023 (revised from a rise of 1.2%).
  • Food store sales volumes fell by 0.7% in March 2023, following a rise of 0.6% in February 2023.
  • Non-store retailing (predominantly online retailers) sales volumes fell by 0.8% in March 2023, following a rise of 0.3% in February 2023.
  • Automotive fuel sales volumes rose by 0.2% in March 2023, following a fall of 1.2% in February 2023; sales remain 8.5% below their pre-coronavirus (COVID-19) February 2020 levels
  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.9% in the 12 months to March 2023, down from 9.2% in February.
  • The largest upward contributions to the annual CPIH inflation rate in March 23 came from housing and household services (principally from fuels), and food and non-alcoholic beverages.
  • Core CPIH (excluding energy, food, alcohol and tobacco) rose by 5.7% in the 12 months to March 23, unchanged from Feb; the CPIH goods annual rate eased from 13.4% to 12.7% over the two months, while the CPIH services annual rate rose slightly from 5.6% to 5.7%.
  • Average UK house prices increased by 5.5% in the 12 months to Feb 23, down from 6.5% in January 2023.
  • The average UK house price was £288,000 in February 2023, which is £16,000 higher than 12 months ago, but £5,000 below the recent peak in November 2022.
  • The average UK house price has fallen for the third consecutive month, on both a seasonally adjusted basis and a non-seasonally adjusted basis.
  • WM had the highest annual house price inflation between February 2022 and February 2023. Average prices in the WM increased by 8.6%, with the average house price increasing from £233,852 to £253,921. However, this is down from the average annual percentage change in January 2023 of 9.1%.
  • Total website sales made by businesses in the UK non-financial sector reached £459.2 billion in 2021, an increase of £102.8 billion (28.8%) compared with 2019.
  • UK website sales were dominated by businesses with 1,000 or more employees; their sales were £272.8 billion in 2021 and accounted for 59.4% of total UK website sales.

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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