With the devastation caused by war in Ukraine continuing, Russia has halted gas exports to Poland and Bulgaria in what has been termed a strategy of ‘energy blackmail’. Many European countries are working to reduce dependence on gas from Russia. Awareness of supply pressures on certain goods, notably cooking oil, is becoming more apparent with implications for consumers, the food manufacturing sector and hospitality.
International developments
- Tensions have continued to rise in in Europe. Russia has halted gas exports to both Poland and Bulgaria. Many EU leaders are stating that this equates to blackmail. Many European countries are putting in place strong strategies for alternative energy sources, with the aim of phasing out Russian gas by the end of the year.
- In France, President Macron has been re-elected. This is the first time in 20 years, the French electorate has re-elected a sitting President., but Marine Le Pen secured the most votes of any far right candidate in in the history of the French Republic. As in other parts of Europe Voter turnout was the lowest since 1969, with just under 72% of the French electorate voting, and more than 3 million ballots were spoilt or blank.
- Streaming services are struggling greatly globally; with Netflix and Amazon Prime are all seeing subscribers leave their platform following rapid growth during the pandemic. The opening up of economies and the rising cost of living are amongst the driving factors here.
Cost of living increases
- Nationally, Kantar’s latest take-home grocery figures show that supermarket sales fell by 5.9% over the 12 weeks to 17th April 2022, with grocery price inflation rising on average 5.9% this month. Kantar has estimated that this rise in inflation could lead to extra costs of £271 for the average household this year.
- As people see their cost-of-living rise there is an increasing transition towards value products. Major retailers are listening to the concerns of their consumers, with Asda launching its Just Essentials line and Morrisons announcing price cuts on everyday goods.
- The war in Ukraine has also increased public awareness of supply pressures and there has been evidence of some stockpiling of goods, notably cooking oil, as consumers prepare for limited access along with higher prices. Such shortages, and associated price increases, also have implications for the food manufacturing sector.
- Given the rapidly rising cost of living, 17% of respondents to an ONS survey said they were borrowing more than they did last year. And this is before energy price increases in April 2022.
- Many local areas within the West Midlands will be impacted particularly hard by energy price rises. Analysis of figures from the End Fuel Poverty Coalition shows that the most fuel poor constituency is Birmingham Hodge Hill which has seen the proportion of fuel poor households increase from 27.4% in 2019 to 54.5% in April 2022.
The economy and businesses
- According to online job advert statistics from Adzuna, nationally, between 8th and 14th April 2022, total online job adverts increased by 3.5%. On the 14th April 2022, total online job adverts were at 143.7% of their average level in February 2020. Excluding in the East Midlands, online job adverts for all regions increased but only by from 0.3% in the West Midlands.
- Google Mobility data provides an indicator of changes in the volume of visits to different location types compared with a pre-coronavirus baseline. Visits to each location type in the UK in the week to 15th April 2022 compared with the previous week shows that parks increased by 30% (to 54% above pre-coronavirus levels), retail and recreation increased by 8% (but were 9% below pre-coronavirus levels), grocery and pharmacy increased by 5% (to 5% above pre-coronavirus levels) but workplaces decreased by 11% (32% below pre-coronavirus levels).
- The System Average Price (SAP) of gas fell by 22% in the latest week (to 17th April 2022), although it was 234% higher than the equivalent period from the previous year and 665% higher when compared to the pre-Coronavirus baseline.
- The final results from Wave 54 of the Business Insights and Conditions Survey (which had a reference period of March 2022), based on 5,095 businesses surveyed across the West Midlands, reveal that in terms of international trading, excluding “not sure” responses, 55.9% of responding West Midlands businesses reported “exporting as normal” and excluding “not sure” responses, 57.3% of responding West Midlands businesses reported “importing as normal”.
- 33% of West Midlands businesses reported “no extra costs” due to the end of the EU transition period, while 31.7% reported “additional transportation costs”.
- 2% of West Midlands businesses reported experiencing global supply chain disruption in March 2022.
- 4% of West Midlands businesses reported the main concern for business was “inflation of goods and services prices” in April 2022.
- Excluding “not applicable” or “not sure” responses, 25.9% of West Midlands businesses reported they had not been affected by recent increases in energy prices.
- 5% of West Midlands businesses reported that due to price rises they have “had to absorb costs”. Over 40% had to pass on price increases to customers.
- 4% of responding West Midlands businesses reported currently experiencing a shortage of workers. Due to the shortage of workers, 64.4% of West Midlands businesses reported employees were then working increased hours.
The National Minimum Wage
- April 1st 2022 marked the 23rd year since the introduction of the National Minimum Wage (NMW). The day is also notable for a minimum wage rise for workers across the UK. For over 23s, the National Living Wage (NLW) (introduced in 2016) rose from £8.91 to £9.50 per hour. For those aged 21-22 and for whom the NMW still exists, the NMW rate rose from £8.36 to £9.18, whilst for workers aged 18 to 20, it rose from £4.62 to £4.81. The Apprentice rate rose from £4.30 to £4.81.
- Initial fears that the introduction of the minimum wage would lead to an overall loss of jobs have proved unfounded. A review of international evidence on the impacts of minimum found that recent evidence from the US, UK and other developed countries “points to a very muted effect of minimum wages on employment, while significantly increasing the earnings of low paid workers”. Moreover, the hourly rates for full-time workers have grown at a faster pace at lower percentiles.
- According to the Low Pay Commission, in 2021 5.9% of workers nationally receive either the NMW or the NLW. The proportion differs across the UK, with the West Midlands standing out (after the North East) as having the high proportion of workers receiving the NMW or NLW in England. In absolute terms, most workers claiming NMW or NLW (over 29,000 workers) live in Birmingham, reflecting the size of the local authority area, but in relative terms Walsall and Dudley have amongst the highest percentages (12.2% and 10.4%, respectively), being paid at this rate.
- The proportion of people receiving the NLW differs according to ethnicity and is highest amongst workers of Bangladeshi and Pakistani origin.
- ‘Delivering good jobs’ and ensuring that there are adequate opportunities for up-skilling and re-skilling will be essential to enabling workers to move into the newly created roles and reducing the proportion of individuals in minimum wage roles in the West Midlands.
Public transport and access to services
- For people living in socio-economically disadvantaged areas, access to public transport is very important in terms of providing independence for groups of people who cannot drive, cycle or walk; it provides them with the chance to access services such as employment and healthcare independently, as well as preventing them from being excluded from society through engaging with people and being around them routinely.
- Lack of public transport availability is an important challenge in some areas, especially outside large urban centres, but even where regular services exist, many low-income households can perceive public transport to be costly.
- There is a need to include much wider participatory approaches to planning transport, which can help in shaping policies that are targeted and more inclusive. These co-created solutions have more public acceptability than top-down solutions most common in transport planning.
- An evidence review by the Government Office for Science in 2019, shows that many people in the UK may not be able to access important local services and activities, such as jobs, learning, healthcare, food shopping or leisure as a result of a lack of adequate transport provision. Problems with transport and poor links to opportunity destinations can also contribute to social isolation, by preventing full participation in these life-enhancing opportunities. There is international evidence to suggest that transport barriers are a contributory cause of missed and cancelled health appointments, delays in care, and non-compliance with prescribed medication. These forms of disrupted and impaired care are associated with adverse health outcomes.
- Social groups who are more at risk from mobility and accessibility inequalities than others include lowest income households (where female heads of household, children, young and older people, black and minority ethnic (BME) and disabled people are particularly concentrated.
- More generally, from a workforce and workplace perspective, inequality is concentrated amongst certain groups but talent is spread across all groups. If firms fail to embrace diversity, they will miss out. For example, the government-backed McGregor Smith Review of Race in the Workplace estimated that if BAME individuals are fully utilised across the labour market as a result of improved participation and progression, the economy could benefit from a £24 billion boost.
Implications of global trade, supply disruptions and the pandemic on the automotive sector
- Global trade and supply disruptions and the legacy of the pandemic are set to have a damaging impact on this automotive sector, with 40% of all new cars exported from the UK made in the West Midlands, and with the region account for 35% of all of the UK’s automotive employment in 2019.
- SMMT figures show that new car production is down -29.3% in 2020 and 28.7% in 2021 compared to 2019 (SMMT, 2021 and SMMT, 2022), representing the lowest levels of car production since 1984.
- The automotive sector is broad with strong linkages to metals, engineering, R&D and other advanced manufacturing sectors.
- The Socio-Economic Impact Model for the UK (SEIM-UK) is a multi-regional input-output (MRIO) built in City-REDI which has been used to estimate the economic shocks triggered by six scenarios representing a broad range of the potential impacts of Covid-19 and Brexit on the UK economy. In percentage terms, the output impact ranges from -0.18% to -0.50% and in employment -0.12% to -0.33% nationally.
- The change in employment by region follows a similar pattern, with the West Midlands seeing the biggest impact with a loss of full-time equivalent (FTE) jobs between -0.75% and -1.99% throughout the economy.
- In terms of output the most vulnerable sectors are the manufacture of vehicles and fabricated metals. Outside of the shocked sectors, the spill-over impacts are in the broader manufacturing sectors, professional and technical services, construction, trade of motor vehicles, electricity, transportation and storage.
- The automotive sector is facing significant change over the next decade. Diesel and petrol engines are being phased out with a ban on new combustion engines from 2030 in the UK (BBC, 2020a). The supply chains for alternative propulsion engines may be significantly different to the status quo leading to further uncertainty in the future regional automotive sector. For policy, this means regions like the Midlands will have to recalibrate their labour markets with the help of universities in preparation for demand for new skills and technologies.
COVID-19 infections
- COVID-19 case numbers across Europe have dropped. This is likely because of the changing weather and increased vaccination rates. Rates are highest in Germany and France.
- Latest ONS infection survey data shows that in England, the percentage of people testing positive for COVID-19 continued to decrease in the week ending 16 April 2022; we estimate that 3,218,700 people in England had COVID-19 (95% credible interval: 3,120,200 to 3,317,200), equating to 5.90% of the population or around 1 in 17 people.
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 Anne Green, Professor of Regional Economic Development at City-REDI / WMREDI, University of Birmingham.
Disclaimer:
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.