WM REDI has been tasked with providing an up to date monitor of the current COVID-19 economic impacts, on a weekly basis. These reports will help regional partners to shape responses and interventions to boost the region’s resilience so that it can thrive going forward. Each week the focus of the report is based on research and evidence published that week.
The Chancellor has announced how the government intends to protect the UK from an expected historic and deep, Covid-driven recession. Main measures include:
- Job Retention Bonus – £1,000 to be paid to businesses that retain furlough staff from November 2020 to January 2021; staff must be paid £520 per month at minimum. This could equate to up £9bn in payments. There are 500k people on furlough in the region that this programme could support to stay in work.
- Boosting work search, skills and apprenticeships:
- Kickstart Scheme – £2bn work experience programme for 16-24 year olds that have been unemployed for more than six months. 41k young people are now on benefits in the region, a doubling of claimants since February.
- New payment of £2,000 to employers in England for each new apprentice they hire aged under 25, and a £1,500 payment for each new apprentice they hire aged 25 and over. The WMCA area has the highest number of apprenticeship vacancies at 1,600 but the numbers have declined recently from 2,700.
- £111m extra will be added to the traineeship budget, employers will be paid £1,000 per trainee.
- £100m for more places on level 2 and 3 courses. NVQ 2 in the region has risen by 2.1% but NVQ 3 has dropped by 5.2%. There are still 290k people with no qualifications and 446k with level 1.
- £32m over two years for the National Careers Service to fund careers advice for 269,000 more people.
- £17m to expand sector based work academies, tripling the number of places.
- Reduced rate of VAT for hospitality, accommodation and attractions – Temporary cut to VAT on food, accommodation and attractions from 20% to 5% for six months. Regionally there are 135k jobs and the sector contributes £4.3bn.
- Eat Out to Help Out – vouchers that will give diners 50% off their meals out, with conditions, for August.
- Public sector and social housing decarbonisation – £1bn to improve energy efficiency of public buildings. The WMCA region has 1.7m dwellings, this year an additional 3,822 affordable dwellings and 1,960 affordable rented dwellings.
- Green Homes Grant – A £2bn “green homes grant” to help make homes more energy efficient. This would provide at least £2 for every £1 homeowners and landlords spend to make their homes more energy efficient, £5,000 per household.
- Stamp Duty Land Tax temporary cut – Temporary cut to stamp-duty increasing the threshold to £500,000 until March 2021. Average house price in the West Midlands is £220k (a fall of £21k and drop of 9% in the last 12 months). According to Zoopla there were 16k sales in the last 12 months, 2,112 in last 6 months. Transactions have dropped 53% in last quarter
Inward Investment Forecast for 2020-2021
A combination of Brexit uncertainties and the impact of Covid-19 restrictions meant that by March 2020 WMGC inward investment pipeline had shrunk by 9% from December 2019 and by 33% from March 2019.
- While commercial and legal processes relating to property acquisition are taking much longer, investors are also re-setting their space requirements as they adopt more agile and home working.
- There is no incentive for investors to progress projects until office occupation levels begin to increase. Current projections from Birmingham’s BPFS sector practice heads suggest that only 20% of their staff will be back in the office full time by January 2021.
Sluggish recovery scenario: the region’s investment pipeline would remain at below pre-Covid levels throughout the forecast period and new initiatives such as the Midlands Engine KAM Programme and the Commonwealth Games Tourism, Trade and Investment (TTI) Programme would not hit their outcome targets. Under the WMGC ‘Second wave scenario’ prolonged Covid-19 restrictions would act as a significant constraint on business attraction activity into 2021-2022. Just 4 new inward investment projects would be landed this year, another 14 would be landed in 2021-2022 and another 18 would be landed in 2022-2023, with performance 67% below target over the forecast period. Only just over 1,500 new jobs would be created.
Visitor Forecast – Based on impact modelling carried out by Global Tourism Solutions, the consultants who provide our STEAM tourism and value model, we are forecasting a fall in visitor numbers of 37% and an associated economic impact of 36% between 2018 (latest data available) and 2020. Based on the assumption that the sector continued to grow in line with recent trends in 2019, we estimate that while visitor numbers will fall from 137 million in 2019 to just 83 million in 2020, associated direct and multiplied expenditure will fall from 13 billion to just 8 billion.
The weekly monitor brings together data and intelligence from the WM REDI 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 WM REDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.
City-REDI / WM REDI have developed a resource page with all of our analysis of 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.
This blog was written by Rebecca Riley, Business Development Director, City-REDI.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.
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