This week’s monitor looks at the delayed GVA statistics for 2019, where the region’s growth was lower than expected. Many indicators and surveys are pointing to an emerging recovery, but it is highly dependent on the opening up of the cities and high streets. Published research is turning to the opening up of cities and the risks posed. In future monitors work WMREDI is doing on this topic will be published.
- The WMCA (3 LEP) total GVA has increased from £104.6bn in 2018 to £106.7bn in 2019. This equates to a 2.0% annual increase, below the UK average growth of 3.5% and lower level than expected for that year by many forecasters. GVA per head has increased from £25,082 in 2018 to £25,438 in 2019. This equates to a 1.4% increase, below the UK average growth of 2.9%. There is a shortfall of £4,161 to the UK figure (£29,599). The sector with the highest GVA growth was Digital & Creative, increasing by 11.2%. Other sectors that reported above economy wide average growth rates include Logistics & Transport (+4.7%), Public Sector including Education (+4.6%) and Cultural Economy including Sports (+4.1%).
- The OECD Economic Outlook for May 2021 has found that the outlook for the world economy has brightened but this will be no ordinary recovery. It is highly likely to be dependent on the effectiveness of various vaccination programmes globally.
- Global economic growth projections have been revised up to 8% for this year by the OECD, a sharp increase from the December 2020 projection of 4.2% for 2021.
- According to the World Bank, in emerging market and developing economies the effects of the pandemic are reversing the gains they had previously made in poverty reduction, so compounding food insecurity and other long-standing challenges.
- Lloyds Bank Business Barometer shows optimism regarding the economy climbed five points to 37%, the highest since 2016, while firms’ trading prospects rose three points to 28%. Overall business confidence increased for a fourth consecutive month – by four percentage points to 33% in May, the highest level for three years. In regional analysis the West Midlands saw a strong business confidence increase of 10 points to 41%.
- The number of permanent staff appointments in the Midlands increased again during May. Though softening from April’s seven-year high, the rate of increase remained marked, as companies continued to hire amid a further easing of lockdown restrictions. The latest KPMG and REC UK Report on Jobs also shows that temp billings continued to rise; however the rate of increase weakened to the softest recorded since July 2020.
- In general, business enquiries are shifting away from Covid and there is more positive feedback from companies focusing on growth – mainly companies searching for funding for growth, as opposed to just trying to survive the pandemic.
- Nationally, between 21st and 28th May 2021 total online job adverts increased by 8.1 percentage points. On the 28th May 2021, total online job adverts were at 126.5% of their average level in February 2020.
- Birmingham in the UK has become the second city in the UK to launch a Clean Air Zone (CAZ). The council has decided on a ‘soft launch’. From 1 June 2021 through to 11:59:59pm 13 June 2021 the council will not require drivers to pay the daily fee and they will not pursue enforcement.
- Universities UK (UUK) predicts that over the next 5 years universities in the West Midlands will be involved in research projects worth almost £2 billion; be part of regeneration projects worth £547 million to the local economy; help 1,300 new businesses and charities to be formed; and train 16,000 nurses, 5,000 medics, 18,000 teachers.
- The University of Birmingham ranked first nationally in Research England’s Knowledge Exchange Framework for its contribution to the regional economy.
- A report has been released that depicts a bright future for Midlands-based businesses and showcases opportunities for investment in what appears to be an undercapitalised region in the UK. The report shows that last year saw a record £665m invested in Midlands-based companies, via 286 equity deals. Yet while the Midlands is home to 11% of the UK’s high-growth companies, the region only secured 5% of the £13.5bn invested in UK companies. In addition to these R&D collaborations, these universities also punch above their weight by generating more patents per unit of research income than any other major UK university grouping. The report also emphasises the importance of comparative advantage and capitalising on place/business strengths.
Covid 19
- Events companies across the region are nervous about the likelihood of Government delaying the withdrawal of the need for all social distancing measures from 21st June and fully opening the events sector. There are fears that new COVID variants could delay the recruitment of staff to work at events, pushing back economic recovery in that sector as well as employment of local people.
- As offices prepare to reopen, business leaders in the region are making, or planning to make, significant changes to the working environment in a bid to recover from the effects of the global pandemic. More than a third of Midlands businesses (35 per cent) plan to create permanent remote roles, as companies make a major shift towards new ways of working. Remote working will be the biggest driver in boosting economic recovery, with 30 per cent of Midlands businesses saying that the region will benefit from workers spending more money locally in towns, suburbs and rural economies, rather than commuting into city centres. This is according to the latest BDO LLP Rethinking the Economy survey of 500 mid-sized businesses.
- IHS Markit/CIPS Purchasing Managers Index (PMI) survey also found that raw material prices were increasing with inflation hitting levels not seen since records began in 1997.
- The hospitality industry has mounting debts of more than £8 billion because pubs and restaurants were forced to borrow money and pause rent payments due to coronavirus. Operators now have around £2.2bn in unpaid rents according to the trade body UKHospitality.
- A report commissioned by the Key Cities and Core Cities UK highlights British cities now face two futures. These are: (1) ‘Long-term Scarring’ that could drag the UK back to the 1980s, with a big increase in unemployment, worsening health and economic inequalities and a revenue crisis, heightened by a loss of business rates and commercial revenue; and (2) ‘Inclusive Renewal’ with cities doing what they have always done best – renewal and re-invention. The report proposes an Inclusive Renewal Deal between cities and Government and sets out how cities will need to change to build inclusive renewal and fulfil their side of the Recovery and Levelling up deal
- Data from Springboard shows that in the week to 29th May 2021 UK retail footfall saw a weekly increase of 7% and was at 73% of its level in the equivalent week of 2019. Footfall at retail parks remained strongest as a proportion of its level in the same week of 2019 when compared with other retail locations at 92%, whereas footfall was at 68% for shopping centres and 67% for high streets.
- The UN has reported in their World Economic Situation and Prospects for this month that steep and persistent inequalities threaten to jeopardise global economic recovery and the achievement of sustainable development outcomes.
- 40 million people in the UK have had their first vaccination with 27 million of those having had their second vaccination also.
- Public Health England shows that 2 doses of the COVID-19 vaccines are highly effective against the Delta variant. The government previously met its target of offering the vaccine to the most vulnerable by 15th April and remains on track to offer a first dose to all adults by the end of July.
- According to data analysed by the FT, having two doses of the vaccines is about 95% effective at preventing hospital admission with the Delta variant, and one dose is upwards of 70% effective. Therefore, younger people who have not yet had both jabs, are more likely to contract the Delta variant.
- Regional intelligence suggests that 40% of manufacturing businesses are fully operational and 60% report plans for growth in the region. Yet many manufacturers face the challenge of an inability to forecast future demand. Staff recruitment and retention is a further challenge.
- In total, the WMCA (3 LEP) area had 195,200 employments furloughed at 30th April 2021. This reflects 11.2% take-up of eligible employments for the scheme, compared to the UK average of 11.7%. When compared to 31st March 2021, the number of employments furloughed in the WMCA (3 LEP) decreased by 43,200 people (-18.1%). The UK decreased by 20.5% over the same period.
- Across the WMCA (3 LEP) area, 171,500 people were eligible for the fourth grant of SEISS. There were 90,200 claims made in the period to 9th May, with a total value of just over £238m and with an average claim value of £2,642. The take-up rate was 53%, above the UK average of 50%.
- At a West Midlands regional level, there were approximately 259,000 of the population eligible for the fourth grant of the SEISS, which is a take up rate of 50% based on the total number of claims of 130,000.
- 7% of trading businesses in the West Midlands reported their turnover had decreased by at least 20% over the last week. However, 42.2% of trading businesses in the West Midlands reported that their turnover was unaffected and approximately 15.5% reported their turnover had increased by at least 20%.
- 4% of responding West Midlands businesses reported the main reason for the change in the business turnover in the last two weeks was due to COVID-19, 1.2% reported the main reason as the end of the EU transition period and 9.1% reported that it was due to COVID-19 and the end of the EU transition period.
EU Exit
- Issues related to the UK’s trading relationship with the EU continue to be raised. These are now seemingly more like structural issues rather than “teething” problems.
- Research conducted by Aston University surrounding the impact of Brexit on service trade has found that following the UK’s departure from the EU more than £100bn in service exports have switch to Ireland. The shift occurred in the wake of the 2016 referendum and had been accelerating ever since. By the start of 2020, just before the onset of the pandemic, the UK’s service exports had fallen in value by a total of £113bn comparative to trends before the vote, equivalent to nearly 10% of the UK’s entire services exports.
- In relation to international trade intelligence suggests that some companies are further internationalising their websites. The DIT continues to receive many queries on logistics and transition issues. A further issue is that the first deadline for delayed customs import declarations is approaching.
- The deadline for the EU Settlement Scheme is 30 June 2021. This relates to EU, EEA and Swiss citizens who wish to continue living in the UK after this date. Local authorities report an increase in application numbers. In guidance published in May 2021 the Home Office makes clear that there remains scope, indefinitely, for a person eligible for status under the EU Settlement Scheme to make a late application to the scheme if there are reasonable grounds for a person’s failure to reach the deadline.
- Employers should continue to accept valid passports and national identity cards of all EU citizens as evidence of their right to work in the UK up to 30 June 2021, but intelligence suggests that some employers are already asking for prospective employees to confirm their EU Settlement Scheme status.
- Local authorities face a learning curve in the transition from ERDF and ESF funding for jobs, employment and skills to new funding schemes, which are very competitive.
Download and view a copy of the West Midlands Economic Monitor
The bi-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 has 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 / WM REDI, University of Birmingham.
Disclaimer:
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.