This week the impacts of EU exit and transition continue to unfold in the news, and the UK and regional PMI has gone back into contraction. As predicted by many forecasters, the ongoing lockdown continues to have a negative impact on the economy, but there are some good news stories in the region with £20 million investment in the electricity grid; Jaguar Land Rover’s revenue and pre-tax profits accelerated; and Mondelez International, owners of Cadbury’s, announced a £15m investment in its site at Bournville Birmingham.
Economic performance
- ILO Monitor: Covid-19 and the world of work confirmed the massive impact that labour markets have suffered in 2020. The latest figures show that 8.8 per cent of global working hours were lost for the whole of last year (relative to the fourth quarter of 2019), equivalent to 255 million full-time jobs. This is approximately four times greater than the number lost during the 2008 global financial crisis.
- According to Deloitte, weakness in the global economy remains centred around the services sector. The manufacturing sector continues to expand at a healthy pace due to strong demand for goods that do not involve or require social distancing.
- Barclaycard said consumer spending last month was down by more than 16% year-on-year, while the monthly BRC/KPMP retail sales monitor showed that 63% of all non-food shopping took place online in January – a doubling from the 31% seen a year previously.
- The UK services PMI fell sharply from 49.4 in December to 39.5 in January, indicating a severe decline in activity. The West Midlands Business Activity Index decreased from 54.2 in December to 41.5 in January. Although a sharp reduction was seen in business activity, the decline was a much slower rate when compared to the first national lockdown. Companies in the West Midlands reported the fall in activity was from COVID-19 restrictions and business closures that hindered output. 68% of companies surveyed in the West Midlands foresee output growth in the next 12 months. The level of positive sentiment is at the highest in four years.
- In its quarterly update, the National Institute of Economic and Social Research (NIESR) said it now expected the economy to grow by 3.4% in 2021 compared with the 5.9% it had been expecting in November. NIESR said the UK would be one of the weakest advanced economies in the first three months of 2021. It believes unemployment will rise sharply after the government’s furlough scheme ends in April and will reach 2.5m – or 7.5% of the workforce – by the end of the year.
- MakeUK latest results show 44% of manufacturers currently have no staff furloughed; 52% have already made redundancies; only 6.5% are planning further redundancies, 1/2 believe they will achieve full operating levels by the end of 2021; more than 60% will return to normal in less than 12 months and 2/3 have allowed staff to work flexibly due to school closures.
- Overall UK footfall for the week ending 31st January 2021 was at 35% of the level seen in the same week of the previous year; this also remains unchanged when compared to the previous week (24th January).
- Companies House data shows there were 16,108 company incorporations in the week ending 29th January 2021, above the incorporations recorded for the previous week which was 15,905. This was also higher when compared to the fifth week in 2020 (12,660) and for 2019 (14,434).
- Weighted by turnover, across the UK approximately 6% of businesses that have continued trading reported turnover had increased by at least 20%. While 38% reported that turnover had not been affected. However, 47% of businesses reported turnover had decreased by at least 20%.
- There was also a low of 70 visits over the Christmas week for daily cargo ship visits, this has increased to 101 in the week of the 31st When compared to February 2020, figures are slightly lower (119).
- Between the 22nd January and 29th January 2021, for the West Midlands, the total online jobs adverts decreased by 5.9 percentage points.
Coronavirus Impacts
- Centre for Cities propose government should support places to recover from COVID-19 by boosting Universal Credit; supporting workers until social restrictions are lifted; supporting people who have lost their job to retrain, and considering a ‘spend out to help out’ voucher. They recommend that the government should deliver on levelling up by investing in skills; creating jobs; improving city centres; investing in transport; investing in innovation; and pressing ahead with devolution.
- The Institute for Government says that countering the virus may be a perpetual task as it is not likely to be eradicated completely due to the difficulties of vaccinating everyone and the likelihood that the virus will mutate into vaccine-resistant strains.
- The Institute for Employment Studies found that the low-paid have borne the brunt of the coronavirus crisis and are twice as likely to be on furlough, have their hours reduced or lose their jobs completely compared with other workers. More likely to have had their work disrupted, their health, safety and well-being, household finances, and support needs have been stretched.
- CIPD demonstrate that the digital divide in the workplace will disadvantage those companies without the capacity and capability to utilise online training.
- CIPD has also explored the UK Coronavirus Job Retention Scheme (CJRS) and recommend introducing a lower limit to CJRS set at the National Minimum Wage; people should continue to work from home until mass vaccination is working; extend CJRS till the end of June 2021 and announce ahead of the deadline; link CJRS to training for workers furloughed or provide outplacement for those at risk of redundancy; and a future scheme should be based on a flat rate wage subsidy set at the National Living Wage rate for someone working full time – £1,300.
- The International Labour Organization has looked at the key policy areas for home working including improving the visibility of homeworkers; raising awareness of their rights and responsibilities; setting fair w.ages and limiting working hours; ensuring safe and healthy workplaces; applying a strategic compliance model of enforcement; ensuring social protection coverage; ensuring access to quality childcare, and promoting training and career development.
- The Open University recommend that social care work is promoted as a suitable career choice to a new audience; a nationally recognised career framework is put in place; skills gaps are targeted; and that the sector is sustainably funded.
- The Princes Trust find that young people are feeling more anxious than ever before and that this is particularly the case for those not in work, education or training (NEET). 60% feel that getting a new job seems impossible at the moment. But ¾ of young people agree that their generation can change the future for the better.
- The British Beer & Pub Association (BBPA) report trading restrictions and lockdowns caused sales of beer to plummet by 56% in 2020 – down by £7.8 billion.
- Avison and Young’s UK cities Recovery Indices finds that Birmingham is tracking ahead of the National Index, at 61.2 and 57.9 respectively. Following a peak in activity in the run-up to Christmas both have fallen to the same level as during the second national lockdown in November. Birmingham has performed comparatively very well on the Commercial Activity Index compared to other cities and relatively well on residential and retail indices but is lagging on return to office and hotel and leisure indices.
- 76% of adults reported they were very or somewhat worried about the effect COVID-19 was having on their life, compared with the Great Britain average of 75%. Only 9% of responding West Midlands adults reported that they were somewhat unworried or not at all worried (matching GB average). 54% of adults in the West Midlands felt they had enough information about government plans to manage COVID-19 (53% GB). 84% of adults in the West Midlands strongly or tend to support the current lockdown measures for where they live (87% GB).
- An increasing number of businesses are enquiring about the availability of Additional Restrictions Grants from local authorities, suggesting the availability across LEPs and local authorities are inconsistent. There is a broader concern about business failure/closure within recipients of both Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS), and the effect on wider taxes to pay for this.
- There has been positive feedback in relation to the Kickstart scheme with businesses creating positions that would not have been possible without the level of support and financial assistance the programme provides. It is felt this scheme is essential to the country’s longer-term COVID recovery strategy.
- Working from Home is reported to be working very well on the whole. Many businesses are discussing plans for this to continue with some suggesting a planned 50/50 split in arrangements post-Covid. This has allowed firms to consider larger-scale adjustments to their property requirements nationally as they continue to revise recovery strategies and future planning.
- Mental health remains a significant concern across a number of businesses although most are proactively addressing this with enhanced support measures to ensure the ongoing welfare of the team.
Specific Brexit and Transition impacts
- Exports from Britain to the European Union fell by 68% in January as trade was disrupted after the end of a transition period following Britain’s departure from the European Union, according to a trade body representing hauliers.
- Ongoing issues are still being highlighted including difficulty getting products from Europe; price increases; procedural impacts (ie GDPR, licences etc); and supply chain disruption.
- Many businesses are still reporting that they are not affected by the EU deal – although they have mentioned they have noticed difficulties for others. This could suggest a lack of concern caused by some delays or additional costs. Other businesses are suggesting that they may not be affected as the economy is not yet operating at full speed, disguising any real impact that could become apparent later on.
New investments and opportunities
- Electricity distributor Western Power Distribution (WPD) has announced a £20 million investment in the electricity grid to boost green growth and jobs across the West Midlands over the next two years.
- Jaguar Land Rover’s revenue and pre-tax profits accelerated during the last three months of 2020. The automotive giant has posted profits of £439m for the period to 31 December 2020, up £374m from the prior quarter and up £121m from a year ago.
- Mondelez International, owners of Cadbury’s, announced a £15m investment in its site at Bournville Birmingham to repatriate 12,000 tonnes of Dairy Milk production.
Download and view a copy of the West Midlands Weekly Economic Monitor.
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 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.