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 Purchasing Managers’ Index (PMI) has risen again showing welcome signs of the economy picking back up for the West Midlands to 27.9 from 10.9 and the export climate index rose to 35.9 from the record low of 24.5 in April
- The Organisation for Economic Co-operation and Development (OECD) has released its latest predictions and warns that Britain is likely to be hardest hit with a slump of 11.5%, or 14% if there is a second wave. This is largely because of the reliance on the services sector and the warning that the furlough scheme may not offset effects on employment. Local intelligence would reflect this concern that furlough may just be deferring redundancy and company failure
- The Institute of Chartered Accountants in England and Wales (ICAEW) forecasts say GDP dropped 2% in Q1 the largest drop since 2009 and is forecast to shrink by 8.3% rebounding by 7.8% next year. The West Midlands may face the largest decline of all regions at 9.2%, however, it may see the largest growth in 2021 at 8.1%. This is based on having the largest number of temporary closures and an expectation of most reopening. This is far from certain and will be affected by social distancing measures and the implications of a second wave.
- A recent report comparing ethnic unemployment finds unemployment rates in the West Midlands are stark, 11% of ethnic minority groups are unemployed compared to 5% of white groups. Disparities in health outcomes, educational outcomes, crime, age, income and hostile immigration, all contribute to racial inequalities. COVID-19 is likely to worsen these issues. Although there aren’t recent data on claimants by ethnicity, pre-COVID-19, Black or Black British groups faced higher unemployment levels. Mapping where the increases in claimants are, these are largely in areas with high black populations and greater employment in sectors which are closed.
- The pandemic makes it more likely that the UK will exit the EU without a trade deal, work by City-REDI estimated risk to West Midlands Combined Authority GDP of 12.2% and the whole NUTS1 region of 14.3%, making it more exposed than the UK average. It is expected that any type of Brexit will exacerbate the negative impact of COVID-19. We are also nearing the closure of the EU programmes, 80% of which support recovery type activities and there has been no detail on replacement or shared prosperity funds.
- Retail footfall fell to 20% of its 2019 levels and remains below 40%, with the West Midlands and North East seeing the highest falls between 74% and 76%, however, the lowest fall is still significant at 68%.
- Consumer spending data shows small towns geared around tourism are hardest hit. There is a significant localisation effect leading to inner-city areas doing better than suburbs. Consumer spend in Coventry has seen a 47% drop, Birmingham saw a 42% drop and Wolverhampton and Walsall a 46% drop.
- There is a rising concern about redundancies with a rise from 2,400 in April to 5,500 in May, significant regional announcements include Rolls Royce, Aston Martin, Triumph, Churchill China and Forterra, with Intu Merry Hill putting administrators on standby. There are also concerns about quarantine and its impact on international trade flows and activity, and still no support for Limited Company Directors.
- There are signs that businesses are adjusting their employment but remaining productive, if this pattern grows or remains in the long term it could point towards higher levels of structural unemployment but improved productivity (similar to other European countries). Since 2009 the UK has maintained employment levels and protected skills workforce this may signal the end of that pattern.
The overwhelming focus is that Businesses are ready for change and some are already innovating, we have to ensure that local skills and employment policies ensure people, especially the young can fit into this change. We also need to support and promote a return to good spending and resilience in the financial resilience in businesses and households.
Before the onset of COVID-19 the West Midlands region was in a period of significant growth, based on a burgeoning construction sector; a thriving city centre international business and professional services sector which was driving high levels of business tourism; a manufacturing base becoming more productive and an automotive sector responding to the challenge of a carbon-neutral future; high exports, foreign direct investment and strong international links, and the biggest higher education cluster outside London. All powered by a young workforce. However, underlying this growth there were significant issues with inequality, poverty, youth unemployment, low skills, poor health and school performance.
Covid-19 could exacerbate our weaknesses and undermine our assets. This means we need to protect our assets and ensure they survive and then build their recovery on a resilient infrastructure, which encourages diversifying and supporting local growth, employment and supply chains. At the same time, we need to develop new ways of working internationally in a tech-based future.
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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