West Midlands Weekly Economic Impact Monitor – 16th October 2020

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This week infections continue to rise globally. Rates are surging in countless countries across the globe, with cases in Europe accelerating notably. UK Prime Minister Boris Johnson has announced bars and pubs will be closed in the worst-hit parts of England in order to suppress the spread of the virus. Chris Witty, the Chief Medical Officer, has said more measures might still be needed. Households in the Liverpool city-region are banned from mixing indoors and in private gardens, with pubs, gyms and casinos closed.

Key Issues:
  • UK redundancies increased by 74k in August, resulting in 227k redundant across the UK. The rise in unemployment, whilst steep, comes from a historically low baseline.
  • NatWest West Midlands Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – registered at 58.5 in September. This signals that the region’s private sector activity has grown for the fourth consecutive month. It should be noted that the index was down from 61.9 in August.
  • The Export Climate Index posted at 52.3 in September, signalling a third consecutive improvement in trade conditions for firms in the region. However, the latest reading was down from 52.7 in August.
  • Lockdown had a far-reaching impact on the tourism sector – 90% of businesses had temporarily closed by the end of lockdown and half have seen revenue fall by more than 75%. Those feeling that their performance has been worse than expected has nearly doubled from 25% in July to 44% now. Some 80% of businesses are concerned that, in the current climate and without additional support, they may not survive beyond the next 12 months.
  • By late April 40% of businesses had temporarily closed, increasing to 80% by the end of May and the proportion had reached 90% by the end of lockdown.
  • Almost half of the region’s tourism businesses have seen a fall in revenue of more than 75% and a further quarter have seen revenue fall by between 50% and 75%.
  • After an initial post lockdown boost to tourism, business performance has deteriorated as measures such as ‘eat out to help out’ have ended and the government has started to introduce new Covid restrictions. The proportion feeling that performance has been better than expected has fallen from 33% in July to just 9% now, and the proportion feeling that performance has been worse than expected has nearly doubled from 25% to 44%. As a result, 70% of businesses have had to reduce employee hours and more than 40% have made redundancies.
  • An intergenerational audit for the UK 2020 provides the first comprehensive assessment of the initial phase of the coronavirus crisis for different generations in Britain. The core conclusion across the analysis in this audit is that the virus itself has determined the physical health outcomes across generations, and the shape of the pre-coronavirus economy has driven the initial economic impacts.
    • The youngest and oldest workers are the hardest hit in terms of the labour market.
    • The Job Retention Scheme and boosts to benefits, mean that incomes fell most in lockdown for those in their late 40s.
    • Consumer debt usage has accelerated for 35-44 year-olds; falling equity prices have dented the wealth of those in their 50s, and there were no particularly clear age differences by age (within the working-age population) in the likelihood of falling behind with housing payments in mid-lockdown.
    • Younger adults had become the most likely to fall behind with housing payments; young people risk long-term employment and pay ‘scarring’ effects from starting careers in a downturn; the prospects for a post-coronavirus home ownership increase among aspirant buyers appear limited, and the removal of temporary welfare boosts looks set to provide a major drag on the incomes of young and childrearing-age adults.
  • Transport regionally is at a steady-state with minor fluctuations indicating travel demand is stabilising and reducing slightly. Transport services remain at their current levels with social distancing measures in place.
  • The West Midlands region has received £16.9m in funding from the Culture Recovery Fund round 1, across 95 successful bids, the second-lowest level after the North East. Birmingham city centre applicants received awards totalling £5.1m, Coventry £2.3m and Wolverhampton £262k. The largest bids were to theatres with Belgrade Theatre trust (£1m) and Malvern theatres (£1m) topping the regional list.
  • The Avison Young Recovery Index for Birmingham is tracking higher than the National Index. It stood at 84.2 on 11th October, compared to 76.1 for the UK index.
  • Early experimental data on the impact of the coronavirus (COVID-19) on the UK economy and society has been released. It shows:
    • According to the latest survey, nearly a fifth (19%) of businesses intend to use increased homeworking as a permanent business model in the future.
    • The proportion of adults who used a face covering was the highest since the data series began, at 98%, according to the latest Opinions and Lifestyle Survey.
    • Between 25 September and 2 October 2020, total online job adverts increased from 59% to 61% of their 2019 average, their highest recorded level since 3 April 2020.
    • Prices of items in the food and drink basket increased by 0.4% in the latest week, driven by an increase in the prices of vegetables, bread and cereals.
    • Footfall decreased in all 10 featured countries and regions, with the largest decrease in Wales.
    • The volume of all motor vehicle traffic was nine percentage points below the levels seen on the first Monday of February, the third consecutive week showing a small fall in traffic levels, according to data from the Department for Transport.
    • In London and the North East the counts of cars were around 90% of the average level seen pre-lockdown, and counts of pedestrians and cyclists 80%, according to traffic camera data.
    • The average number of daily ship visits was 289, which is slightly higher than the low point of 279 visits in the week ending 3 May 2020.
In the West Midlands ONS data highlights:
      • For the week ending the 4th October, overall footfall fell below 70% of the 2019 level. High streets were the main reason for the overall decrease, although there was a small decrease in shopping centres and little change was seen in retail park footfall.
      • There were 17,940 incorporations in the week ending 2nd October 2020, this is above the incorporations recorded in the same week as 2019 which was 13,791. Also, there were 6,198 voluntary dissolution applications. This is also above the same week as the previous year at 4,900.
      • 53.0% of trading businesses in the West Midlands reported their turnover had decreased by at least 20%. However, 27.7% of trading businesses in the West Midlands reported that their turnover was unaffected and 11.5% reported their turnover had increased by at least 20%.
      • 1.1% of West Midlands businesses reported that operating costs exceeded turnover by at least 20% (UK 13.4%) and 10.7% reported that turnover was equal to operating costs (UK 12.7%. While 55.5% of West Midlands businesses reported turnover exceeded operating costs by at least 20% (UK 49.9%).
      • For the West Midlands, the highest industry ceased trading was accommodation and food services activities at 3.4%.

Download and view a copy of the West Midlands Weekly Economic Monitor.

For an accessible version of the monitor please contact us.

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  / WM REDI, University of Birmingham.

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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