West Midlands Weekly Economic Impact Monitor – 17th September 2021

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This fortnight there have been a number of significant announcements on social care financing, latest furlough data and the PMI, along with a cabinet reshuffle this week. Midlands MP Nadhim Zahawi is the new Education Secretary and Michael Gove has moved to MHCLG. As an avowed public sector reformer, this latter appointment could signal changes across devolved government as he leads the levelling up agenda. Regionally WMREDI and its partners have launched the West Midlands Data Lab. The data lab provides a single interactive portal for a wealth of up to the minute regional data and research.

  • China’s global economy slowed in August raising fears for global recovery.
  • The number of extremely hot days every year when the temperature reaches 50C has doubled since the 1980s. Extremely hot days have also been happening in more areas of the world than before.
  • BBC analysis found that maximum temperatures increased by 0.5C more in the last decade compared with the long-term average from 1980 to 2009. However, these increases have not been felt equally around the world.
  • The WM Business Activity Index (PMI) decreased from 58.3 in July 2021 to a six-month low of 55.2 in August 2021. This decrease shows that even with the relaxation of COVID-19 restrictions, growth was hindered by companies not being able to appropriate labour to fill job roles and also difficulties in sourcing raw materials. The overall UK Business Activity Index decreased from 59.2 in July 2021 to 54.8 in August 2021. Out of the 12 UK regions (where the highest is first), the West Midlands region was 6th for the Business Activity Index in August 2021. The West Midlands Future Activity Index increased from 74.4 in July 2021 to 77.2 in July 2021: a three-month high and above the historical average. Approximately 63% of West Midlands companies are forecasting growth in the next 12 months.
  • From April 2022 employees, employers and the self-employed will all pay 25p more in the pound for National Insurance (NI). However, from April 2023 NI will return to its normal rate and the extra tax will be collected as a new Health and Social Care Levy. This levy, unlike NI, will also be paid by state pensioners who are still working. The increase will see an employee on £20,000 a year paying an extra £130 in tax. There are concerns this will impact the lower-paid the most.
  • The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 3.0% in the 12 months to August 2021, up from 2.1% in the 12 months to July 2021. The increase of 0.9 percentage points is the largest increase ever recorded in the CPIH National Statistic 12-month inflation rate series, which began in January 2006; however, this is likely to be a temporary change.
  • Job vacancies have hit a record high since records began in 2001, at 1 million in the three months to August 2021. Figures also showed employee numbers were back at pre-Covid levels in August. However, business groups have said that despite the return of staffing levels to pre-pandemic rates there remains high demand for more staff and labour shortages would dampen growth. Currently, food and accommodation sectors have the highest number of vacancies. These industries in the UK usually have a high number of migrant workers.
  • The Bridge Group have found that 51% of graduates in the UK remain local to their university after graduation. Those who commuted to university as students were more likely to stay locally (76%). Graduates want to have ‘meaningful’ careers, rather than just high salaries, and to be able to live in places and environments which appeal to them.
  • 27.7% of businesses that contacted the Growth Hub through the pandemic were referred to one of the nine regional university partner-specific business support programmes, providing specialised support such as adoption of new technologies and processes, skills development, and business leadership.
  • Problems with cluster approaches are outlined: it is not an easy task as successful clusters come in all shapes and sizes. As there is no one-size-fits-all cluster model and a “best practice” does not exist, the West Midlands must find the best cluster shape to build competitive advantages based on its local strengths and assets combined with global networks’ inspirations and trends. It also needs to take account of the experience of successful local clusters.
  • The number of UK payroll employees showed another monthly increase, up 241,000 to 29.1 million in August 2021, returning to pre-coronavirus pandemic (February 2020) levels. For the three months ending in July 2021, the West Midlands regional employment rate (for those aged 16- 64 years) was 74.2%. Since the three months ending April 2021, the employment rate saw an increase of 1 percentage point (pp). For the three months ending in July 2021, the West Midlands regional unemployment rate (aged 16 years and over) was 5.1%, a decrease of 0.8pp since the previous quarter.
  • There were 21,000 new VAT reporters in the UK in August 2021, a decrease of 4% from 21,930 in July 2021. The number of new VAT reporters in August 2021 was 18% higher than in August 2020 (17,730) but 2% lower than August 2019 (21,490).
  • The month-on-month, all-industry turnover estimate for July 2021 shows that in the past month, out of 38,550 firms, more firms have reported decreasing rather than increasing turnover (net negative 3%). This is the largest negative net difference since April 2020.
  • Transport for West Midlands (TfWM) has unveiled a new mini-transport hub which is designed to bring together eco-friendly travel options such as e-scooters, pedal bikes and electric vehicle charging points to neighbourhoods.
  • The University of Birmingham (UoB), in partnership with Siemens, is set to transform the University’s Edgbaston and Dubai campuses into the world’s smartest global campus, creating a ‘Living lab’ where research, teaching and learning all benefit from access to new data and connectivity.
  • SuperTech West Midlands, supported by GBSLEP, has announced the launch of the Connector Series. The aim is to grow the tech professional services cluster and establish the West Midlands as a world leading destination and a centre of excellence.
  • In MakeUK’s latest survey, the West Midlands has been the top performer, maintaining manufacturing output levels on average in the second half of the pandemic, posting a positive balance of 12%.
  • WCG, formerly Warwickshire College Group, has secured £1.2m of government funding to expand its range of technical qualifications from the £50m TLevel Capital Fund.
  • British Gas has outlined plans for the recruitment of more than 400 smart energy apprentices in the West Midlands over the next decade, with the aim that approximately a 1/3 of the vacancies filled within the next year.
Covid Impacts
  • Business confidence in the region stayed strong during August 2021 despite dipping from the previous month, according to new figures. The latest Business Barometer from Lloyds Bank Commercial Banking found confidence in the West Midlands fell three points during August to 27% but remained above the year-to-date average of 23%.
  • There has also been a growth in the number of permanent staff appointments according to the latest KPMG and REC UK Report on Jobs. The report signalled an accelerated upturn in permanent placements during the eighth month of the year as businesses were increasingly confident about market demand.
  • The economic recovery of the West Midlands continued in August 2021, with amid a robust improvement in demand conditions. Local companies linked the upturn to the relaxation of Covid-19 restrictions and increased order numbers, but suggested that growth has been restricted by difficulties in sourcing raw materials and struggles finding suitable labour to fill existing vacancies. The rate of inflation was sharp and the second-fastest since mid-2008.
  • Tensions between office workers also appear to be growing globally between those who are vaccinated against Covid and those who are not. 37% of companies surveyed by Seyfarth at Work reported that vaccinated staff were angry and frustrated at the transmission risk posed by unvaccinated workers.
  • Last year an unprecedented number of families were pushed into poverty as their incomes reduced due to the loss of working hours following Covid-19. Unemployment hit a five-year high at the end of 2020, with 5.1% or 1.7 million people out of work. This means that significant number of households were relying on social security to say afloat.
  • In order to help those on lower incomes the government decided to boost Universal Credit (UC) and working tax credits by £20 a week. This was the first rise in UC at or above inflation since its introduction 8 years ago in 2013; there was a benefit freeze from 2016 to 2019. Between, 2016 and 2019 UC had fallen 5% behind inflation. Citizen’s Advice surveyed over 2,000 people on UC and found that 38% would be in debt after paying just their essential bills if their benefits were to decrease by £20 per week.
  • The Trussell Trust found that faced with a £20 a week cut, 1.2 million people (20%) claiming UC say they would very likely need to skip meals and 1.3 million (21%) say they will very likely be unable to afford to heat their homes this winter.
  • The WMCA (3 LEP) area had 105,400 employments furloughed on the 31st July 2021. This reflects a 6.2% take-up of eligible employments for the scheme, compared to UK-wide of 5.4%. When compared to 30th June 2021, the number of employments furloughed in the WMCA (3 LEP) area decreased by 16,300 (-13.4%, UK -17.8%). The largest reductions in the number of employments on furlough in June and July were for younger employees in the under 18, 18 to 24 and 25 to 34 age bands. The parliamentary constituency with the highest take-up rate on 31st July 2021 was Birmingham, Hodge Hill at 9.4% (3,700 furloughed of the 39,500 eligible).
  • It is estimated that 10% of the region’s employees are on low pay and when applied to furlough figures this amounts to 16,000 workers in the region who could struggle if their employment conditions change (i.e. reduced hours) following the ending of the furlough scheme.
  • Birmingham is the main outlier in the region for furlough, with 34,400 people accessing support; this is at least three times higher than any other local authority area in the region.
  • Some of the furlough impact on manufacturing can be attributed to a global semiconductor shortage and other issues such as Brexit. In the region, as of 30th June 2021 21,000 (10%) of the region’s manufacturing employees are still on furlough.
  • There has been a total of 523,100 claims made from 151,000 individual in the WMCA (3 LEP) across all SEISS grants; the total claims reached a value of nearly £1.35bn. Across the WMCA (3 LEP) area, 170,100 people were eligible for the fifth grant of SEISS. There were 43,100 claims made to 15th August 2021 (approximately split by 30,600 claims made for the higher grant and 12,900 claims for the lower grant) with a total value of £91.8m (split approximately by £78m for the higher grant and £13.6m for the lower grant) with an average overall claim value of £2,200. The overall take-up rate for was 25%, above the UK average of 24%.
  • At a West Midlands regional level, there were approximately 258,000 of the population eligible for the fifth grant of the SEISS, which is a take-up rate of 23% based on the total number of claims of 60,000. This can be split further by gender: there was a total potentially eligible male population of 184,000 for the fifth grant of the SEISS, which equates to a take-up rate of 25%, which is based on the total number of claims of 45,000. There was an eligible female population of 74,000 for the region with a take-up rate of 20% based on the total number of claims of 15,000. The sectors with the highest take-up rates in the region were transport and storage at 34% (24,100 eligible, 8,200 claims) and other service activities at 29% (18,100 eligible, 5,300 claims).
  • Businesses were asked how their turnover for the last two weeks compared to normal expectations for the time of year. Excluding ‘not sure’ responses, 27.3% of trading businesses in the West Midlands reported their turnover had decreased by at least 20%. However, 44.6% of trading businesses reported that their turnover was unaffected and approximately 14.7% reported their turnover had increased by at least 20%.
  • 1% of trading businesses in the West Midlands reported profits had decreased by at least 20%. However, 41.4% of trading businesses reported that profits had stayed the same and approximately 11.3% reported their profits had increased by at least 20%.
  • Businesses were asked in the last two weeks, had their businesses exporting or importing of goods or services been affected when compared to normal expectations for the time of year. Excluding ‘not sure’ responses, 25.3% of exporting businesses in the West Midlands reported their businesses were still exporting but less than normal. Of those businesses who continued to trade and import, 18.8% in the West Midlands were importing less than normal. 57.4% of businesses who were exporting reported that they had not been affected and 64.4% reported that importing had not been affected.
  • 9% of responding West Midlands businesses reported that prices increased more than normal, 42.1% reported that prices did not change any more than normal. 7.2% of businesses reported some prices increased and some prices decreased and less than 1% reported prices decreased more than normal.
  • 2% of responding WM businesses reported an increase in demand for goods or services sold in the last two weeks, with 62.6% reporting no increase.
  • 6% of WM businesses reported there was no difference in the ability to fill vacancies and 42.8% reported vacancies were more difficult to fill. 13% of businesses did not have any vacancies to fill.
  • According to the research by PwC more than 1,500 shops disappeared from Midlands retail locations in the first half of 2021.
  • According to Springboard, in the week to 4th September 2021, the volume of overall retail footfall in the UK decreased slightly by 1% from the previous week (week to 28th August 2021).
  • In the week ending 5th September 2021, the seven-day average number of UK daily flights was 3,589, a 5% increase from the previous week (3,405) and a 15% increase from 3,111 the previous month (week ending 8th August 2021). This is the highest weekly average number of UK flights seen for almost 18 months.
EU Exit Impacts
  • As previously reported, the labour shortages problem is, according to many businesses’ experiences, caused and exacerbated by the UK’s exit from the EU. Businesses are struggling to recruit people for less desirable roles, such as HGV drivers, cleaners and care staff, due to the return of EU nationals to the EU, and reduction in flow of EU migration to the UK.
  • Furthermore, businesses in the region still report that Brexit has caused ongoing disruption at borders. Reliability of carriers is a problem, as is timeliness, losing shipments and delays of incoming goods stuck at the border.

Download and view a copy of the West Midlands Economic Monitor

The bi-weekly monitor brings together data and intelligence from the WMREDI 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 WMREDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.

City-REDI / WMREDI has developed a resource page providing 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 at City-REDI  / WMREDI, 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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