This week we continue to see the success of vaccine rollout. The Midlands has successfully provided the most 1st and 2nd doses of the vaccines out of any region in England, which is particularly important given the region has the highest reported hospital admissions. The region has recently published its Digital roadmap – research carried out by WM REDI shows that early adoption (such as 5G) has long term positive impacts and is key to growth.
- China has now become the EU’s largest trading partner, overtaking the US in 2020. Although China’s economy was hard hit in the first quarter of 2020 due to the pandemic, its economic recovery later in the year fuelled demand for EU goods. China was the only major global economy to see growth in 2020, stoking demand for European cars and luxury goods.
- China has also overtaken the US as the world’s top destination for foreign direct investment. New investments into America from overseas companies fell by almost half last year.
- This week a winter storm has landed in the US which has severely disrupted business across the country. Because millions of people have been working from home during the coronavirus pandemic, winter storms may not have quite the economic cost they once did. But the loss of power can sever the internet connections that people need to do their jobs.
- Last year the UK encountered its deepest recession on record, which prompted warnings of a return to 1980s levels of unemployment. However, the current recession has differed greatly from previous recessions. As a result, we should expect the UK to make a quick recovery. This time around local services saw a deeper fall, especially in ‘high street’ services such as accommodation, food and leisure. Secondly, exporter industries have been in recovery mode for many months.
- The City of Birmingham has retained its spot as the UK’s start-up capital outside of London for the seventh year running.
- Birmingham is also a top location for businesses that are scaling up. Recent data from the Scaleup Institute shows there were 1,750 ‘scale-ups’ across the region’s Local Enterprise Partnerships throughout 2020.
- The Birmingham property market is the most valuable in the UK outside of London. Transaction levels and house prices have been on the rise, and recent reports forecast the city’s house prices to increase further in the coming years.
- Early engagement with the digital economy can explain regional productivity differences for up to 16 years down the line. This means that the decision for the rollout of digital technologies can have significant economic impacts for many years ahead and that typical evaluation timeline may underestimate the importance of these decisions. In this sense, the West Midlands Combined Authority is expected to benefit from being a 5G testbed region
- Jaguar Land Rover has announced that it will be ditching the internal combustion engine within 15 years as new chief executive Thierry Bolloré unveiled a radical plan to steer one of the UK’s best-known carmakers into the electric era. In the biggest overhaul of Britain’s largest automotive business in a decade, the company will from 2026 phase out the diesel technology fleet and by 2025 shift to an electric-only brand.
- The plan will also see JLR wind down production at its Castle Bromwich plant but, will keep the site open by shifting production of non-car manufacturing to the West Midlands facility. Employing more than 2,000 people, the plant had been widely expected to shut in the long-awaited overhaul.
- Most of the global 54 GEM National Teams point towards the continued urgent need for sufficiency and transparency in financial support mechanisms for entrepreneurs. There needs to be a reduction in bureaucratic red tape. Entrepreneurial activity does not take place in isolation. It is shaped by a set of social, cultural, political and economic contextual factors that are encapsulated in nine pillars.
- Many workers can work from home in different neighbourhoods from where they work. Economic activity is decreasing in city centres and increasing in residential suburbs, and ‘Zoomshock’ moves workers away from areas with a large supply of locally consumed services to areas where such supply is relatively scarce.
- Research raises concerns that the closure of parks and green spaces due to the coronavirus (COVID-19) pandemic may have had an impact on wellbeing and examines some of the barriers to accessing green spaces during the pandemic. Research reveals disparities in access to green spaces and opportunities for recreation – people living in deprived areas having the least access and are most likely to be physically inactive. Green spaces are shown to increase life satisfaction and subjective wellbeing; children living in greener areas have a lower risk of psychiatric disorders in later life, and those using green space for physical activity have a decreased risk of all-case mortality and cardiovascular disease.
- Remote working has resulted in larger numbers of people working longer hours to prove their worth or be ultra-responsive to clients. Research argues that having a poor work-life balance should not be regarded as positive or admirable.
- The new Reporters Index measures the number of firms sending VAT returns for the first time (relates to the number of firm births). In January 2021, the number of new VAT reporters was 20,510 – this was above the level that was seen in January 2020 (20,90) but remains below the 2015 to 2019 average of 20,908.
- 3% of trading businesses in the West Midlands reported profits had decreased by at least 20% compared with normal expectations for the time of year. However, 33.6% of trading businesses in the West Midlands reported that profits had stayed the same and approximately 6% reported their profits had increased by at least 20%.
- 9% of West Midlands businesses reported that over the last two weeks prices did not change any more than normal, 15.1% reported prices increased more than normal and 6.5% of West Midlands businesses reported some prices increased and some prices decreased.
- 2% of businesses in the West Midlands reported capital expenditure was higher than normal. 34.9% reported capital expenditure had not been affected. 29.9% of West Midlands businesses reported capital expenditure was lower than normal and 7.6% reported expenditure had stopped.
- 9% of responding businesses had high confidence in surviving over the next three months. 27.9% had moderate confidence of survival, 4.0% had low confidence. 44.7% of West Midlands businesses reported that the risk of insolvency had increased due to COVID-19, while, 46.1% of West Midlands businesses reported insolvency risk had stayed the same.
- Passenger numbers at Birmingham airport have fallen by 91 per cent since the start of the pandemic. Birmingham Airport is set to receive an £18.5m emergency loan from the City Council to stave off the threat of insolvency.
- HS2 Phase 2a has been given Royal Assent. This takes the high-speed line from Birmingham to Crewe, creating thousands of jobs.
- The £24.1 million Dudley Interchange linking bus and trams has been given the go-ahead by the combined authority’s board.
- Culture Coventry Trust, which manages the Herbert Art Gallery and Museum, has secured grant funding of £500,000 from Arts Council England and £100,000 from Coventry City Council towards its UK City of Culture programme.
EU Exit impacts
- The Brexit deal has failed to have any major effect on the exchange rate of the pound since January 1 2021. The pound has held steady against the US dollar at US$1.36 and has strengthened slightly against the euro to €1.12.
- Services are even more important from the UK’s perspective. Led by areas like finance and law, they make up a significant part of UK GDP, and the EU is again the biggest single export market. A deal is being negotiated but a reduction in the short term seems unavoidable.
- UK in a Changing Europe reports that the effect of Brexit on the economy is expected to emerge slowly, but to be permanent. It estimates that the UK’s economy will shrink by a total of 4.9% over 15 years.
- All trade models predict that international trade in goods between the UK and EU will be reduced, given that Brexit creates new obstacles for the two trading partners and is costly. As a consequence, some import prices will increase and some export jobs will be lost.
- The Government is confident that its post-Brexit worst-case scenario of disruption from queues of thousands of lorries in Kent has now been avoided. Internal figures seen by the BBC show outbound roll-on roll-off lorry traffic for Great Britain for the month so far at 98% of last February’s levels.
- Lorry traffic on the crossing from Kent to the EU on ferries and via the Channel Tunnel in January was 67% of the same month in 2020, and 82% of that in February. Although there is no formal count of empty lorries, a variety of ferry company, French and UK official data suggest the proportion of empty lorries going back to the EU is at around 50%. With overall levels of lorry traffic back to normal, there are around 1,000-2,000 fewer lorries exiting the whole of Great Britain with actual freight.
- The Government’s data on lorries turning back due to the wrong documentation is now below 2.5%, having been closer to 8% in the first days of the new regime.
- London’s financial district has officially lost its crown to Amsterdam as Europe’s top place to buy stock and shares. Traders have shifted interest-rate swaps out of the U.K. capital. Relocations of bankers are set to continue in 2021, with London finance job vacancies declining since the Brexit vote back in 2016.
- Many businesses exporting to the EU have experienced difficulties, particularly as there was no phased implementation period for exporters to help them with the new trading arrangements. With further changes to import controls set to be brought in in April and July, it is considered vital that grant funding reaches businesses as quickly as possible so that they are ready for when these new controls are introduced.
- The difficulties businesses are facing include increased administration, costs, delays and confusion about what rules to follow.
- Businesses are looking for the next government payment to help them survive the ongoing pandemic. It is unclear, one year on from the start of the COVID-19 in the UK, whether many of the businesses in receipt of government support will be able to bounce back quickly or whether they will face the stark reality that their ventures may fail.
- There are high volumes of inbound enquiries and requests for support. Common subjects include sales & marketing strategy, skills, and a continued requirement for support with startups and start-up finance.
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.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.