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.
Key points:
- 496,200 people have been furloughed in the region which accounts for approximately 26.9% of jobs, with Birmingham featuring among the UK’s top-5 affected cities.
- In May 2020, there were 207,635 claimants (aged 16 years and over) in the WMCA (3 LEP) – this is an increase of 36,390 claimants with respect to the previous month. This 21.3% increase has been smaller for the WMCA (3 LEP) compared to the 26.6% national growth. Since March 2020, the claimants in the WMCA have increased by 90,045 people, which represents a 76.6% 3-month growth, a much lower rate than the UK’s one (110.9%). In the WMCA, there were 41,225 youth claimants in May 2020, which represent an increase of 27% (8,775 youth claimants) with respect to last month.
- The Institute for Fiscal Studies (IFS) has argued that the effects of the recession on new entrants to the labour market, together with school closures and a fall in available apprenticeships, will cause long-term damage to the prospects of younger generations in the UK. “Investing in the human capital of the young should be central to any economic recovery plan”.
- The Institute for Economic Affairs has also argued that coronavirus is very likely to lead to a “radical reconstruction of the welfare system”. Amongst other measures, it suggested that the UK should consider introducing a universal basic income scheme to “guarantee” financial security for everyone.
- Nationally the Federation of Small Businesses (FSB) has reported that 35% of all UK small businesses (which make up 99% of all UK businesses) have remained closed during the lockdown. This number represents 60% in the case of retail businesses. The results also show that 62% on the high street shops remain closed as more than 60% estimate that it would cost up to £1000 in terms of set up costs to comply with government guidance. 28% estimate between £1k to £10k and 20% do not consider they can open at all.
- Relative to the size of the Creative Industries in 2019, the West Midlands is the hardest hit in employment terms, with a projected 43% drop in creative jobs in 2020. In this region, we find the lowest recorded Coronavirus Job Retention Scheme uptake across the UK.
- The implementation of Social Distancing measures remain a key concern for UK businesses, with many businesses not able to adapt and 20% of small businesses saying they cannot meet the criteria
- Chambers and MakeUK report similar results for the last QTR. At the national level, UK’s output has plunged to the lowest level in 30-year survey history; UK and export orders have dropped to levels comparable to the 2008 financial crisis. At the industry level, just over 10% of companies are operating at full capacity. Employment and investment have also suffered significant cutbacks with employment balance dropped by -22 and investment intentions flipped on its head. Prices and exports have also dropped, and margins have collapsed further into negative territory as orders have disappeared, cutting cash flow and profits.
- There have been calls for the Government to extend the Brexit transition period because of Covid-19. The Bank of England said that its economic scenario analysis depends on a “comprehensive free trade agreement” with the EU.
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 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.
Download and view a copy of the West Midlands Weekly Economic Monitor.
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.
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.
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