West Midlands Weekly Economic Impact Monitor – 19th March 2021

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This week it good to highlight the vaccine rollout continues at pace. The Midlands has successfully vaccinated 3,358,909 people with the first dose of the vaccine and 95,203 of these individuals have received the second dose. The Midlands has successfully continued to provide the most doses of the first jab and has remained the 3rd highest provider of the second dose out of the English regions.

  • The Scottish Government has announced this week that Scotland’s train operator Scotrail is to be nationalised. From the end of March next year Dutch firm Abellio well stop running the ScotRail franchise.
  • The Welsh government also nationalised its rail service in February, following them taking over the rail service after falls in demand due to Covid-19. The aim of the nationalisation of these services is to create a greener, integrated public transport system which serves communities and not shareholders.
  • The ‘Everyone In Initiative’, which was designed to house rough sleepers during the pandemic has exposed the scale of the rough sleeping issue. The Public Accounts Committee has praised the initiative, which took 37,000 people off the streets by January 2021. However, this number was nearly nine times the official estimates of rough sleepers.
  • The Department for Transport (DFT) has announced the creation of a second headquarters in Birmingham.
  • West Works site in Longbridge, Birmingham is to be regenerated following a £6m investment package. The deal between the West Midlands Combined Authority and property developer St. Modwen will see the construction of 350 homes and 900,000sqft of commercial floorspace, creating up to 5,000 jobs.
  • JCB has launched a fresh recruitment drive to employ an additional 450 agency shop floor staff at its factories in Staffordshire, Derbyshire and Wrexham.
  • A £1.9m development loan has been awarded by Wyre Forest District Council (WFDC) to support the regeneration of 4.5 acres of brownfield land in Kidderminster.
  • Engine-maker Rolls-Royce has plummeted to a mammoth £4 billion annual loss after a “severe” hit from the pandemic as the crisis hammered the global aviation industry.
  • Lord Sainsbury of Turville’s report has said that in order to ‘level up’ economically weaker performing cities need to become clusters of high-value activities. Effective and efficient institutions at the regional level should share three features: They should match the geography of the local economy and have accountable leadership, adequate powers and resources. If Mayors are to have a positive impact on local economic growth, they need to have the necessary powers and resources that allow for joining up transport and spatial planning, a skills system better aligned with business needs, and more resources for R&D.
  • Latest Make UK research highlights: Output volumes are up and UK orders improve; Export orders decline, likely arising from business both in the UK and EU yet to settle into the new UK-EU trading arrangements; Employment and investment intentions remain negative though significantly better than last quarter, employment is expected to turn positive in Q2; Expectations for next quarter more positive across all indicators; Prices improve but margins decline; Manufacturing growth forecast upgraded in 2021 to 3.9% from 2.7%.
Latest Economic Indicators Dashboard:
  • There has been an increase in the proportion of deaths related to COVID-19 since September 2020, reaching a peak at 39.8% of deaths in January 2021. The WMCA was the worst-performing Combined Authority on this measure.
  • There were 41,230 youth claimants in the WMCA (3 LEP) area in January 2021. When compared to March 2020 (22,835), the number of youth claimants has increased by 18,395. This increase has been maintained throughout the year.
  • There were 207,645 claimants aged 16 years and over in the WMCA (3 LEP) area in January 2021. When compared to March 2020 (117,590) the number of claimants has increased by 90,055. WMCA – Highest CA on this measure.
  • PMI dropped again at the beginning of the year and companies in the West Midlands reported the fall in activity was from COVID-19 restrictions and business closures that hindered output. The Future Activity Index registered at 77.5 in January 2021 with optimism stemming from the COVID-19 vaccine programme and the prediction of reductions in infections.
  • The latest data shows there were 1,717 apprenticeship vacancies in January 2021. This is an increase of 25 apprenticeships vacancies since December 2020 but 187 lower than January 2020. The WMCA is the highest Combined Authority.
  • The latest data shows there were 131,929 unique jobs postings in January 2021. This has decreased by 2,706 since December 2020 and by 2,005 since January 2020. The WMCA is the highest Combined Authority.
  • 619,800 individuals in the WMCA 3 LEP area have been furloughed at some point. Provisional data shows that 261,300 workers were furloughed in the WMCA (3 LEP area) as of 31st January 2021. On 31st January, 14.5% of eligible employments were furloughed, compared to 15.6% for the UK.
  • Percentage change quarter on quarter shows for the West Midlands region there was a negative GDP growth of 4.7% in Q1 2020, this was followed by 21.0% negative growth in Q2 2020. The UK recorded a negative growth of 2.8% in Q1 2020 followed by negative growth of 18.8% in Q2 2020. WM– Highest Negative Growth.
Covid Impacts
  • The West Midlands saw 1,468 chain stores close permanently last year at retail locations. The West Midlands had 600 openings in 2020 meaning a net loss of 868 for the region. Fashion retailers were the hardest hit last year, with more than 1,100 disappearings, as names such as Laura Ashley, Warehouse, Oasis and Jaeger exited the high street.
  • Reg Flag Alert – which has been collecting and measuring the financial data of UK companies since 2004 – shows that 274,720 jobs could go when the Coronavirus Job Retention Scheme (CJRS) ends in September 2021.
  • For the week ending the 6 March 2021, overall footfall was at 42% compared to the same week 2020.
  • In the West Midlands, 1.5% of businesses sites were temporarily or permanently closed, compared to a high of 6% in London and the South East. The accommodation and food service activities industry has less than 50% of businesses currently trading, at 43%.
  • VAT returns diffusion indices for January 2021 compared with January 2020 have shown a decrease, at 1.4 (pink) standard deviations below its historical average with a diffusion index of negative 0.07. This implies that, in January 2021, a net 7% of 32,380 firms reported a fall in turnover compared with January 2020.
  • 7% of all businesses currently trading were providing regular testing to their employees, and of those businesses providing testing, 11% of the workforce were being tested.
  • The EU has announced plans to roll out a travel certificate before summer 2021, which will enable anyone vaccinated against Covid-19, or who has tested negative or recently recovered from the virus, to travel within the EU.
  • The National Audit Office reports that the Department for Education supported schools and pupils, including ensuring that schools could remain open for vulnerable children and funding on-line resources for those learning at home. However, the Department was slow to respond and had they acted more quickly, the support that they implemented would have been more effective in mitigating the learning pupils lost as a result of the disruption.
  • Thorntons announced this week, that it would be closing all of its remaining 61 high street outlets; all stores will now remain closed following the easing of restrictions.
Sector Risks for the West Midlands

The West Midlands Local Enterprise Partnerships (LEPs) and partners have developed two risk matrix for the West Midlands to support more targeted local policy and decision making. One for Covid and one for the EU Exit.

COVID Sector Risks

Description and risk exposure is defined as:

  • Skills & Labour: The requirement for financial support for employment. The percentage of the West Midlands region furloughed by industry is used as a quantitative indicator for this RAG rating.
  • Access to Finance: Requirement for financial support for cash flow/survival. Access to the Coronavirus Business Interruption Loan Scheme (CBILS) and the Bounce Back Loan Scheme (BBLS) data is used as a quantitative indicator for this RAG rating – specifically, the difference between the percentage of all loans offered and each sector’s size in the economy.
  • Transition to New Business Models: Ability to adapt to new business models and consumer behaviour – for example a reduction in air travel.
  • Digital / Home Working: Exposure to the shift towards home working and through digital means.
  • Loss of EUSIF Funding: Reflecting the estimated sector risk of ERDF and ESF funding and programmes tapering off. The value shown is the value of West Midlands’ projects that were specific to this sector for the 2014-2020 EUSIF funding round.
  • Exposure to lockdown restrictions; Future order book values expected, Exposure to business debt and insolvency, Exposure to continuing social distancing rules, Exposure to workforce absence due to Covid isolation and testing requirements; Flexibility in managing risks associated with the pandemic.

Finding include: 

  • Sectors most at risk – Advanced Manufacturing & Engineering, Retail, Cultural and hospitality, Transport and Logistics
  • Medium risk – Construction, Energy and low carbon, Creative industries
  • Lowest risk – Business, Professional and Financial Services and Public sector, Health care and life sciences

EU Exit risks

Description and risk exposure is defined as:

  • Business risks: Exposure to changes in the VAT regime when trading with the EU; Exposure to uncertainty relating to the lack of agreement on the financial equivalence between the UK and EU; Exposure to new rules on business travel for working in the EU; Exposure to additional customs checks and paperwork required when trading with the EU; Exposure to the application of Rules of Origin on products being traded between the UK and EU; Exposure to certain changes in standards and regulation of products and services; Exposure to the lack of agreement on cross-border data exchange.

Findings include: 

  • Skills Shortages: Exposure to skills shortages due to immigration / freedom of movement changes and the UK’s new points-based system; Exposure to the lack of mutual recognition on professional qualifications between the UK and EU.
  • Sectors most at risk Advanced Manufacturing & Engineering, Retail, Business, Professional and Financial Services, Transport and Logistics.
  • Medium risk – Cultural and creative industries, Construction, Health care and life sciences
  • Lowest risk – Energy and low carbon and Public sector

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

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.

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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