West Midlands Weekly Economic Impact Monitor – 20th August 2021

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Whilst the world is looking at events in Afghanistan, the UK has seen a resurgence in infection rates, and the number of daily new cases confirmed in the UK is now the highest out of the selected European countries. 8% of West Midlands adults reported they were self-isolating; the highest region in Great Britain for that week. This week we highlight the recently published State of the Region and also take an in-depth look at why the regional claimant count is not reducing as quickly as other places.

  • On the 4th August 2021, WMREDI and partners held an event to launch the State of the Region 2021 report. It highlights five challenges facing the region. However there is no precedent, things have changed rapidly, data is lagging and policy actions have directly affected indicators – employment, business, innovation, FDI, visitors. The WMCA area had been out-performing other areas in the run-up to Brexit and pandemic impacts. The last 18 months have hit the region hard; the industrial make-up of the region and structural issues have left the West Midlands more exposed. Potential issues highlighted last year have come to pass, and jobs levels are expected not to return to 2019 levels until 2023 and GVA not until 2022, after dropping back below £100bn last year. There are signs in the last few months of opening back up and a positive rebound; the Purchasing Managers’ Index (PMI) still doing well, business sentiment in the region is still positive and jobs are coming back.
  • Between the 8th December 2020 and the 29th July 2021, the Midlands has successfully vaccinated 7,226,985 people with the first dose and 5,854,104 of these individuals have received the second dose as well. This means that the Midlands has successfully provided the most jabs out of any region including London.
  • The sixth report from the Intergovernmental Panel on Climate Change (IPCC) provides unequivocal evidence that human influence has warmed the atmosphere, ocean, and land. The scale of recent changes to climate has been widespread, rapid, and unprecedented for thousands of years.
  • The Delta variant of coronavirus has continued to have a global impact with Oxford Economics forecasting slower GDP growth than previously expected. Global growth for 2021 is forecast to reach 5.9%, down from the 6.2% previously anticipated. However, there is seen to be some bounce-back next year with the outlook for 2022 being raised by 0.2 percentage points to 4.8%.
  • The Office for Budget Responsibility will prepare an economic and fiscal forecast which will be presented on 27th October 2021.
  • The takeover of the Taliban in Afghanistan is leading to increased instability in the country and across the region. The threat of returning to a hard-line rule in Afghanistan has led to mass efforts to escape the country, with as many as two million people crossing the borders into Iran and Pakistan, amongst others.
  • This week the Monitor looks at the slow claimant count reduction in the WMCA area and highlights that Birmingham contributes significantly to the regional performance on this measure. Issues behind this include, larger numbers of claimants historically; a sizeable low wage economy – especially for women working in vulnerable sectors; higher levels of households with dependents; reliance on working longer to earn more, so vulnerability to cuts in hours; high numbers still furloughed (and on reduced wages); numbers of jobs; high numbers of people with caring responsibilities, influencing job appetite; lower levels of quality jobs and higher-skilled people to fill them; reliance on jobs vulnerable to EU Exit and pandemic impacts; and dependence on large employers in vulnerable sectors.
  • A new study by Aviva has found that 47% of employees were less career-focused because of the pandemic. Just 14% of employees favoured returning to the office full-time. Secure, well-paying jobs have a strong link with broader personal wellbeing. People with secure jobs have been able to save more over the course of the Covid-19 pandemic, and have generally had more favourable wellbeing outcomes. The trend of many people, particularly younger people, becoming more reliant on lower-paid insecure work has been a factor in a deterioration in wellbeing over the pandemic.
  • The number of payroll employees in the UK showed another monthly increase, up 182,000 to 28.9 million in July 2021. However, it remains 201,000 below pre-COVID-19 pandemic levels.
  • From May to July 2021, there were an estimated 953,000 job vacancies, a record high, having grown by 43.8% (+290,000) compared with the previous quarter and 168,000 more than its pre-pandemic level (January to March 2020).
  • The UK unemployment rate was estimated at 4.7%, 0.8 percentage points higher than before the pandemic, but 0.2 percentage points lower than the previous quarter.
  • The redundancy rate decreased in the quarter (-1.9 thousand per employees) and has returned to pre-pandemic levels (3.6 per thousand employees April to June 2021).
  • There were 172,549 unique job postings across the WMCA (3 LEP) geography in July 2021, 4.8% more than in June. This is the fifth consecutive month that monthly job postings have strengthened.
  • All but three of the 19 LA areas across the WMCA 3 LEP geography recorded a positive change compared to June. Nominal reductions were logged in Bromsgrove (-0.2%) and Dudley (-0.3%); whilst the number of postings fell by -1.5% in Walsall.
  • Growth in average total pay (including bonuses) was 8.8% and regular pay (excluding bonuses) was 7.4% from April to June 2021. These are compositional effects where there has been a fall in the number and proportion of lower-paid employee jobs so increasing average earnings and base effects where the latest months are now compared with low base periods when earnings were first affected by the pandemic.
  • The relaxations of the government-mandated coronavirus restrictions have had a positive impact on the gross domestic product (GDP) of the UK. In Q2 (April to June) 2021 UK GDP increased by 4.8% and is now 4.4% below the pre-pandemic level at the end of 2019.
  • By Q4 2021, the Bank of England forecasts GDP to reach its pre-pandemic levels. The Consumer Price Index (CPI) rate of inflation is at 1% as of August 2021, just above the 2% target, but is expected to rise further before falling back to within target. The forecasts by the Bank of England indicate that inflation could reach 4% by the turn of the year and stay above the 2% target until 2024.
  • The Labour Market Outlook surveys Summer 2021 from the Chartered Institute of Personnel and Development share the general optimism in the labour market. Employment confidence reaches a record high, with a net value of +32, and the proportion of employers planning on recruiting rises further to 69%. The Covid-hit sectors such as hospitality, arts, and entertainment are struggling to fill vacancies.
  • However, the Business Impact of Covid-19 Survey indicated that 1-in-50 businesses expect to make redundancies in the next three months. The top three most susceptible industries are transportation and storage (where 7% of businesses are expecting to make redundancies); information and communication (4%); and manufacturing (3%). The main reasons for the redundancies are down to: a need to reduce staff costs (41% of respondents stated this reason); certain job roles not being required (36%); and phasing out of the furlough scheme (28%).
  • There has been evidence of in recent weeks and months, such as in the West Midlands Quarterly Economic Snapshot and the Business Barometer from Lloyds Bank. For example, 62 per cent of local firms expect their profitability to increase over the next 12 months.
  • The West Midlands Business Activity Index (PMI) decreased from 64.0 in June 2021 to 58.3 in July 2021. With the Business Activity Index still above the 50-mark, this shows a slower but still a sharp rate of increase. The rise in business activity was restricted by staff and raw material shortages.
  • The overall UK Business Activity Index decreased from 62.2 in June 2021 to 59.2 in July 2021. Out of the twelve UK regions, the West Midlands region was the fifth lowest for the Business Activity Index in July 2021.
  • The West Midlands Future Activity Index decreased from 77.1 in June 2021 to 74.4 in July 2021 – despite this falling to a seven-month low, firms still had a strong degree of optimism.
  • West Midlands Input Prices Index decreased from 79.6 in June 2021 to 77.9 in July 2021 – despite easing from June 2021, the rate of increase was among the sharpest seen in the near 25 years of the survey.
  • The number of UK flights has hit its highest since 22nd March 2020, the week before the first coronavirus lockdown in the UK.
  • House prices in the UK have risen by 13.2% over the year to June 2021. This is the fastest rate of growth since November 2004. Mike Hardie, Head of Prices at ONS stated that the average house price for June 2021 is now £266,000, having risen by £31,000 compared to last year
  • Avison Young’s latest office market update on the nine largest cities in the UK indicates that the city-centre office take-up in Birmingham is 203,499 sq ft in Q2, four times its Q1 total. In addition, the office space take-up is 12% higher in Birmingham compared to the city’s 10-year average. This contrasts with the trend across the country, which averages a 23% fall compared to the 10-year average. IWG Spaces is committing to 50,000 sq ft at Mailbox, medical research company Binding Site is signing up at Broadway on Broad Street, and there are three lettings at 6 Brindley Place including the Commonwealth Games, British Transport Police, and Office of the Public Guardian.
  • West Midlands Combined Authority (WMCA) has developed a new training plan to help local people gain jobs in health care and health sciences. WMCA has launched a plan, in partnership with local employers such as University Hospitals Birmingham NHS Foundation Trust, training providers, and the Department for Work and Pensions, to support local residents move into the sector.
  • Workers at GKN engineering plant in Birmingham are holding a vote on taking industrial action. The company’s proposals are to shut the factory, leading to the loss of 500 jobs.
  • There are a number of new investments and opportunities in the region emerging too. Law firm Lodders is launching the biggest recruitment drive in their 230-year history to grow their workforce by 25% to 200 people across their offices in Stratford-upon-Avon, Birmingham, and Henley. In entertainment and recreation, Red Kangeroo, the Coventry-based trampoline park, has received £300,000 for the purchase of additional equipment from the Midlands Engine Investment Fund. Pubs and restaurants group Marston’s is to move its headquarters across Wolverhampton. St John’s House in St John’s Square is to be refurbished – starting in January – and 250 Marston’s staff will be based there. An £8million restoration of Stevens Park, in Quarry Bank, Dudley, is nearing completion to revamp a building called Tintern House, formerly known as the White House. Greggs is to create 500 jobs as it plans 100 more stores. The Walsall-based retail chain Poundland is currently recruiting more than 100 drivers across its three distribution centres. Arup, the employee-owned built environment consultancy, is set to move its third largest global office to Paradise Birmingham bringing 1,000 jobs to Birmingham city centre
  • Less than 1% of West Midlands businesses reported the number of workers within the EU had increased. 24.3% of West Midlands businesses reported the number of workers within the EU had stayed the same and 12.6% reported the number of EU workers had decreased.

Download and view a copy of the West Midlands Economic Monitor

The bi-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 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, 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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