West Midlands Weekly Economic Impact Monitor – 20th November 2020

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This week the development of vaccines is signalling a positive change, according to the International Monetary Fund (IMF)’s most recent forecasts, global growth is expected to be around 5.2% during 2021 based on the assumption that social distancing would gradually fade away as new Covid-19 vaccines are being developed. It’s worth noting that, following the vaccine news the IMF stated that a speedier recovery was possible. “Progress with vaccines and treatments, as well as changes in the workplace and by consumers to reduce transmission, may allow activity to return more rapidly to pre-pandemic levels than currently projected, without triggering repeated waves of infection.”

  • Last month’s EUROSTAT study suggests that the eurozone grew by 12.7% in the third quarter of the year compared to the previous three-month period. In comparison with the same quarter of the previous year, seasonally adjusted GDP has nonetheless decreased by 4.3% in the euro area and by 3.9% in the EU in the third quarter of 2020, which points represents a partial recovery after -14.8% and -13.9% respectively in the previous quarter.
  • Vaccine news was most beneficial to industries that have suffered the most during the last 6 months such as airlines and hotels. More specifically (in decreasing order) Rolls-Royce (+9.9%), hotel chain Whitbread (+9.8%) and airline group IAG (+9.7%) ended the day as the top risers. Firms whose products were best adapted to the pandemic are now the ones whose shares are seeing dips (i.e. Ocado fell 4%).
  • The positive trade news stimulated Asian stocks toward a record close. This is on the back of data showing China’s economic recovery has strengthened, propelled by increased consumer spending and industrial production rising faster than expected.
  • Prime Minister Boris Johnson, whilst in self-isolation following close contact with a confirmed Covid-19 case, has launched a Ten Point Plan for a Green Industrial Revolution will create and support up to 250,000 jobs.
  • With national restrictions coming into place for England on the 5th November, overall footfall on the 8th November fell to 33% of it 2019 level. Although, the day before restrictions were brought into the place, overall footfall peaked at 91% of its 2019 levels.
  • On the 8th November, footfall for high streets and shopping centres both fell to 27% of the 2019 levels. Retail parks footfall fell to just over a half when compared to the same day in 2019.
  • All the English regions experienced a decrease from the previous week on the 8th of November. The South East, West Midlands, South West and East of England all saw declines of 50 percentage points. As Northern Ireland was still in a circuit breaker lockdown over this time, there was a weekly increase of 10 percentage points.
  • Government has backed the development of new ‘space hubs’ across the country, as well as funding for a space hub in the West Midlands, the work is led by City-REDI.
  • Covid-19 cases across the West Midlands continue to rise, despite a reduction in active cases across the North West, North East and Yorkshire. Positivity rates in England have increased in recent weeks, but the rate of increase is getting less.
  • There is welcome news that one of two new Mega Labs to process test results (so markedly increasing the UK’s capacity on this front) is to be sited in the region at Leamington Spa (the other site is in Scotland). The sites are expected to create up to 4 thousand jobs – at a range of different skills levels.
  • In terms of support for businesses, there is now a range of different grants and instruments covering different time periods and with different eligibility rules. This makes for an increasingly complex picture.
  • In the current lockdown in England concerns have been raised that non-essential retailers have had to close. Simultaneously other outlets – such as garden centres – are open and are able to sell non-essential items. This has raised the issue amongst businesses and the public as to whether the current lockdown is actually a ‘full lockdown’.
  • Footfall data suggests that lockdown has a greater impact on activity than the tiered system. Going forward, it seems that perceptions of safety have a marked impact on behaviour.
  • Issues relating to Brexit and replacements for European funding are ongoing. In terms of preparations for Brexit, the lack of available information means that businesses lack the specificity they need. In terms of exports, there is also the issue that as well as UK exporters needing to be prepared for changes, so EU importers need to be prepared for receipt of incoming goods. Currently, European funding sources (such as the European Social Fund) are important for supporting youth employment initiatives and for Small and Medium Enterprises (SMEs). Given the Covid-19 crisis, continuing support here remains very important. The European Investment Bank is also an important source of finance and access to funding in 2021 remains unclear.
  • The new immigration system (due to be implemented in 2021) is a ‘game-changer’. Free movement will come to an end. EU and non-EU immigrants are due to be treated on the same basis in a skills-based immigration system which has no general entry route for migrants to fill low-skilled jobs. Many SMEs lack the capacity to deal with the paperwork associated with the new system.
  • Survey finding show manufacturers expect a long haul back to normal trading. Key findings:
    • Over a third of companies see normal trading more than a year away
    • Just a quarter of companies at full operating capacity
    • Half of companies have made redundancies with a fifth still expecting to do so in the next six months
    • A fifth of companies say measures on business rates should be a top priority for the Government
    • A quarter of companies stockpiling ahead of ‘no deal’
  • There were 43,660 youth claimants in the WMCA (3 LEP) area in October 2020. When compared to March 2020 (22,835), the number of youth claimants has increased by 20,825.
  • There were 210,975 claimants aged 16 years and over in the WMCA (3 LEP) area in October 2020. When compared to March 2020 (117,590) the number of claimants has increased by 93,385.
  • The headline NatWest West Midlands Business Activity Index – a seasonally adjusted index that measures the month-on-month change in the combined output of the region’s manufacturing and service sectors – posted 51.2 in October, signalling the weakest rate of expansion in private sector output since June.
  • Although private sector companies in the West Midlands remained confident of a rise in output in the coming 12 months, the overall level of positive sentiment fell to a five-month low in October and was below its long-run average.
  • The latest data shows that apprenticeship vacancies stood at over 1,600 in October 2020, this has increased for the third month in a row.
  • The latest data shows that the number of unique jobs postings stood at just over 115,000 in October 2020. This has increased for the fourth consecutive month.
  • 619,800 individuals in the West Midland Combined Authority 3 Local Enterprise Partnership (WMCA 3 LEP) area have been furloughed at some point, but 205,500 remain furloughed as of 31st August 2020. On 31st August 2020, in the WMCA 3 LEP area, 11.3% of eligible employments for the scheme, compared to 10.8% for the UK.
  • Percentage change quarter on quarter shows for the West Midlands region there was negative GDP growth of 0.8% in Q4 2019, this was followed by 3.5% negative growth in Q1 2020. The UK recorded flat growth in Q4 2019 followed by negative growth of 2.5% in Q1 2020.
  • Regional exports fell by nearly £4.6bn (-14.1%) over the year of 2020 Q2 to £27.5bn – the UK decreased by 9.0%. The West Midlands region imports decreased by 18.0% to £31.3bn – leading to a trade deficit of £3.8bn.
  • Pre-Covid the region was performing well and the number of active enterprises continued to increase and in 2019 there were 172.875 in the WMCA 3 LEP area. This has increased by 1.7% (+2,915 enterprises) compared to 2.5% growth for the UK since 2018. In the WMCA 3 LEP area, there were 28,175 enterprise births in 2019. This is an increase of 16.4% (+3,980 births) since 2018, the UK increased by 5.4% over the period. The WMCA 3 LEP area enterprise deaths decreased by 16.9% (-4,180 deaths) since 2018 to 20,340 in 2019, while the UK increased over this period by 8.1%.
  • Transport demand remains lower than previous to the 2nd lockdown by approx. 10-20% per mode. Planning is in place with highway and transport authorities for a surge of activity pending release from lockdown and anticipated retail activity as well as the transport support for university students returning home.
  • 67% of adults in the West Midlands region reported finding it easy or very easy to understand the current lockdown measures, this is slightly above the England average of 65%. Also, 67% of adults in the West Midlands region reported finding it easy or very easy to follow the current lockdown measures, above the 66% average for England.
  • 9% of adults in the West Midlands in the past seven days have self-isolated because of COVID-19.
  • 91% of adults in the West Midlands region who left their home in the past seven days had avoided physical contract with others and when they have returned home 89% have often or always washed hands with soap and water straight away.

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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