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:
- Nationally, according to the ONS weekly survey, people think the country is getting kinder, and general wellbeing remains the same. But since the beginning of the survey people think the country is also becoming more unequal.
- Generally, business feedback is that government intervention is working and therefore there has been a decline in immediate issues to be resolved. Remaining issues are credit within supply chains and recovery planning where businesses need advice and support to rebuild. Work by the Enterprise Research Centre shows that sole traders are very exposed, especially female and young entrepreneurs, and this is an issue still being raised by business representative organisations, as often sole traders slip through the current support mechanisms.
- Consumer spending is down significantly, and opening businesses up will have no effect unless people buy the products and services. There has been significant behaviour change with a drop in spending of more than a third and latest data from Barclays says spending is far lower than the Bank of England are forecasting, we don’t know yet whether this change will become the norm. However, people are clearing household debt greater than ever before £3.8bn has been paid off and savings have gone up by £13.1bn. The virus has accelerated recent trends, with online shopping increasing by 60% against an average of 8%. Businesses have responded with a significant take up of online provision and technology transformation. Rebuilding customer experience and appealing to these changing values will be key for business success and revival.
- Since starting the monitors, the West Midlands performance has changed dramatically, as is the case everywhere:
- Youth claimant counts have gone up by 10k to 6.8% of the young population, sitting 5th amongst combined authority areas but the rate of increase was much higher than elsewhere. As a region with high numbers of young people, we have a population facing multiple impacts from the pandemic as previous monitors have shown. Closure of sectors which employ them, the education system changing rapidly to cope with social distancing and the loss of final term in schools weakens the transition points between school, further and higher education and employment.
- Apprenticeships – the West Midlands Combined Authority (WMCA) has the highest level of available vacancies which is positive for the region, however recent business surveys show a decline in training and apprenticeship opportunities. As in previous weeks, this creates long term scaring especially for those with lower qualifications.
- Overall claimants stand at 171k, which is 5.2% of the working-age population, this is despite the extensive furloughing and the success of the intervention. Businesses are flagging that although this is an excellent policy approach, it may just be moving the redundancy problem down the road if consumer spend and business activity doesn’t return and they aren’t supported to adapt.
- The WMCA area has the second-highest death rates of all combined authorities, the pandemic hits cities harder. As in last week’s monitor pandemics hit denser, poorer, urban populations more, as social distancing is harder and overcrowding more common.
- Purchasing Managers Index (PMI) Business activity has dropped from 51.2 (over 50 signals growth, under 50 signals contraction) to 10.9, the lowest levels ever. To be expected in these extraordinary conditions. However the PMI future business activity is holding up, rising from 55.9 to 62.1, signalling businesses are positive about the future once lockdown ends.
- Job postings have gone down, but the WMCA area has the highest levels of any CA at 146k.
Reviewing the last 9 weeks of monitors there is cause for concern, as seen above, but the focus now should be on recovery and protecting our assets. Businesses are ready for change and 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 resilience in the 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 also 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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