West Midlands Weekly Economic Impact Monitor – 23rd July 2021

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This week England has opened up, lifting most of the restrictions in place to date. This has been met with mixed reviews, especially as Covid-19 cases are rising. It remains to be seen what impact opening up has overall and how public perceptions and behaviour unfold over the coming weeks.

  • The UK has seen a resurgence in infection rates, and the daily new cases per million confirmed in the UK is now the highest out of comparator European countries. This comes as vaccination rates in England fall and social distancing rules are relaxed, including the re-opening of pubs; which are seeing increasing numbers of visitors. Infection rates are expected to increase further as England scraps legally mandated socially distancing measures. The Office for National Statistics (ONS) estimates that 577,700 people within the community population in England have Covid-19, equating to around 1 in 95 people.
  • As England scraps nearly all of its non-pharmaceutical interventions, including legally mandated mask-wearing and social distancing measures, more than half of a million people in England have been ‘pinged’ by NHS test and trace in a week. This is the highest figure recorded and is expected to get higher.
  • The ‘pingdemic’ is causing substantial disruption in the West Midlands. In Solihull, bin collections have been cancelled. West Midlands Trains has issued a warning that trains could be cancelled at short notice following the number of staff having to isolate ‘quadrupling’ in recent weeks.
  • Prof Alan McNally from the University of Birmingham has highlighted the lifting of restrictions will put a strain on testing infrastructure and that it is not able to cope. In the most recent weeks, 63% of in-person tests were received within 24 hours, compared to nearly 77% (76.9%) in the previous week.
  • The response to opening up has been mixed. Independent Sage has called for a long-term strategy for pandemic control and evidence-based information on how to protect the population. As well as keeping preventative measures such as masks, and giving local authorities the ability to extend test and trace. The BMJ has published a letter to the Lancet by a group of 122 scientists and doctors branding the opening up as dangerous and premature.
  • Internationally, there is substantial unlocking following successful vaccine rollout in many major economies. There has been substantial economic growth, but the success of the vaccines has not yet been able to stop the infection spread. This means investment strategists are considering a new bearish scenario: that the global economy has already hit its peak in growth.
  • Several major European countries are now experiencing a sharp rise in infections. Spain, Portugal, Greece, Cyprus, and the Netherlands are amongst those with the largest infection growth rates.
  • Analysis from the Institute for Fiscal Studies (IFS) suggests an improvement in the near-term economic outlook is likely. Under Citi’s latest forecast, they expect higher growth (and consequently higher tax revenues) to reduce borrowing this year (2021−22) by £30 billion, compared with the official forecast at the Budget in March 2021. Under Citi’s forecast, the recovery is faster, but not more complete, due to permanent economic damage done by the pandemic. By the middle of the decade, the cash size of the economy is expected by Citi to be 3% smaller than official pre-COVID forecasts. In the medium term, this would leave no headroom against the Chancellor’s stated target of the current budget balance. The government’s existing spending plans imply cuts to some departments and make no allowance for additional virus-related spending.
  • Discussions about tighter monetary policy to bring inflation under control, coupled with the growth of the Delta variant, is fuelling a growing sense of worry that financial markets have become too optimistic, which resulted in the S&P 500 falling the most since May on Monday.
  • In London, the FTSE 100 fell 163.70 points, or 2.3%, to a three-month low of 6,844.39. This was mainly fuelled by sharp declines in travel and leisure stocks, putting pressure on the UK’s domestic stock market.
  • The BBC highlights record government borrowing was at £8.7bn in repaying interest on debt last month. This is linked to huge inflation on government index-linked bonds.
  • The Institute for Public Policy think tank has recently launched a paper on how to achieve the green transition through fairness and opportunity. The report is optimistic, with participating citizens’ juries showing that people believe that if all parts of society work together, then not only can the climate and nature crises be tackled, but actions to address them could create jobs, improve people’s everyday lives, and improve health and wellbeing.
  • In 2019, the total number of flights from, to and within the UK ranged from approximately 5,000 per day in quieter months to over 6,500 per day in the peak holiday season. After the Foreign, Commonwealth & Development Office (FCO) advised against all non-essential international travel from March 2020, the number of flights fell to a low of around 500 per day at the start of April, approximately 10% of what they were in the equivalent period of 2019. By July 2021, the seven-day average number of daily flights was 2,307. This is an increase of 9% on the previous week when the equivalent figure was 2,126.
Business and trade
  • British goods exports to the European Union rose to their highest since October 2019 in May 2021, official data showed, reversing a slump at the start of 2021 when Britain exited the bloc’s single market and customs union. But overall trade with the EU has lagged behind growth in sales to the rest of the world, and business groups said they still faced extra red tape dealing with European customers and suppliers as a result of Brexit.
  • Container shipping rates from Asia to the U.S. and Europe have continued their upward trajectory and reached record levels over the past week.
  • Make UK has released a new report on ‘Trade and Cooperation with the EU: Six months on’: 96% of companies have faced challenges since the start of the year with the new trading environment. Nearly half (47%) had difficulty with customs processes initially. This has eased as companies’ understanding of the new rules improved. However, over a third (36%) – mainly small and medium-sized companies – are still struggling with the new customs procedures and paperwork; More than a quarter (29%) say demonstrating the origin of their products is a challenge. Business travel remains almost completely untested as international travel beings to reopen for business bringing with it a critical risk for companies who still do not understand the business travel rules for the different EU member states. 86% of manufacturers want the Government to work with the EU to ease the difficulties around export processes and customs formalities. Regulation key to manufacturers is now solely in the control of UK legislators. The UK Government must decide how this sovereignty is used to benefit manufacturers in the UK; the majority of manufacturers favour cooperation with the EU.
  • 7% of trading businesses in the West Midlands reported profits had decreased by at least 20%. However, 42.9% of trading businesses reported that profits had stayed the same and approximately 11.5% reported their profits had increased by at least 20%.
  • 0% of responding West Midlands businesses reported they were aware that most CE marked products need to be United Kingdom Conformity Assessed (UKCA) marked from 1st January 2022, although 5.5% were not aware.
  • 9% of responding West Midlands businesses reported that prices increased, 42.6% reported that prices did not change any more than normal. 8.3% reported some prices increased and some prices decreased and less than 1% reported prices decreased more than normal.
  • The West Midlands Business Activity Index decreased marginally from 65.5 in May to 64.0 in June but highlighted the third-quickest rate of expansion since the series started in January 1997. Local companies linked growth to a pick-up in sales, strengthening demand conditions and businesses reopening. Out of the twelve UK regions, the West Midlands region was the fourth highest for the Business Activity Index.
  • The West Midlands Future Activity Index registered at 77.1 as there was hope that the vaccination programme will control the spread of infections allowing restrictions to be uplifted and a recovery in demand.
  • A new £8.5 million centre, designed to promote innovation in waste, energy, and low carbon vehicle systems has been officially opened at Tyseley Energy Park (TEP). The Birmingham Energy Innovation Centre (BEIC) is part of an overall programme of more than £20 million invested to deliver energy innovation activities.
  • A £1 billion industrial scheme in the West Midlands has a new team leading the project following a land deal. Real estate investor and asset manager Oxford Properties and specialist developer Logistics Capital Partners have formed a new joint venture to acquire the 734-acre site west of junction 12 of the M6, near Four Ashes in Staffordshire (the planned ‘West Midlands Exchange’ scheme).
  • Ellandi has revealed plans for a more than £50m programme of investment to transform Merry Hill shopping centre in Brierley Hill.
  • A US-based printing specialist firm is set to open a new £2.6million site in Wo Printful will create up to 150 jobs.
Covid 19 impacts
  • Current issues reflect a still uncertain business environment, with a potential “perfect storm” of Covid-related difficulties hitting later this year: phasing out of government support; issues relating to the end of restrictions; and business and consumer confidence.
  • A common issue recently is that skills and staffing seem to be key barriers to growth for businesses, with the candidate market of available people being scarce. This is particularly so within hospitality and transportation – where many employed EU nationals and have been furloughed and gone back home to start working in their home countries whilst still getting their 80% wages. Which has allowed them to start up again back home. In these circumstances, it is expected that they are not coming back to the UK once their furlough payments end.
  • A report from the British Academy outlines the evidence on societal impacts of Covid-19. These include increased importance of local communities; low and unstable levels of trust in governance; widening geographic inequalities; exacerbated structural inequalities; worsened health outcomes and growing health inequalities; greater awareness of the importance of mental health; pressure on revenue streams across the economy; rising unemployment and changing labour markets; and renewed awareness of education and skills.
  • A PWC report has suggested that the switch to online shopping is likely to stay after the pandemic and concludes that the pandemic is resulting in a “historic and dramatic shift in consumer behaviour”.
  • There were 195,715 claimants in the WMCA (3 LEP) area in June 2021. Since May 2021 there has been a -3.1% (-6,315) decrease smaller than the UK decrease of -5.6%. Compared to the same month in 2020, claimants decreased by -4.2% (-8,650) while the UK decreased by -10.2%. When compared to pre-pandemic figures (March 2020), the proportion of claimants increased by 66.4% (+78,125), with the UK increasing by 83.3% over the same period.
  • There were 38,055 youth claimants in the WMCA (3 LEP) area in June 2021. Since May 2021, there was a decrease of -4.1% (-1,635), the UK decreased by -6.5%. Compared to the same month in 2020, youth claimants decreased by -9.3% (-3,880) while the UK decreased by -16.4%. When compared to pre-pandemic levels (March 2020), the number of youth claimants has increased by 66.7% (+15,220), with the UK increasing by 78.8% over the same period.
  • Between the 2nd and 9th July 2021, the West Midlands region online job adverts decreased by 7.3 percentage points. Although, on the 9th July 2021, total online job adverts were at 145.9% of their average level in February 2020.
  • According to Springboard, overall retail footfall in the week to 10th July 2021 was at 74% of its level in the equivalent week of 2019. In the same week, footfall at retail parks was at 96% of its level equivalent week in 2019, whereas it was 69% for shopping centres and 67% for high streets. Footfall was strongest in Northern Ireland (90%), the East of England (79%) and the West Midlands (78%).

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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