West Midlands Weekly Economic Impact Monitor – 24th July 2020

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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.

In general, the economic indicators are getting worse: furlough continues, youth claimants are going up, as is the use of food banks and redundancy notifications. Some economic indicators are showing an uptick such as PMI but OBR has released forecasts that predict a 12.4% contraction and borrowing at a peacetime high.

  • The Nasdaq 100 index had its best gain in three months to close at a record high this week. The lockdown and stay-at-home order have driven a rise in the Fang bloc of mega-cap technology companies including Amazon.com Inc., while Zoom Video Communications Inc. also gained. The main beneficiary of the lockdown has been technology companies, evident in the recent gains made by such tech companies on the stock markets.
  • The UK’s Oxford COVID-19 vaccine is safe and induces an immune reaction, according to preliminary phase 1.
  • The latest round of talks on the UK’s post-Brexit relationship with the EU started this week. No progress has been made in informal meetings since last month.
  • Andy Haldane, the Bank of England’s chief economist has said that the economy has recovered half the output lost during the lockdown. He told the Treasury select committee this week that the economy had experienced a bounce-back in activity, with almost half the quarter plunge in output experienced during March and April clawed back. He maintained that the recovery is following a V shape.
  • The number of profit warnings issued by listed businesses in the West Midlands in the first half of 2020 increased by 131%. There were 30 profit warnings among West Midlands companies in the first six months of this year, which is the highest figure for two decades.
  • The emptying out of cities could be accelerating the wealth divide with those able to afford to move out, moving to towns and suburbs, utilising the flexibility of working from home more, leaving the young and poorer communities concentrated in the urban inner city.
  • The pandemic may accelerate the decline of the high street, where the number of shops could more than halve in the next two years, but this is a trend that was already in play. Highstreets which have thrived are the ones which have picked up on and maximised some of the other trends which have accelerated under COVID-19 conditions, including, personalised, ethical and local businesses and embracing online sales to diversify markets.
  • Labour markets over recent years have polarised and the impact of the virus could accelerate this divergence of knowledge workers and service workers. This suggests that cities and towns will experience uneven and unequal impacts. The IFS has explored the issue of interrelated vulnerabilities and argued they should remain at the forefront of policymaking. They conclude that the government’s approach to easing the lockdown needs to protect public health whilst enabling economic activity and minimising the real social costs of isolation, and they suggest that the balance between these goals might look very different around the country.
  • Reviewing recent research on the revival of towns pre-pandemic and the impact of COVID-19 on places reveals broad recommendations for future direction to deal with the economic, physical and mental health of residents and businesses, these include:
    • Creative and innovative leadership
    • Meaningful community engagement
    • Understanding place-unique selling points
    • Competitive, safe socialising and experience
    • Let there be light, blue and green infrastructure
    • Investment in modern age markets and an environment for independents to thrive
    • Reshape ownership and taxation models
    • Connectivity which enables high-quality interactions
    • Create a place for caring and community
  • Across the whole of the Midlands, there are 1.4m people furloughed, a higher percentage of firms report turnover decrease than England; manufacturing output is at a 30 year low with only 10% of companies operating at normal capacity; and inequalities will be exacerbated particularly for the young, low earners and women. The Purchasing Managers’ Index (PMI) is strong in contrast to previous months, the West and East Midlands both reported the highest index across all regions and higher than the national avg. of 47.7.
  • In comparison to the previous months, the Chambers survey says 48% of businesses witnessed a fall in UK revenue (with 24% citing a significant decrease) with 31% recording an uplift in domestic revenue. 57% of firms saw a drop in international revenue (with 31% suggesting it was significant) and 19% reported an increase in revenue generated overseas. 53% had also seen a decline in cash reserves (with 23% noting an uplift compared to the previous month).
  • On 20th April 40% of businesses had temporarily closed, increasing to 80% by the end of May and the proportion had reached 93% by the end of lockdown. Some 60% have seen a drop in revenue of 75% or more and another 26% have seen a drop of 50% – 75%. Half of all businesses have now re-opened. The others plan a more gradual re-opening, with the majority unable to operate viably with social distancing.
  • Latest ONS data for the West Midlands, says 90.3% of responding businesses are currently trading and have been for more than the last two weeks (UK 85.1%). 60.9% of trading businesses in the West Midlands reported their turnover had decreased by at least 20%, compared to 57.6% of businesses in the UK. However, 20.1% of trading businesses in the West Midlands reported that their turnover was unaffected (25.2% for the UK) and 11.8% reported their turnover had increased by at least 20% in the West Midlands, slightly above the UK average of 11.%. 51.5% of exporting businesses in the West Midlands, and 46.1% in the UK, reported their businesses were still exporting but less than normal. 2.6% of West Midlands businesses that have not permanently stopped trading have no cash reserves. For the UK, this figure is 3.7%.
  • 67% of adults met up with others to socialise between 8th and 12th July. Of these adults, 49% had met with one or two people, 27% met with three or four people and 23% met with more than five people. 27% of adults stated they were likely or very likely to go on holiday in the UK this summer. 27% of adults reported they would be comfortable or very comfortable to eat indoors are a restaurant while 52% reported they would be uncomfortable or very uncomfortable.
  • 27% of adults reported working exclusively at home, while for the first time 50% of adults reported they had travelled to work.

    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.

    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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