West Midlands Weekly Economic Impact Monitor – 25th September 2020

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This week, rising infection rates have led to increased restrictions across the UK, bringing most places into line and increasing some restrictions in locked-down areas. The Prime Minister hinted at this being a medium-term (6 months) approach to bring the virus under control.

Key issues
  • Regional representative organisations say there are still lots of issues being raised by businesses about lockdowns and support. Kickstart is a mixed picture, especially Small and Medium-sized Enterprises (SMEs) participation due to the minimum numbers of 30. There are increased asks for targeted support for furlough especially now further restrictions are in place. New restrictions in Birmingham, Solihull and Sandwell were already affecting consumer spend, and small retailers now seeing a drop again with increased risk of infection. As it’s the end of furlough, the “light at end of the tunnel has gone out”. Extending support is therefore key, many businesses had no support and are looking at another 6 months without support. The closed sectors are still being hit hardest.
  • There is now a rise in redundancies being notified, especially accommodation, food, transport nationally and particularly manufacturing in the West Midlands. With Brexit on the horizon, current constraints are leaving businesses unable to prepare, but Brexit is now getting back on business the agenda, but businesses don’t know what to prepare for.
  • Business can’t stockpile this time round as there is no cash available. The issue is that the one size fits all doesn’t work as very different issues emerge across businesses and there is a lack of capacity to support. For example, there are huge impacts on trading standards and environmental health in terms of Brexit, including the recruitment of people to do assessments.
  • The latest results from Make UK indicate that manufacturers are still faring poorly in the current economic climate, but that performance in comparison to last quarter is greatly improved. Still, the numbers on output, orders, employment and investment remain amongst the worst results observed on record.
  • As the UK enters a period of recovery, the latest survey reported a better than predicted output balance of -36%. Promisingly, UK manufacturers forecast the trend towards growth to continue over the next quarter. UK orders have been negative since the aftermath of uncertainty from multiple EU exit deadlines
  • The investment intentions balance also worsened to -32%. As the UK endeavours to reinvigorate itself on the global stage it is concerning that manufacturers either fear or are unable to invest in new technologies.
  • There were 173,200 of the population eligible for the Self-Employment Income Support Scheme (SEISS). There were 107,500 claims made to the 31st August 2020, which equates to a value of £257,400,000 or on average £2,500 per claim. The take-up rate for the WMCA (3 LEP) was 62%. At a West Midlands regional level, overall, there were around 261,000 of the population eligible for the SEISS, which is a take-up rate of 60%.
  • In the year ending Q2 2020, the West Midlands regional export value was worth nearly £27.5bn, a decrease of 14.4% (-£4.6bn) when compared to the year ending Q2 2019. The UK decreased by 9.0% to reach £314.2bn.
  • In the year ending Q2 2020, the West Midlands imported nearly £31.3bn worth of goods, this has decreased by 18.0% (-£6.9bn). While the UK decreased by 12.0% to reach £433.7bn. The West Midlands has a trade deficit of £3.8bn.
  • Nationally footfall for the week starting 7th September 2020 was around 72% of the 2019 level. This is a decrease from 75% that was recorded two weeks ago. High streets, shopping centres and retail parks all experienced a decrease varying between one and three percentage points.
  • In this week’s ONS data, 97% of responding businesses were currently trading with 10% of the workforce on furlough leave. 40% of businesses are providing pay top-ups to the Coronavirus Job Retention Scheme, and 71% of the workforce are receiving top-ups to the Coronavirus Retention Scheme. 3% of businesses have temporarily paused or closed trading with 68% of the workforce on furlough leave.
  • Over 6 in 10 (62%) working adults reported they had travelled to work (either exclusively or in combination with working from home) in the past seven days, while 20% had worked exclusively at home.
Looking across sectoral risk factors together highlights:
  • Highest GVA sectors that are most exposed in terms of jobs and Brexit: Business, Professional and Financial Services Sector, Advanced Manufacturing and Retail.
  • However each factor can impact differently, furlough risk is the currently the highest risk due to the exposure to high numbers of redundancies or business risk. Therefore some sectors are already finding the current conditions extremely difficult and the estimated impact of a no-deal Brexit will compound this.
  • Culture and Sport –  76% of all jobs are exposed to potential losses, making the potential losses nearly as significant as the larger sectors.
  • The impact of coronavirus could be relatively short-lived, with a rebound, however, Brexit is a long term structural change which sectors may not recover from and our three largest sectors face significant effects
  • Other issues which may cause increased risk exposure: the high levels of self-employed/single employee LTD company where support has been limited and skills exposure, where Brexit impacts on labour markets and capacity.
ICAEW Scorecard by Oxford Economics
  • GVA and employment may fall by more than the UK average in 2020. That may be followed by a slightly faster than average recovery in 2021, but after that, the region will probably underperform the UK slightly.
  • Employment in 2021 is likely to be lower than it was pre-virus, at 2.87m compared with 2.95m in 2019.
  • The region is more manufacturing intensive than the UK average but has a smaller than average hospitality sector. Digital connectivity is, however, slightly better than average.
Wave 2 Covid-19 transport impact survey
  • Travel in the last 7 days was largely for shopping and work, a significant minority had not made a trip. As lockdown restriction eased there was an increase in social and leisure trips.
  • The car was the main way to travel for all journeys, the exception to this was amongst non-car owners, where bus and walking were most common.
  • Compared to travel before lockdown, there was a decrease in public transport use amongst all groups of respondents, the decline was even noticeable amongst non-car owners, albeit to a lesser extent.
  • Concerns about using public transport post lockdown remain. However, the proportion feeling extremely concerned declined in comparison to Wave 1. Younger people had fewer concerns about using public transport, as did those who were currently making use of it. Amongst those who had previously travelled by public transport most would only resume its use if their employer makes them go back to work or when the advice is that it is safe to use.

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 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  / 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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