West Midlands Weekly Economic Impact Monitor – 26th February 2021

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This week the Prime Minister announced a roadmap out of the Covid-19 lockdown which has been welcomed broadly by businesses. It provides some degree of clarity. However, in the immediate term issues persist – particularly for industries unable to open as normal. One local Growth Hub has received a months’ worth of calls, webchats, emails and web traffic in the past week. But sentiment is improving generally with greater optimism than in previous months.

  • COVID-19 infections have been falling sharply since mid-January, from a peak of around 740,000 per day to under 370,000 by 17th February. The improvement has been widespread, but the sharpest falls have been seen in advanced economies.
  • In terms of the vaccine roll-out Israel, the UAE, UK, and the US are in the lead. The Midlands has successfully continued to provide the most doses of the first jab, however, the region has dropped to the 3rd highest provider of the second dose out of the English regions.
  • The current fiscal debate in the US on Biden’s fiscal expansion is not so much concerned with the principle of expansion – rather it is the scale that is creating most discussion. If economies were at capacity fiscal policy could create bottlenecks and inflation but if the economy was underperforming, due to technological change and unemployment, increased investment could level up and boost the economy.
  • The tone of relationships between the US and China has changed somewhat since the inauguration, with the administration moving away from the language of decoupling to small yard, high fence. Meaning that the US will move towards protecting key industries and assets and allowing other trade and capital to grow.
  • The flash UK PMIs indicate that the services sector is starting to stabilize after having contracted. Although the manufacturing sector is growing, the disruption of supply chains is holding back growth. Such disruption is related both to the pandemic and to Brexit. Services PMI increased from 39.5 in January to 49.7 in February, a level indicating a return to no change after a sharp decline in January. Stabilisation in services is being driven by the professional services sector, whilst the manufacturing sector grew at a healthy pace, with a PMI of 54.9 in February.
  • Jaguar Land Rover (JLR) is to axe 2,000 management jobs over the next financial year. The job cuts will be across roles such as managers, designers, technicians and admin staff and John Lewis is set to launch a fresh round of store closures as the turmoil on the high street worsens.
  • Codemasters, one of the oldest names in Britain’s video game sector, has been acquired by industry giant Electronic Arts (EA) with the aim of establishing a new global powerhouse in racing video games.
  • Coventry City Council will enter a Joint Venture partnership with Coventry Airport Ltd to develop proposals for a Gigafactory at Coventry Airport. The public-private partnership represents a game-changing initiative in the UK’s pursuit of a Gigafactory and further strengthens the West Midlands’ attraction for battery suppliers.
  • Ambitious new plans for a £24 million bus and Metro interchange in Dudley have been given the green light by the WMCA.
  • The BBC reported on the roadmap for lifting lockdown as it was announced on Monday, after the first stage in March there will be a further lifting of the rules providing certain conditions are met- such as the vaccine rollout going to plan.
  • The Scale-up Institute investigated the scaling-up of businesses in the West Midlands. It found that the support in the area was focused on upscaling by developing cross-sector models of support that are built on sharing and learning from networks. The report references the Creative Scale Up programme which is identified as good practice. Data on the local authorities in the area show they have grown considerably in employment terms from a low base but not as much in turnover.
  • This week it has been announced that the Ministry of Housing, Communities and Local Government is creating a second headquarters in Wolverhampton, with at least 500 roles set to be based across the West Midlands by 2025.
  • Policy Exchange’s new paper on creating an electric vehicle charging infrastructure recommends the funding and creation of Chargepoint Teams within local authorities and supporting the rollout in underserviced areas.
Social impacts
  • The ‘Long Covid in the Labour market’ report from the Resolution Foundation highlights the rollout of the vaccine as an indicator that we can be more confident that this will be a recovery that lasts. The January 2021 lockdown does not appear to have led to a very significant additional deterioration of conditions in the labour market, but it remains in a fragile position. The Job Retention Scheme (JRS) was doing its job in this period and essentially keeping the labour market frozen. A less positive trend as the year ended was redundancies, which rose sharply in the autumn. The length of the crisis means we should pay attention to the depth of the impact experienced by some individuals. The number of workers who in January 2021 had been on full furlough for at least six months (475,000) is nearly as large as the number of people in January who are estimated to have been unemployed for at least six months (689,000). The self-employed have continued to face a big hit and gaps in support remain. With job losses on the horizon, one-in-seven workers are already looking for a new job. One-in-twelve workers plan to move sectors after the crisis. Policy must continue to support firms and workers beyond April 2021. Overall, a long illness leaves the patient needing greater care and stronger medicine.
  • The West Midlands region had 93,500 employments furloughed on the 31st October 2020. Compared to the 30th September 2020, this has decreased by 19.6% (-46,300) for the West Midlands region, while the UK decreased by 15.6%. Compared to 31st July 2020, the West Midlands region has decreased by 52.0% (-220,300 employment furloughed), while the UK decreased by 55.5%.
  • The West Midlands region had 2.8m workforce jobs in September 2020, following the trend across all the UK regions when compared to September 2019, the West Midlands decreased by 163,762 workforce jobs. The West Midlands region had 92,502 fewer workforce jobs when compared to the last quarter.
  • Sector furloughs peaked at different points in the year, but have all dropped off to significantly lower levels by October 2020. Exceptions are food and retail (remaining at 50% of peak levels), Arts and entertainment and Accommodation and Food (remaining at a third of the peak).
  • It has been reported this week that Birmingham has suffered a jobs meltdown with nearly one in seven looking for employment within the city. Unfortunately, the city also continues to have the worst levels of joblessness in the UK, with five of the ten constituencies within with the highest jobless rates across the entire UK being in Birmingham.
  • Lockdown has put pressure on banks’ bereavement services, making it harder for grieving families to settle the finances of loved ones who have died.
  • The Competition and Markets Authority (CMA) has announced it would like regulatory changes to deal with the market dominance that Google and Facebook hold within the UK. It stated that the two tech giants have a duopoly within the UK when it comes to digital advertising, which can often stifle competition.
  • Teach First reports that over a third of parents have children who have no device dedicated to home learning during the pandemic.
EU Exit impacts
  • A multimillion-pound fund to help Small and Medium Enterprises (SMEs) adapt to new trading rules with the EU has been welcomed by business leaders and businesses: £20m SME Brexit Support Fund to support businesses that trade exclusively with the EU in adjusting to new customs, rules of origin and VAT rules.
  • A number of businesses still report that they are not affected by our exit from the EU, so it depends on sector and company operations/trading status. Some businesses are now feeling the impact of a lack of preparation prior to the deal being agreed upon. They are now behind and playing catch up, with the Department for Internation Trade playing a big part in dealing with repeat queries, particularly with commodity codes and paperwork support for export/import.
  • Bloomberg provided a rundown of what the B5, the top five industry organisations in the UK, are asking for. The British Chamber of Commerce reports that half of exporters are facing difficulties adjusting to the new Brexit rules and that almost a third of business to customer businesses will run out of cash in the next three months.
  • The Purchasing Managers’ Index (PMI) also noted British manufacturers reported severe supply chain problems due to “international shipping delays, strong worldwide demand for raw materials, and Brexit-related trade frictions.” That said, businesses “remained resolute that things can only get better.” The sub-index for future expectations was up strongly, fuelled by confidence in the vaccine.
  • Current issues facing SMEs: Current grant funding is not covering the overheads for larger SMEs or those with high-cost premises. There are significant gaps in support for wider supply chain businesses and directors of limited companies. The complexity of current grant schemes is leading to significant issues for businesses and local authorities administrating them. A return to single household groups would not be viable for hospitality businesses. Sector-specific support will be required to match the Government’s “road map”– there are significant concerns for tourism & live events as they will be the last to unlock. There are substantial concerns regarding unsustainable debt and access to finance for growth.
  • An employer survey was undertaken by the Construction Industry Training Board (CITB) revealed that 72% of employers thought that the end of free movement and introduction of the Points-Based Immigration System (PBIS) would impact the construction sector’s ability to secure a skilled workforce. Over a quarter of employers and half of recruitment agencies thought the impact would be serious. 10.2% of the UK’s construction workers were from outside the UK in 2019.
  • Budget asks include:
    • The extension and simplification of grant support
    • Extend business rates relief & VAT reduction
    • Extend Coronavirus Job Retention Scheme and remove National Insurance and Pension contributions
    • Extending the terms of the Coronavirus Business Interruption Loan Scheme (CBILS) from 6 to 10 years
    • Develop an exit strategy for high debt burdens and support recapitalisation, which could include innovative instruments for packaging and restructuring CBILS and Bounce Back Loan Scheme (BBLS) debt
    • Introduce financial support for landlords and tenants to deal with the build-up of rent arrears
    • Bring forward sector-specific support for the hardest-hit industries such as the travel industry and events industry as well as non-essential retail, hospitality and accommodation.

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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