This week ONS released the latest GVA (for 2018-2019): the UK average was 3.5% GVA growth. WMCA GVA grew by 1.99% to £106.7bn in 2019, which is lower than expected for that year by many forecasters (Oxford Economics had forecast £110.8bn and are currently revising their forecasts). The Black Country grew by 1.29% to £22.3bn (2nd lowest growth of all LEPs). Coventry and Warwickshire saw growth of 1.24% to £29.7bn (lowest growth of all LEPs) and Greater Birmingham and Solihull grew by 2.69% to £54.7bn. West Midlands (WM) had the slowest growth of all regions at 2.3%.
Upside News
- UN World Economic Situation and Prospects (WESP) mid-2021 report showed that following a sharp contraction of 3.6 per cent in 2020, the global economy is now projected to expand by 5.4 per cent in 2021, reflecting an upward revision from the UN forecasts released in January. Global merchandise trade has already surpassed pre-pandemic levels, buoyed by strong demand for electrical and electronic equipment, personal protective equipment, and other manufactured goods.
- It was announced by RSM this week that the number of new tech companies being set up in the UK had risen 13%.
- The economic health of the manufacturing sector, as implied by manufacturing PMI, showed an increasing trend in major economies in April 2021. The PMI was revised slightly lower to 60.5 in April of 2021; the reading indicated a robust improvement in the health of the US manufacturing sector and the steepest rise since data collection began in May 2007. Eurozone Manufacturing PMI stood at 62.9 in April 2021, signalling the fastest pace of expansion in the manufacturing sector since data collection began in June 1997
- The West Midlands Business Activity Index (PMI) increased from 60.7 in March 2021 to 65.9 in April 2021, which is the sharpest increase of business activity since records began in Jan 1997. The latest growth reported was associated with the ongoing easing of COVID-19 restrictions, boosting the demand for goods and services. The overall UK Business Activity Index increased from 56.4 in March 2021 to 60.7 in April 2021. Out of the twelve UK regions, the WM region was the highest for the Business Activity Index in April 2021. The WM Future Activity Index increased from 80.2 in March 2021 to 80.8 in April 2021 – reaching the highest level since records began in mid-2012. The positive expectations for the upcoming twelve months are linked to the ongoing easing of COVID-19 restrictions, new work in the pipeline and diversification.
- The CBI reported this week that the UK Manufacturing output grew at the fastest rate since December 2018 – the first material growth reported in almost two years.
- More civil service jobs are coming to Birmingham after the Department for Business, Energy and Industrial Strategy (BEIS) announced it was creating 175 roles in the city.
- As children return to school across the region there has been a sharp rise in demand for family homes, according to Zoopla. The pandemic-led search for space means demand has also spiked for four and five-bed homes in some areas, with Sandwell and Dudley seeing notable rises. Other areas such as Wolverhampton and Walsall are also enjoying a rise in demand for family homes, up more than 10 per cent since March in both areas.
- Severn Trent has received a regulatory endorsement to invest £565m in a Green Recovery programme to support the UK’s economic bounce back and create 2,500 jobs in the Midlands.
- More than £75 million of funding to revitalise high streets and help them bounce back from the pandemic has been confirmed for the West Midlands. Wolverhampton will receive £15.7 million, Stafford £14.3 million and Walsall £11.4 million. A further £10 million will be provided for Leamington Spa, £11 million for Newcastle-under-Lyme and £13.3m for Nuneaton.
- Luxury car manufacturer Jaguar Land Rover has reported strong underlying profitability and cash flow for the three months to March 31, 2021, its fourth-quarter period – and solid results for the full year.
Downside News
- GKN Automotive in Chester Road will shut in 2022 with the loss of 519 roles after an alternative plan by a team of union officers, senior management at the plant, proposed earlier this month was turned down.
- Liberty Steel is restructuring and will sell seven UK plants employing 1,500 people. They include Liberty Steel’s largest UK site, its aerospace and special alloys business near Sheffield, where 762 currently work. However, parent company GFG Alliance has begun the sale processes for Liberty Aluminium Technologies, and Liberty Pressing Solutions, which together employ 475 people – in Coventry, Kidderminster and Witham, in Essex.
- An IPPR report found that the poverty rate among working households in the UK was at its highest rate since 1996. There had been an increase in relative poverty in working households from 13% in 1996 to 17.4% in March 2020. Due to a combination of low wage rises and spiralling costs of living, such as soaring property prices, private sector rent hikes and crippling child care costs.
- The UK is one of the most prosperous nations in the world, ranked 13th in the Legatum Prosperity IndexTM. Its prosperity increased during the first half of the 2010s but since then has been stagnating. Overall the WMCA area is the second bottom above GMCA.
- A third of small businesses are still unaware of loan repayment options, even though the first Bounce Back Loan repayments are due to start in June for many borrowers. Around a third of businesses plan to make the standard repayments. Just 5% intend to take the full six-month repayment holiday available.
Labour Market Analysis by City-REDI
- There are clear signs of recovery in the regional economy. Using HMRC Pay As You Earn data for the West Midlands NUTS 2 region (i.e. the seven metropolitan districts) shows a steady and sustained rise in payrolled employees from 2015 until the start of 2019. The increase in payrolled employees since November 2020 has been more marked in the West Midlands than elsewhere. Young people saw the greatest reductions in employment and have also been the slowest to see a recovery. Variations in experience by sector go some way to explaining these differences by age.
- Labour Force Survey data also points in the direction of recovery: quarterly improvements in the unemployment rate are apparent. At 21.3% in the quarter ending March 2021, the economic inactivity rate is slightly higher than at the start of the Covid-19 pandemic. It is likely that various factors are at play here, including increases in economically inactive students.
- The overall picture would have been worse without furlough. What will happen when furlough ends is unclear. Nevertheless, it is clear that the challenges ahead are pronounced for young people. In general, those young people with higher qualifications fare better than those in skills poverty. Graduates facing difficulties in finding work can ‘bump down’ in the labour market, so exacerbating problems for those who are least qualified and who already face the biggest obstacles in securing good quality work. Young people will increasingly bear the brunt of the unemployment crisis.
- The proportion of people claiming unemployment-related benefits rose three times faster in areas with higher pre-pandemic claimant rates than in areas with the lowest rates pre-pandemic rates. This highlights a continuing role for place-based employment support programmes, such as Connecting Communities, to help people facing a range of challenges to work in local areas of persistent disadvantage.
- Further analysis by City-REDI and The Work Foundation looks at the future of employment, and this is likely to depend on the success of Government efforts to contain and manage the spread of the virus and new variants that might emerge over upcoming months. Other longer-term trends will also continue to shape the labour market, creating new challenges as well as opportunities. Brexit, automation, the shift to a net-zero carbon economy, an ageing population, the digitisation of services etc. will all shape the kinds, number and location of jobs into the future. Some sectors are likely to be harder hit by automation than others and job growth could become more geographically concentrated over the next ten years.
- Just focusing on creating more jobs will not be enough. Unless concerns regarding the quality and type of employment are addressed, insecure employment is likely to rise further. The number of insecure, low-paid jobs increased following the financial crisis and there is evidence a similar trend is occurring again.
Covid Impacts
- The latest ICAEW national Business Confidence monitor has found that Business Confidence has reached record levels, as the success of the UK vaccine programme and declining infection rates increase hopes that large parts of the economy will reopen later this year.
- However, whilst the economy is beginning to improve and we are seeing greater numbers of people returning to work after lockdowns, there is still a significant proportion of the workforce that is still furloughed as of March 2021 13% of the economically active population was still furloughed.
- MakeUK research highlights that £1,039 million in apprenticeship levy funds have expired in the 9 months from May 2020 without being spent by businesses. These expired funds – which cannot now be used – are up 22% on last year from £847 million. Targeted approach with the flexibility of spending needed to create and support high-value apprenticeships in high growth sectors like manufacturing.
- MakeUK research highlights that half of manufacturers have been the victim of cyber-crime in the last year. 63% faced losses of up to £5,000 with almost a quarter (22%) revealing a cost to their business of between £5,000 and £25,000. 50% of businesses say cybersecurity has become a higher priority since the start of the pandemic and the move to remote working.
This is the final week we are asking all readers to participate in a survey. Please follow the link to the survey here, it should only take 5 minutes. West Midlands Monitor Survey
Download and view a copy of the West Midlands Weekly 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 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.
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.