Global news has been dominated by the departure of allied forces from Afghanistan. Nationally, the number of daily new Covid-19 cases per million people confirmed in the UK remains easily the highest out of the selected European countries and is at a level slightly above that recorded for the USA. Economically disruption to supply chains continues, with factory activity now shrinking in Southeast Asia and a shortage of parts impacting on manufacturing in Europe. This week we highlight reports on prospects for developing the space sector in the West Midlands by leveraging latent competitive advantages in related areas of advanced manufacturing and also report on funding for the advanced ceramics sector in the Midlands (on the back of Strength in Places Funding success). We also look forward over the medium- and longer-term at the future of work and training and at adapting to future mobilities.
- Global factory activity lost momentum in August as the ongoing pandemic has disrupted supply chains. Southeast Asia was hit particularly hard with factory activity shrinking in Vietnam, Indonesia and Malaysia. China’s factory activity also slipped into contraction for the first time in a year and a half. The issues in Asia are affecting economies worldwide, with manufacturing companies reporting shortages of materials ranging from memory chips basics such as wooden pallets.
- 5 billion doses of the vaccine have been administered globally as of August 23rd, but only 15.02 million of those doses were in low-income countries, so delaying their economic convergence towards advanced economies and fuelling poverty. The Economist Economic Intelligence Unit notes that delays in inoculating the world against Covid-19 could cost the global economy US$2.3trn.
- US consumer confidence has dropped to a six-month low, in the light of concerns over the delta variant. The University of Michigan’s consumer index, plunged to its lowest level since 2011, as Americans grew more concerned about the economy’s prospects, inflation and the recent surge in Covid cases.
- President Biden has upheld the deal stuck between the Taliban and former President Trump, to fully withdraw forces from the region. There is uncertainty about the future of Afghanistan – especially with regard to the treatment of and prospects for women.
- UK business confidence has hit a 4-year high, due to the growing optimism about the post-Covid recovery, but companies have highlighted serious concerns surrounding labour shortages – blamed on both Covid and post-Brexit immigration policies, and associated pressures on wages. The Lloyd’s business barometer showed overall confidence rose by 6 points to 36% in August, the highest level since April 2017.
- The IHS Markit / CIPS UK Manufacturing PMI found that whilst the UK economy was still growing the rate at which it was growing drastically slowed. The slowdown is attributed to severe disruptions to supply chains and raw material shortages, with factors such as port capacity issues, international shipping delays, the re-imposition of Covid restrictions at key points in global supply chains and ongoing post-Brexit issues all playing a role. The impact of these supply issues is also feeding through to rapid price inflation.
- This month an eco-friendlier petrol (E10) is coming to British filling stations. According to the Department of Transport introducing E10 could cut carbon by 750,000 tonnes a year, the equivalent of taking 350,000 cars if the road.
- The Resolution Foundation in their housing outlook found that between June 2020 and June 2021 house prices rose by 13.2%.
- This week the first new major music venue and club in central Birmingham for over a decade is set to open. Forum Birmingham is a 3,500 capacity newly-upgraded complex featuring a custom-made sound.
- West Midlands based Acacia Training has committed to supporting up to 1,000 people towards a new job by the end of the year after securing funding worth almost £2.5m from three employability schemes.
- WCG, formerly Warwickshire College Group, has been granted funding from the T-level Capital Fund. The £1.2m in funding that WCG has received will fund the expansion of its range of technical qualifications.
- A number of housing developments have been announced around the WMCA over the last few weeks, with developments including brownfield regeneration schemes will take place in Coventry, Nuneaton and Wolverhampton.
- Nationally, between the 13th and 20th August 2021 total online job adverts increased by 0.2 percentage points. On the 20th August 2021, total online job adverts were at 128.3% of their average level in February 2020. Vacancies for transport/logistics/warehouse opportunities increased by 14.8 percentage points over the previous week.
- Between the 13th and 20th August 2021, the West Midlands region online job adverts decreased by 0.7 percentage points. On the 20th August 2021, total online job adverts for the West Midlands were at 146.5% of their average level in February 2020.
- According to Springboard, in the week to 21st August 2021, the volume of overall retail footfall in the UK decreased by 2% from the previous week (week to 14th August 2021). This is the first week to see a decrease in footfall across the UK since the week to 19th June 2021.
- The final results from Wave 37 of the Business Insights and Conditions Survey (BICS) based on the 5,107 businesses surveyed across the West Midlands and excluding ‘not sure’ responses show that 28.8% of trading businesses reported their turnover had decreased by at least 20% in the last two weeks, 46% of trading businesses reported that their turnover was unaffected and 14.8% reported their turnover had increased by at least 20%.
- Regarding international trading, excluding ‘not sure’ responses, 24.9% of exporting businesses in the West Midlands reported their businesses were still exporting but less than normal in the last two weeks compared with normal expectations for the time of year. Of those businesses who continued to trade and import, 17.1% in the West Midlands were importing less than normal. 61% of West Midlands businesses who were exporting reported that they had not been affected and 67.9% reported that importing had not been affected.
- Businesses were asked if they had made changes to supply chains due to the end of the EU transition period. 7.7% of responding West Midlands businesses reported they had. Where businesses stated they had made changes, the highest response at 54.8% of responding West Midlands businesses was that they were using more UK suppliers.
- 4% of responding West Midlands businesses reported extra costs due to additional transportation costs.
- In the West Midlands, 72.8% of responding businesses had high confidence in surviving over the next three months. 19.6% had moderate confidence of survival, 1.5% had low confidence and 5.9% were not sure.
- 0% of responding West Midlands businesses expect to make redundancies in the next three months. 68.8% of West Midlands businesses reported they did not expect redundancies over the next three months. The remaining 26.2% were not sure.
- Currently, there is regional positivity within a period of sustained uncertainty, with external issues surrounding Covid and Brexit causing businesses many issues. In particular price rises and product shortages remain a cause for concern, particularly for the construction and manufacturing sectors. Many firms are still facing financial hardship and will require additional support from the government as they look to get their operations off the ground after nearly 16 months of forced closure.
- The number of firms reporting hiring challenges has increased significantly in recent weeks, reflecting a skills and jobs crisis. This has multiple facets, including a reduction in candidate availability, with recruiters facing a large increase in counteroffers from existing employers to retain staff, and/or successful candidates taking up positions with competitors. This has led to a general increase in hourly rates, salaries and the introduction of attractive up-front financial incentives to candidates. This staffing crisis risks inward investment opportunities. Businesses offering lower-paid, physical, undesirable and jobs with unsociable hours are struggling the most to recruit staff.
- The problem of labour shortages problem is, according to many businesses’ experiences, caused and exacerbated by the UK’s exit from the EU.
- A new study exploring the impact of Brexit on business – ‘Post Brexit Transition Period – An impact analysis on businesses based in the West Midlands Combined Authority area’ – reveals that 47% of local businesses have found it more difficult to import goods from the EU since 1st January; 34% of local businesses have found it more difficult exporting goods to the EU since 1st January; 40% of respondents had experienced increased costs and 28% have experienced border delays as a result of the UK’s departure from the EU.
Medium-term sectoral opportunities
- The space sector is one of the UK’s fastest-growing and most promising sectors and is a key enabler of growth in other sectors. Nationally the sector employs around 42,000 people and generates an income of nearly £15 billion every year.
- Reports from a study financed via the UK Space Agency Local Space Cluster and Supply Chain Development Fund assessing and setting out the prospects for the space sector in the West Midlands have been published. Importantly, the work sets out a proposed route to increase the maturity of the West Midlands space cluster, further developing latent competitive advantages in related areas of advanced manufacturing, especially aerospace, automotive, and rail.
- The West Midlands region combines space application capabilities with important end-user sectors for space data/services (ranging from autonomous vehicles to modern services, life sciences and agriculture), creating a powerful value-chain ecosystem for innovation, business growth, and end-user benefit.
- The Midlands has an opportunity to be a world leader in advanced ceramics following the success of the Midlands Industrial Ceramics Group (MICG) in securing funding of £18.27m from the Strength in Places Fund (SIPF) which combined with partner investment and the creation of new business opportunities, makes for a £42.1 million project. Advanced ceramics (also known as technical ceramics) are embedded in numerous high-performing products owing to their high strength, high operating temperatures, wear-resistance and tailorable properties.
- The advanced ceramics sector growing rapidly across the world. Grandview Research estimates that the advanced ceramics sector achieved annual global revenues of £42 billion in 2015 and projected the sector would reach £143 billion by 2025.
- The Advanced Ceramics Sector Profile prepared to support the funding bid shows that no other region has an equivalent mass of advanced ceramics specialist suppliers, end-users, and researchers. Producers of advanced ceramics form an integral part of the Midlands manufacturing supply chain, as well as exporting specialist products across the world.
Looking ahead in the medium-/longer-term – work and training, and adapting to future mobilities
- Increasing technological innovation and the growing adoption of new technologies are changing the types of jobs available and the range of skills required by employers. Reskilling and upskilling the workforce is urgent to avoid significant skills gaps and mismatches within the next decade. At the same time, participation in training is declining.
- By investing in training, firms can build on existing talent and prepare themselves for the changing labour market. Developing training to improve the quality of managers is important if firms are to maximise the benefits of increased technological capability. A broader institutional culture that champions training, led from the top of organisations, is essential to this.
- Moreover, the impact of the Covid-19 pandemic in accelerating the more widespread adoption of remote and hybrid working requires managers to develop new skills to best manage workers who spend more of their time outside traditional office settings.
- The shift to remote and hybrid working also poses challenges of adapting to future mobility patterns. Post-Covid there needs to be greater emphasis on an urban model that prioritises walking and cycling and other forms of micro mobility, alongside encouragement of the use of public transport and taking advantage of emerging transport innovations to reduce the long-term impact of CO2 and other vehicle pollutants. This is necessary not only as a short-term response but as a long-term national vision.
- Adapting to future mobilities is about improving health and well-being, urban design and provision of local services in line with changes in values and behaviour, as well as about investment in infrastructure.
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.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.