West Midlands Weekly Economic Impact Monitor – 5th June 2020

Published: Posted on

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.

Key points:

  • A recent report by NESTA has identified the West Midlands ‘business-led innovation region’ where above-average levels of business investment in R&D are not matched by public sector investment. This business-led investment is under threat within the post COVID-19 economy and there is a need for a rebalance of the public sector investment. There needs to be a supercharged approach to backing the decisions of the private sector with additional public sector funding. Recommendations include:
    • Greater transparency of decisions making
    • Regional devolution of innovation funding
    • New science and tech institutions outside the SE
    • UKRI to lead regional rebalancing
    • Strength in Places Fund developed and expanded
  • 9 out of 10 manufacturers have continued to trade during the crisis;  1 in 4 plan to make redundancies in the next 6 months; 40% believe it could take more than 12 months to return to normal trading conditions; 1 in 5 manufacturers are operating between 25% and 50% of their full capacity; Over 70% of manufacturers have seen a further decrease in orders and sales and 1 in 4 companies expect to be back to full operating levels by the start of 2021.
  • Work carried out by WM REDI highlights that there are 21 large manufacturing firms in the West Midlands automotive sector which are at high risk because they have relatively poor liquidity ratios. They employ 16k people and only 12 are eligible for Coronavirus Large Business Interruption Loan Scheme (CLBILS). Out of the 9 high-risk firms that do not qualify for the CLBILS, 6 of these also have negative profit margins. The 21 firms that do not qualify for CLBILS will rely heavily on the Coronavirus Job Retention Scheme (CJRS), which is only a temporary measure.
  • Latest West Midlands Growth Company data highlights 80% of businesses are now closed in the tourism sector. All have seen a drop in revenue of more than 50% and 60% are experiencing cash flow problems. Most businesses are worried that without additional support, they may not survive lockdown. Some 10% say they are contemplating permanent closure in the next few weeks and another 40% say they may be facing failure by the end of the summer. An audience survey by Indigo highlights only 17% of audience responses are booking for events, half of which are for events from November onwards and 35% are in Sept/October.
  • Safety measures which need to be put in place to combat the virus and ensure social distancing are of significant concern to businesses as premises are often too small to accommodate the demands. Businesses are still concerned about getting staff back to work without transport and adapting to working from home on a longer basis, but for many industries, this isn’t possible. Businesses are still reporting issues with accessing finance through the COVID-19 support schemes due to ineligibility. Quarantine requirements continue to scar businesses as they try and deal with high absence levels. There are also significant issues and implications of track and trace on the operations of businesses
  • There has been no further development on data at the regional level, key areas still outstanding include; Furlough impacts at a local/sectoral level; Take up of grants and loans at a detailed level and performance including discretionary funding; Universal Credit claimants at a detailed level and reasons.

The overwhelming focus is that Businesses are ready for change and some are already innovating, we have to ensure that local skills and employment policies ensure people, especially the young can fit into this change. We also need to support and promote a return to good spending and resilience in the financial resilience in businesses and households.

Before the onset of COVID-19 the West Midlands region was in a period of significant growth, based on a burgeoning construction sector; a thriving city centre international business and professional services sector which was driving high levels of business tourism; a manufacturing base becoming more productive and an automotive sector responding to the challenge of a carbon-neutral future; high exports, foreign direct investment and strong international links, and the biggest higher education cluster outside London. All powered by a young workforce. However, underlying this growth there were significant issues with inequality, poverty, youth unemployment, low skills, poor health and school performance.

Covid-19 could exacerbate our weaknesses and undermine our assets. This means we need to protect our assets and ensure they survive and then build their recovery on a resilient infrastructure, which encourages diversifying and supporting local growth, employment and supply chains. At the same time, we need to develop new ways of working internationally in a tech-based future.

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.

To sign up to our blog mailing list, please click here.

Leave a Reply

Your email address will not be published. Required fields are marked *