This week the UK has seen a resurgence in infection rates, and the daily new cases confirmed in the UK are now the highest out of the selected European countries. This comes as vaccination rates per day in the UK fall and social distancing rules are relaxed, including the re-opening of pubs; which are seeing increasing numbers of visitors. The latest announcements are that we can expect restrictions to be lifted on the 19th with a definite announcement next week. The region’s strong business perceptions continue to grow.
- The Midlands has successfully vaccinated 6,930,612 people with the first dose and 5,251,535 of these individuals have received the second dose as well. This is the most jabs of any region.
- Based on current prices, across all industries in 2019, output per hour worked in the West Midlands region was £31.80 an increase of 2.0% (+£0.61) since 2018. Out of the 17 broad sectors, there was a decrease in eight sectors for the West Midlands region between 2018 and 2019. The highest value decrease was in arts, entertainment and recreation by £6,065 (-15.8% compared to an increase UK-wide at 1.6%) to £32,220. The broad sector with the highest value increase between 2018 and 2019 for the West Midlands was information and communication, with £11,484 (+13.9%, UK increased by 8.9%) to £94,336.
- The mid-year 2020 population estimates show there were over 4.2m residents in the WMCA (3 LEP) area. The population has increased by 0.5% (+20,971 people); in comparison the UK increased by 0.4%.
- Across all the combined authorities, the WMCA (3 LEP), Greater Manchester and West Yorkshire had the highest proportions of the population aged 0-15 years old at 20.5%. The proportion of 16-64 years old in the WMCA (3 LEP) relative to other Combined authorities was fourth lowest 62.4% and aged 65 years or over was fourth lowest at 17.1%.
- In mid-2020 there was 1,011 people per sq. km in the WMCA (3 LEP) area, above the UK average of 276. Coventry saw the largest population growth, with an additional 80 people per square km.
- Work by City-REDI and Nottingham Trent University has underscored the need for greater coordination and collaboration at the sub-national and particularly sub-regional scale; the often-inadequate institutional capacities and resources available to develop evidence-based strategies and programmes to develop local economies; and the need for economic development bodies to be placed on a consistent statutory footing – with commensurate remits, powers and resources. The work highlights the following propositions: level up institutional capacity; a patchwork of bodies has failed to date to deliver; moving away from centralised challenge funds and towards formula based long term funding for places.
- Work by City-REDI highlights that the West Midlands attracts a significant amount of private-sector R&D investment, about £398 per capita, well above the UK average. But it only receives £83 per head in public R&D funding as one of the regions with the largest shortfall.
- A WMREDI/PEC event held virtually at the end of April looking at Createch in the West Midlands highlighted findings suggesting that for every job in the broad creative industries, local economies can generate an extra two jobs in local services. These significant multiplier effects seem to be related to the Creative Services part of the broad sector such as film production and IT where Createch would be expected to be heavily represented.
- The Future Business District Study highlights hybrid working here to stay, in some form. Whilst exactly how to coordinate and manage some people working part from home and part from the office is less clear in practice, the intention is certainly there. The demand for good quality meeting rooms, collaboration spaces and breakout rooms is likely to increase. The considerations for energy efficiency, carbon zero building materials, sustainable transport infrastructure and parking are also on the increase.
Covid Impacts and recovery
- Strong international performance is reflected in data from KPMG that revealed that whilst the West Midlands was the hardest hit by the initial shocks of the pandemic, the local economy is set to return strongest in 2021, with growth predictions of 9.5%: the highest rate of any region area including London and the South East.
- The Bank of England has released their Agents’ summary of business conditions – 2021 Q2. The report found that since the lifting of social distancing restrictions there has been a rise in consumer spending on both goods and services. The boosts in sales come as non-essential stores and hospitality venues re-open around the UK, including pubs. Businesses reported that whilst recruitment was easier than normal, an increasing proportion reported having difficulties in recruiting staff – especially in hospitality, freight and logistics, IT, engineering, construction, professional services, nursing, agriculture and food production.
- Greater Birmingham Chambers of Commerce have released their Q2 report for this year. It was found that the continued roll-out of the vaccination schemes and the easing of lockdown and social distancing restrictions over the last three months, is leading to an increase in business confidence across Greater Birmingham. Domestic demand has soared in the last quarter by 21 points to 68, the region’s highest score since Q4 2018. Alongside this, the export sales balance emerged from negative territory for the first time since the start of the pandemic.
- According to ONS, in the West Midlands, 70.9% of responding businesses had high confidence in surviving over the next three months. 21.1% had moderate confidence in survival, 1.9% had low confidence and 5.7% were not sure.
- The London School of Economics has shown that the broad pattern of urbanisation is likely to be unchanged. However, there may be significant intra-metropolitan, neighbourhood-level and daily life changes to cities. The normalisation of working of remote working will lead to long-term shifts, with fewer people commuting to city centres five days a week. Whilst it is unlikely that the pre-eminence of cities will be affected, their function/s could change. Cities will likely become cultural and civic gathering places, rather than shopping destinations or office hubs. It is likely that the winner-takes-all economic geography of cities will persist.
- A report by Autonomy shows that the large-scale trial of reduced working weeks in Iceland has been a huge success. Many companies such as Google, Microsoft and Unilever are all trialling as well. The success of this trial should be unsurprising given that the world’s most productive countries, like Norway, Denmark, Germany and the Netherlands, on average only work 27 hours a week.
- The UN’s World Economic Situation And Prospects: July 2021, has found that global economic recovery threatens to leave behind many developing countries. Whilst the global economy is strengthening, recovery will be highly uneven. This is supported by the PWC’s Global economy watch: Predictions for 2021. This study found that despite growth being expected to return this year, it will be uneven and contingent on a successful and speedy deployment of vaccines.
- The Living Standards Audit 2021 found that despite strong income growth in 2019-20, the big picture for incomes in the 2010s was one of very weak growth and rising child poverty to 31%. However, the Resolution Foundation estimates that median incomes grew by 1.5 per cent in 2020-21, reflecting higher earnings and a better recovery than previously expected. Older workers who were furloughed (55+) were more likely to remain on furlough than their younger colleagues. As the overall furlough numbers fall, the majority (62%) of those still fully furloughed have been without work for at least six months.
- Online job adverts increased by 0.5 percentage points. On 25th June 2021, total online job adverts were at 129.4% of their average level in February 2020.
- The latest footfall remained broadly unchanged compared with the previous week.
- 7% of trading businesses in the West Midlands reported their turnover had decreased by at least 20%. However, 42.8% of trading businesses in the West Midlands reported that their turnover was unaffected and approximately 13.8% reported their turnover had increased by at least 20%.
- Latest business shocks include Gap, Homebase and Lloyds/Halifax bank announcing closures, and GKN potentially axing 500 jobs.
- Latest investments: JCB recruiting 500 staff, Avara Foods recruiting 130 staff, Amazon recruiting 60 staff, Royal Mail recruiting 1,000 level 2 apprenticeships, 250 jobs saved at JLR, and Quanta Dialysis Technologies raised £176m in private funding.
- In total, the WMCA (3 LEP) area had 144,200 employments furloughed on the 31st of May 2021. There was a higher percentage of males furloughed at 9.0% (77,600), compared to females at 7.9% (66,600). The sector with the highest number was accommodation and food services at 32,270. This was followed by wholesale and retail repair of motor vehicles at 20,710 and then manufacturing at 20,300. The largest reductions have been for younger employees in the 18 to 24 and 25 to 34 age bands. Employers with 250 or more employees have seen a 67% reduction since the peak in January, in comparison with a 28% reduction amongst employers with one employee. This reflects the varying impact on businesses of differing sizes.
- Across the WMCA (3 LEP) area, 171,800 people were eligible for the fourth grant of SEISS. There were 103,900 claims made on 6th June 2021 with a total value of nearly £276m with an average claim value of £2,700. The take-up rate for WM was 60%, above the UK average of 58%. The industries with the highest take-up rates were other service activities at 77% (18,200 eligible, 14,100 claims), followed by transportation and storage at 76% (24,200 eligible, 18,400 claims) and then education at 70% (8,900 eligible, 6,200 claims).
Trade and FDI
- Invest in the West Midlands reports that even though global economic uncertainties posed by the pandemic, the West Midlands has remained the UK’s leading hotspot for foreign investment outside of London and the South East. The West Midlands holds the third-largest share of all UK regions after London and the South-East and is responsible for 9.4% of the UK’s total FDI landscape. India, along with the US and Germany, is ranked as the West Midlands’ leading source of FDI throughout 2020.
- In the year to Q1 2021, the West Midlands region’s export value was worth nearly £23.8bn, a decrease of nearly £7.3bn (-23.4%) when compared to the year ending Q1 2020. The UK export value decreased by 14.9% to £287.9bn worth of exports in the year ending Q1 2021.
- In the year ending Q1 2021, the West Midlands imported nearly £29.9bn worth of goods. This has decreased by nearly £4.9bn (-14%). While the value of all UK imports decreased by 11.9% to £412.3bn.
- 4% of responding West Midlands businesses reported extra costs due to additional transportation costs, although 37.5% reported no extra costs.
- Where applicable, 3.4% of responding West Midlands businesses reported they had not been able to get the materials, goods or services from the EU in the last two weeks.
The Green Economy
- The Climate Change Committee has found that the UK is failing on the Climate Change promises it made last year towards a green recovery and a net-zero future. The Committee provide recommendations including a Net Zero Test would ensure that all Government policy, including planning decisions, is compatible with UK climate targets.
- The environment and sustainability will be an important focus for 2021 according to PWC. They are already being positioned as an opportunity for accelerating the business and policy transition to net zero.
- The West Midlands Combined Authority reported that low-carbon manufacturing and goods is now the West Midlands’ fastest-growing sector, boosting the region’s ambition to lead a new, green industrial revolution. Figures show that the region’s low-carbon sector grew by more than 7% in 2020, despite a 9% downturn in the wider West Midlands economy as a result of the pandemic. The sector now employs around 100,000 people across the region
- InvestWM found that the E-scooters scheme which was rolled out in September of last year in Birmingham, led to a reduction in CO₂ production as a third of the 450,000 e-scooter trips replaced car journeys. This means that there has been an estimated reduction of 66 tonnes of CO₂ in the Birmingham city centre.
- In 2019 the WMCA (3 LEP) area produced a total of 19,614 Kt CO2. This equates to 4.7 tonnes per capita or 4.7 kt per km2; which is below the England average of 4.9 tonnes per capita but above the England average of 2.1 kt per km2.
- Since 2018 carbon dioxide emissions have decreased by 4.4% (-898) in the WMCA (3 LEP) area compared to a decrease of 3.8% nationally.
- In 2019 transport accounted for the highest proportion of carbon dioxide emissions in the WMCA (3 LEP) area at 40.3% (7,908 Kt CO2) of total emissions – slightly above the England proportion of 37.7%.
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.