West Midlands Weekly Economic Impact Monitor – 9th October 2020

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This week cases continue to rise in the UK and death rates associated with covid19 are now also on the rise. Significant outbreaks are happening in the North West but as yet the West Midlands is not seeing the same increases. However business sentiment after a stronger summer, as reported regionally by business representative organisations, is now faltering as the expectation of further restrictions and lockdowns grow and the reality of exiting the EU starts to hit businesses already constrained by tackling the pandemic impacts.

Key issues:
  • Germany has become the latest European country to bring back restrictions to contain the pandemic, including late-night curfews for bars and restaurants in Frankfurt and Berlin
  • In France, the number of intensive-care patients with Covid-19 reached the highest since May
  • The World Health Organization has estimated that 10% of the world’s population have been infected with the coronavirus. That leaves 90% of the world at risk
  • Data from the UK covid symptom study most people recover within 2 weeks, however 1 in 10 still experience symptoms over a longer period. A third of doctors are treating patients with symptoms believed to be a longer-term effect of Covid-19. A study in Rome has shown 87% of discharged hospital patients have symptoms months later and 50% had fatigue. The covid app showed 4m people had symptoms after 30 days and 1 in 50 had symptoms after 90 days. Doctors also are reporting a growing number of Covid-19 patients with symptoms of neurological damage, including brain inflammation, seizures, and hallucinations
  • The Bank of England Misery Index suggests there is a disconnect between public perceptions and policymaker expectations for the economy and the speed of its recovery. The most recent one shows forecast a rise, whereas public perceptions have fallen sharply.
  • There has been some financial winners form the pandemic and shift in consumer spending behaviour. One is Tesco Plc, who’s profits have surged 29% amid the pandemic and loo-roll panic-buying.
  • It also appears the housing market is gaining from pent-up demand and the stamp-duty holiday. House prices rose at their fastest pace in more than four years last month as the property market continued to gain momentum after the lockdown. Property values climbed by 7.3% in the year to September, according to the latest Halifax house price index. This was up from 5.2% in August and the fastest growth rate since June 2016. According to ONS UK average house prices increased by 2.3% over the year to July 2020, down from 2.9% in June 2020. The West Midlands was the English region to see the highest annual growth in average house prices (4.3%), while the South East saw the lowest (1.0%)
  • As a recent blog published by the IMF highlights whilst the rapid unravelling of production, trade and employment may be reversed long term consequences could persist for a generation. Following a Pandemic the natural rate of interest is tilted down by nearly 1.5pp about 20 years later. Things which could prevent this, this time around, are keeping the relative death toll down, due to modern medical care. The effect on the elderly who are more likely to save. Most importantly the aggressive counter pandemic fiscal action will boost debt and force pressure on interest rates. On balance this might mean a period of low interest rates which provides governments space to mitigate consequences.
  • Make UK highlights the West Midlands, where there is a high proportion of traditional, engineering-based manufacturers are based, has a very high proportion of companies still in the innovation pre-conception stage (18%) with only 9% achieving ‘revolution’. Only 9% of manufacturers think that the UK is in a leadership position when it comes to the adoption of IDTs, and only 25% consider themselves ahead of their peers.
  • Over 60% of manufacturers report seeing their supply chains interrupted, leading them to revise their import and export strategies.
  • Seven in ten companies said they had experienced increases in freight time and over half have experienced increases in cost. For many manufacturers the cost and travel time of freight had increased by up to 25%.
  • The areas of jobs growth in the region are likely to be those where we have specific strengths (illustrated by LQs higher than 1). Such as all three LEP areas – Production; Motor trade; Wholesale; Transport; Education. Black Country – Construction; Retail; Property; Health. Birmingham and Solihull – Finance and insurance; Property; Business administration;
  • Overall national footfall for the week ending 27th September 2020 remained above the 70% of its level in the same period in 2019. The latest weekly data (week ending 27th September) shows the West Midlands, North and Yorkshire regions had the highest level of footfall. Across all the English regions, the West Midlands had the highest increase in footfall when compared to the previous week.
  • 42% of businesses currently trading has less than 6 months of cash reserves, this decreases to 40% for businesses that have temporarily paused or closed. 13% of businesses have temporarily paused or closed trading. 50% of businesses are providing pay top-ups to the Coronavirus Job Retention Scheme and 19% of the workforce are receiving top-ups to the Coronavirus Retention Scheme. 9% of responding business plan to close some sites.
  • For the West Midlands, the total online jobs adverts have increased from 61.8% (18th September) to 66.7% (25th September) of its 2019 average. All regions experienced an increase
  • 67% of adults tend to or strongly support the “rule of six” measures in the country where they live.
  • In the past seven days, 25% of adults reported they had not socialised with anyone outside their household. 72% of adults reported the socialised with between one and six people at the same time and 3% reported to socialising with a group of more than six.
  • 59% of working adults reported they had travelled to work (either exclusively or in combination with working from home) in the past seven days, this is a decrease from the previous week (64%). 24% of people worked exclusively from home this week which is an increase from the 21% reported last week.
FSB Q2 Survey
  • Following the record fall witnessed in Q1, small business confidence saw a substantial recovery in Q2. The FSB Small Business Index now stands at -5.0, its joint highest level since Q3 2018.
  • Three quarters (75.3%) of small businesses report falling confidence looking ahead to Q3 as a direct result of the coronavirus outbreak. This is a slightly more muted figure than that witnessed in the previous quarter, when 87.7% of small businesses suffered a reduction in confidence looking ahead to Q2 as a result of coronavirus-linked disruption.
  • Small businesses are cutting employment levels at the fastest rate ever. One in five (22.8%) small businesses report a fall in the number of people they employ, with customer facing businesses, such as those in the accommodation and food services sector, seeing the highest rate of job cuts (37.7%).
  • More than half (53.4%) expect gross profits to fall over the next three months. Small businesses are slightly more optimistic looking ahead to the next quarter compared to their performance in recent months, during which 74.9% saw falling profitability.
  • One fifth (21.9%) of small businesses expect to downsize in the next year. The domestic economy and consumer demand are the most commonly cited barriers to growth, with fears over the foreign economy and regulation also prevalent.
  • Credit availability and affordability both picked up considerably in Q2. Easily accessible loans provided by the Government have contributed to a soaring credit application success rate (80.7%), while a record-low Bank of England base rate has reduced the cost of loans.

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 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  / 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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