BIRMINGHAM ECONOMIC REVIEW 2024
SUMMARY
FOREWORD
The annual Birmingham Economic Review is produced by the City-Region Economic Development Institute (City-REDI) at the University of Birmingham and the Greater Birmingham Chambers of Commerce. It is an in-depth exploration of the economy of the United Kingdom’s second city and a high-quality resource for informing research, policy and investment decisions. What follows is a summary version of the full Birmingham Economic Review 2024. The full-length publication can be found on the Greater Birmingham Chambers of Commerce website. Data and commentary were correct at the time of publishing (November 2024).
HENRIETTA
BREALEY Chief Executive, Greater Birmingham Chambers of Commerce
“The 12 months since our last Birmingham Economic Review have certainly been anything but quiet. We’ve had local, regional and national elections – most notably appointing a new Mayor of the West Midlands and a new government – not to mention further geopolitical disruption.
Greater Birmingham is a place of many strengths, that also has plenty more scope to grow to reach its full potential. Driving inclusive growth, addressing barriers to economic activity and working together to tackle health disparities and high levels of deprivation, will continue to be at the heart of this.
However, the fundamentals that make the city-region a great place to invest and do business remain compelling. HS2 is once again poised to connect our city-region with central London, FDI projects are topping regional rankings, and the region is on the cusp of receiving further devolution of funding for local leaders – and is anticipating new powers coming down the tracks to grow key sector clusters.
We’re proud to continue to play a key role in unlocking the potential of our region’s business community and to work with our partners on convening discussion, debate and insight on the future trajectory of the city-region.”
PROFESSOR REBECCA RILEY
Deputy Pro Vice Chancellor (Regional Engagement), Co-Director City-REDI, Director – Local Policy Innovation Partnership (LPIP) Hub
“The UK economy is in the process of adjustment and recovery from successive shocks in recent years. The pandemic, Brexit, the invasion of Ukraine, the costof-living crisis, higher interest rates and the depreciation of the pound, have all caused significant structural changes to the UK economy, in the short, medium and long term. The UK economy is currently trying to adapt to and navigate these changes in its recovery. The West Midlands was acutely impacted by a number of these shocks, particularly Brexit and the energy crisis, due to the sectoral mix within the region.
In this report, we look in depth at how the region is recovering from a turbulent few years, presenting data and expertise on the performance of the region around key indicators and how people and businesses are impacted. Highlighting both the challenges and opportunities that face the region. Moving forward, sustainable and inclusive growth will depend on the region’s ability to seize opportunities through collaboration, investment and innovation.”
2024:
A YEAR OF HOPEFUL RECOVERY
THE ECONOMIC PRESSURES OF RECENT YEARS ARE BEGINNING TO EASE:
• National economic growth: the latest forecasts from the Office for Budgetary Responsibility anticipate the UK economy growing by 1.1% in 2024, before increasing to 2.0% and 1.8% in 2025 and 2026.
• Growth in the city-region: Greater Birmingham contributed an estimated £60.78bn in gross value added (GVA) to the national economy in 2022, accounting for 2.7% of the UK’s total GVA. The city-region’s GVA appears to have grown by 9.7% since 2021.
• Export growth: the value of goods exports from the West Midlands in Q2 2024 was £8.8bn, 1.4% higher than one year ago in Q2 2023 and 16% higher than pre-pandemic levels.
• A sense of business confidence: in Q3 2024, 65% of businesses anticipated seeing an increase in their turnover in the following 12 months and 57% expected an increase in profitability over the next year.
• Interest rates are beginning to decrease: in August 2024, the Bank of England cut interest rates for the first time since 2020, however, rates remain high at 5.0% and are expected to remain high for a prolonged period.
POPULATION: A YOUNG AND DIVERSE CITY
• Young and diverse: 22.1% of Birmingham residents are aged 0-15 years (compared to 18.5% across England) and 51.4% identify as Black, Asian and/or Minority Ethnic.
• Skills attainment remains below average: 6.5% of working-age people in Greater Birmingham have no formal qualifications compared to 6.2% across England. The city-region also has a shortfall of residents with RQF 4+ qualifications – 43.2% compared to 46.7% nationally, although the region has been closing skills attainment gaps with the national outlook.
• Economic inactivity has declined, but remains high: following a peak in local economic inactivity in 2021, as of 2023 this has since declined to 23.7%, although it remains higher than pre-pandemic levels, contributing to tight labour markets.
• Increasing earnings: between 2022 and 2023, total median weekly earnings in Greater Birmingham rose considerably by 9.2% from £498 to £544, which is greater than the UK rise of 8.0% from £524 to £566.
• High levels of child poverty: as of 2023, over a third of children in Greater Birmingham are in relative poverty and a quarter are in absolute poverty.
UNLEASHING THE POTENTIAL OF GREATER BIRMINGHAM
• High Speed 2: construction of HS2 is well underway, and new funding has been allocated for tunnelling between Old Oak Common and London Euston to help connect Birmingham Curzon Street to central London.
• Devolution: the West Midlands Combined Authority (WMCA) has secured a departmental style ‘single settlement’, giving local leaders unparalleled control over spending on devolved areas including adult skills.
• Industrial Strategy: the government has launched its industrial strategy green paper, setting out key sectors of focus, which the government feels can bring about the most robust growth. It is anticipated that mayors of devolved authorities will be given new powers to grow sectoral clusters.
• Maximising foreign direct investment: in the year 2023-2024, the West Midlands and the South East had the joint highest number of Foreign Direct Investment (FDI) projects outside of London (133 projects). 7,581 new jobs were created as a result of FDI in the West Midlands in this period –the highest of any UK region outside of London.
ECONOMY: CRISES
AND RESILIENCE
The economy has been dealt a series of shocks both nationally and globally in recent years, worsened by a number of long-running structural issues. The West Midlands and Greater Birmingham area have been particularly sensitive to these shocks due to the sectoral mix within the region and faced a slower recovery as a result. Though the UK has started to recover from the global shocks of the last few years and inflationary pressures are beginning to ease, risks to the UK economy remain, including geo-political tensions which could see inflationary pressures begin to rise again.
MACROECONOMIC CONTEXT
In 2020, International Monetary Fund (IMF) data showed that UK Gross Domestic Product (GDP) shrank by 10.4% compared to the previous year. In 2021, this trend was reversed, achieving year-on-year growth of 8.7% which was followed by further growth of 4.3% in 2022. In 2023, GDP growth in the UK then slowed to 0.1%, which was particularly low when compared to the EU and other advanced economies. However, in 2024, the IMF projects that the UK’s real GDP will grow by 1.1%, and from 2025 it is expected to return to its post-2008 growth rate of between 1.5 and 2.0%.
The Organisation for Economic Co-operation and Development (OECD) Economic Outlook has found that global economic growth has been modest over the last year. Tight monetary policy measures continue to pose a challenge to global economies, particularly with regards to housing and credit markets, however, a sense of economic resilience remains, and inflation is falling faster than previously anticipated, which is improving private sector confidence. Furthermore, supply and demand imbalances are easing, and unemployment rates have fallen to record lows.
In the short-term, the World Economic Forum’s global risks tracker forecasts that the biggest challenges to the economy will be misinformation and disinformation, extreme weather events and societal polarisation. While these may be more societal risks rather than economic, they can have a significant impact on the economy.
CONSUMER PRICE INFLATION
The Office for National Statistics (ONS) definition of Consumer Price Inflation (CPI) is the rate at which the price of goods and services bought by households rise or fall. A growing economy likely always has some level of inflation, and the Bank of England aims to maintain a rate of 2%, however, prices have been rapidly rising since 2021, primarily as a result of Russia’s invasion of Ukraine and the subsequent impact on energy prices.
According to the ONS, in September 2022, the annual CPI rate of inflation was 10.1%, meaning that prices were 10.1% higher than they had been in September 2021. Since the height of inflation at 11.1% in the Autumn of 2022 (the highest rate in 41 years), the rate of inflation has been rapidly declining and as of September 2024, the annual CPI rate sits at 1.7%, while overall for 2024, the Office for Budget Responsibility has forecast that CPI inflation will be 2.2%.
As of September 2024, the largest contributing factor to CPI has been restaurants and hotels, contributing 0.48 percentage points. The second largest contributor has been recreation and culture, contributing 0.45 percentage points. Some contributors saw deflation, with prices being lower than they were 12 months ago. For example, transport was the largest negative contributor to CPI, with the fall in goods prices in this sector leading to a contribution of -0.3% towards inflation. Lower energy prices and freezes in fuel duty have also been key downward drivers for CPI.
PRODUCER PRICE INFLATION
The ONS defines Producer Price Inflation (PPI) as the change in the price of goods bought and sold by UK manufacturers, including price indices of materials and fuels purchased (input prices) and factory gate prices (output prices). The rate is measured by comparing the prices that producers paid for input goods and services for the latest month with the same time a year ago. This is the same for output PPI, comparing the price that producers charged for their products in the latest month with the same time a year ago.
Input prices began to increase from late 2020 to early 2021 due to supply-side issues following the pandemic, which drove up production costs, and then again from February 2022 due to the Russian invasion of Ukraine. PPI reached its peak in June 2022, hitting 24.4%, meaning the costs of inputs into the production of goods had increased by almost a quarter between June 2021 and June 2022. In light of these events and in addition to wider geopolitical conflicts, Brexit, extreme weather and labour shortages, data from Food Manufacture, an industry publication for food and drink processors, shows that the largest contributors to input PPI on average have been fuel and domestic food.
As these input prices increased, this began to filter through to output prices. Input PPI generally remained higher than output PPI until March 2023 (since which point, output PPI has been the higher figure), however, the reduction in input PPI from March 2023 onwards has also led to a fall in output PPI as producers have passed on reductions in input prices. As a result, since January 2024, output PPI has largely sat between 2% and -1% (compared to 13.2% in January 2023).
INTEREST RATES
The Bank rate, set by the Monetary Policy Committee (MPC) at the Bank of England, is the single most important interest rate in the UK as it determines commercial banks’ offers on savings and the price they charge for borrowing money. If inflation rises above the 2% inflationary target, the MPC will increase interest rates to cool the economy and slow down price rises. If growth drops in the economy, the Bank will reduce interest rates to try and incentivise investment and spending to grow the economy.
Research from the Institute of Fiscal Studies shows that since the start of 2022, as inflation began to gain pace in the UK, the MPC began increasing interest rates to prevent the economy overheating, with interest rates rising 13 consecutive times between 2022 and 2023, from 0.25% in January 2022 to 5.25% in August 2023. This was mainly a result of rising inflation and the government’s ‘mini-budget’ that implemented expansionary policy during a time when the Bank of England was trying to cool prices, increasing the interest rate faster than would have been the case otherwise. The interest rate in August 2023 was the
highest since March 2008. Since then, research from the House of Commons shows that inflationary pressures have been easing, with the Bank of England reporting that they expect them to continue to ease through 2024. As a result, in August of this year, the Bank of England voted to cut interest rates for the first time since 2020.
Going forward, the Bank of England MPC remains concerned that shocks and inflationary pressures from second-round effects could prove more enduring than anticipated in the medium term. As a result, the MPC expects that interest rates will continue to remain relatively high for a prolonged period until the risks to inflation have dissipated further.
GVA AND REGIONAL OUTPUT
The latest available figures from the ONS show that Greater Birmingham contributed an estimated £60.78bn in gross value added (GVA) to the national economy in 2022, accounting for 2.7% of the UK’s total GVA. This data also shows that the city-region’s GVA grew 9.7% since 2021 and 11.6% since 2019, demonstrating that the economy is recovering from the shock of the pandemic. Between 2019 and 2022, the greatest GVA growth within the city-region was seen in Tamworth, which saw 28.5% growth comparative to pre-pandemic levels. Lichfield saw the second largest growth in GVA between 2019 and 2022 at 23.9%, followed by East Staffordshire at 19.4%.
GVA BY SECTOR
The composition of the Greater Birmingham economy dramatically changed in 2020, as economic shocks led to substantial reductions in economic output. The impact also differed by sector, with some sectors being more impacted than others.
The Business, Professional & Financial Services sector (BPFS) remained the city-region’s largest sector by some margin as measured by GVA. ONS data shows that after initially shrinking 1.1% between 2019 and 2020, the sector has since seen growth, with it now being 20.6% larger in 2022 than in 2019. As the largest sector in the Birmingham city-region, BPFS makes up 34.9% of the total GVA.
The Public Sector, including education, has remained the second largest sectoral group within the Birmingham city-region, which is unsurprising given there are five universities situated within this geography. Year-on-year from 2021 to 2022, data from the Higher Education Statistics Agency (HESA) showed that the higher education sector grew 9.8% to £7.7bn.
Since last year, the Retail sector has grown to be the third largest sector in the region. After initially declining 7.6% between 2019 and 2020, during the pandemic, the sector has since grown larger than its pre-pandemic level, growing 21.1% between 2019 and 2022, the highest growth of any sector between 2019 and 2022.
Advanced Manufacturing has dropped to become the fourth largest sector in the Greater Birmingham area. The advanced manufacturing sector suffered greatly during the pandemic, shrinking by 14.3% between 2019 and 2020, largely as a result of the pandemic dampening international trade according to the BBC. As of 2022, the sector is 10.5% smaller than it was in 2019, contributing £5.9bn to the Greater Birmingham economy.
Life Sciences and Healthcare saw the second highest growth rate of any sector between 2019 and 2022, with data from the Office for Life Sciences showing growth of 20% to £5.7bn in 2022. This was also the only sector to see significant growth in the pandemic, growing 8.3% between 2019 and 2020 –an upward trajectory which has continued since.
The Construction Sector saw a significant decline during the pandemic, reducing 8.9% between 2019 and 2020. According to Construction News, the sector has since recovered and is now larger than prepandemic levels, contributing £4.8bn to the Greater Birmingham region in 2022, 7.4% larger than in 2019. Nevertheless, there are now concerns that the sector is struggling as a result of inflationary pressures and high interest rates.
The Digital and Creative Sector is one of the few sectors which remains smaller in 2022 than pre-pandemic, with declines in GVA of just under 6% in both 2020 and 2021. 2022 was the first time the sector had seen year-on-year growth since before the pandemic, growing 10.6%, however, it remains 1.7% smaller than pre-pandemic (2019).
The Cultural Economy was by far the most greatly impacted sector by the pandemic, shrinking 46.6% in 2020 from 2019, although it did make a significant recovery between 2020 and 2021 growing 41.2%. The sector then continued to grow through 2021 and 2022 although it remains 7% smaller than before the pandemic.
The Logistics and Transport Sector was second hardest hit during the pandemic, reducing 25.9% between 2019 and 2020. Whilst the sector did then have two years of year-on-year growth in 2021 and 2022, its GVA remains 1.4% smaller than in 2019.
The smallest sector in the Greater Birmingham area is the Low Carbon and Environmental Sector After declining by 24.3% between 2019 and 2021, then growing by 17.5% between 2020 and 2021, the rate of growth did decline between 2021 and 2022, to 2.6%. The sector is 8.8% smaller than in 2019, contributing £0.9bn to the Greater Birmingham economy in 2022. This sector currently makes up less than 1.3% of GVA in the Greater Birmingham area.
ANN TONKS Director, Chapter Edgbaston
“Last year I wrote that hospitality was facing an existential crisis due to the impact of soaring cost increases, recruitment difficulties and the challenging trading environment, creating the perfect storm. This year the narrative is no different. Independent, quality establishments are closing every week around the UK and we have lost some great venues in the West Midlands, from Michelin star to neighbourhood Italian. ...
There must be a reason for talent to remain in Birmingham. Infrastructure investment in public transport, affordable housing and the cultural richness of the region are essential to making Birmingham an attractive city for young professionals in all types of industry to live and work.
Restaurants are part of the culture of a city and they are vital in a city’s place-making. ... Growth in our city’s reputation goes hand in hand with growth in our city’s economy; culture, in all its forms, sits at the heart of reputation.”
BUSINESS ACTIVITY
The business activity index produced by NatWest is a seasonally adjusted index that measures the monthon-month change in the combined output of the region’s manufacturing and services sectors. In July, the index (which denotes that a reading above 50 signals growth, and the further above the 50 level the faster the expansion signalled) showed a regional score of 51.2. This score is derived from improvements across both sectors leading to further expansion of business activity and efficiency gains enabling increased workload productivity. Meanwhile, the tracker also showed that inflationary pressures were amongst the lowest in over three years and employment broadly stabilised after sustained contraction.
CONSUMER SPENDING
National data from the ONS shows that consumer spending in Q1 of 2024 is 19.2% higher than prepandemic levels (Q1 2019), following adjustments for inflation. This marks a significant increase in consumer expenditure, with spending increasing by almost a fifth in 5 years, although it is only 2.6% higher than the same time the previous year (Q1 2023).
According to the ONS, by sector, the greatest fall in consumer spending between Q1 2023 and Q1 2024 has been in net tourism (-8.7%) followed by furnishings, household equipment and routine maintenance of the house (-1.4%) and miscellaneous (-1.1%). All other industries have seen a year-on-year increase in spending. The industries which have seen the largest increase have been health (9.2%), restaurants and hotels (7.8%) and education (6.3%).
ANDREW GOODACRE CEO, British Independent Retailers Association
“2024 has been another challenging year. At the start of the year, we were experiencing higher inflation, high interest rates, political uncertainty and low consumer confidence. All these factors resulted in lower consumer expenditure, especially on the so-called non-essential items. Retail has never been easy, but it was probably never more difficult than in the first half of 2024.
Yet I believe we can look forward with optimism. Many of the detrimental factors have eased and I believe they will continue to do so. More importantly, average earnings are increasing significantly more than inflation. This is important because higher income, low inflation and lower interest rates should result in consumers feeling ‘better off’ and having more disposable income. On top of this, we have a new government with a stated intention to boost investment and growth around the UK. All these factors are positive business influences, not least for independent retailers.”
INTERNATIONAL TRADE IN GOODS
Data from HMRC shows that the value of goods exports from the West Midlands in Q2 2024 was £8.8bn, which is 1.4% higher than one year ago in Q2 2023 and 16% higher than pre-pandemic levels (Q1 2020). This figure comprises a total value of exports to the EU of £3.7bn and to non-EU countries of £5.1bn.
Comparatively, the value of goods exports across the UK totalled £87.8bn in Q2 2024, comprising £43.8bn of exports to the EU and £44.0bn to countries outside of the EU. Q2 2024’s total value of exported goods is 4.6% lower than Q2 2023’s total of £91.9bn but 11.7% higher than pre-pandemic levels in Q1 2020 when a total of £78.1bn was recorded.
The value of imports to the West Midlands has increased by 2.7% over the past 12 months to reach £11.2bn in Q2 2024, which is 32.1% higher than in Q1 2020 before the pandemic. Looking at national figures, the total value of imports to the UK was £147.4bn in Q2 2024, having decreased by 1.7% since Q2 2023, but is 28.8% greater than in Q1 2020. Both the West Midlands and the UK have seen a growing trade deficit over the past 12 months, with these having widened by 8.7% and 2.5% respectively.
PHAEDRA JOHNSTONE Head of Services, Greater Birmingham Chambers of Commerce
“The West Midlands is poised for continued growth in export activities, driven by a combination of innovative business practices, supportive infrastructure, and proactive market diversification. It is key that the government supports resilience with the creation of a comprehensive strategy to minimise supply chain disruption and mitigate risks from the geopolitical environment. Regional stakeholders can facilitate success with a ‘stronger together’ approach, coordinating a conducive environment for exports and creating opportunities at every stage of business growth. Businesses in the region who address existing challenges, and leverage available support, can unlock new opportunities and contribute to the broader economic prosperity of the UK, solidifying the position of the West Midlands as a key player in the global market.”
FOREIGN DIRECT INVESTMENT
In the year to 2023-2024, data from the Department for Business and Trade shows that the West Midlands and the South East had the joint highest number of Foreign Direct Investment projects outside of London, each having 133 FDI projects which, combined, accounts for 8.6% of all FDI investments in the UK. The number of new jobs that were created as a result of FDI in the West Midlands in 2023-24 totalled 7,581, which was the highest of any UK region outside of London, outperforming both the South East and East of England. The jobs created in the West Midlands accounted for 10.6% of total jobs in the UK created through FDI.
BUSINESS: RISING PRICES
The last few years have proven difficult for businesses – most notably, the pandemic posed the greatest economic challenge to businesses since World War Two, leaving lasting supply chain issues which have been compounded by changes in international trade regulations and procedures from the UK leaving the EU.
Firms welcomed governmental interventions that successfully supported many through the challenges brought about by closing down large parts of the economy to protect against COVID-19.
Nevertheless, the pandemic was then followed by demand-pull inflation due to rapidly rising demand outstripping supply following the re-opening of global economies. Additionally, supply chain issues, labour under-supply and the invasion of Ukraine have all since led to cost-pull inflation, which has caused the government to tighten monetary policy, leading to increased interest rates which place further pressure on businesses.
BUSINESS DEMOGRAPHY
Statistics from NOMIS show that, as of 2023, there were 72,695 enterprises registered within the Greater Birmingham region. More than a third (31.3%) belonged to the Business, Professional and Financial Services sector, with a further 17.9% in Retail and 14.9% in Construction.
This count fell by 2.4% from 2022, when there were 74,495 enterprises in the city-region. The largest fall in the number of enterprises was largely driven by the BPFS and Logistics and Transport Technologies sectors, although it should be noted that whilst the number of enterprises has decreased, it does not necessarily mean that the sector has shrunk in GVA terms. For instance, between 2021 and 2022, the number of BPFS enterprises declined by 9.0%, however, the GVA of this sector over the same period increased by 11%.
All but two sectors saw a contraction in the number of enterprises, with the Public Sector retaining the same number of enterprises and the number of enterprises in the Life Sciences and Healthcare sector growing by 4.2%. This is likely to be a result of the issues around producer and consumer price inflation and the impact of this on costs for businesses, alongside reductions in consumer spending power.
Nine in ten (88.8%) private businesses in the city-region are micro businesses (0-9 employees). The number of large businesses has grown by 2.9% between 2022 and 2023.
BUSINESS CONFIDENCE
The Institute of Chartered Accountants in England and Wales (ICAEW) measures business confidence in terms of firms’ confidence for the economic prospects facing them over the next 12 months, compared with the previous year. In the latest ICAEW quarterly monitor for Q2 2024, the confidence index in the West Midlands had risen to +12.9, triple that of its historical average of +4.9, the region is still behind the UK average of +16.7.
This increase in confidence was propelled by above-average domestic sales growth, which businesses are anticipating will improve, despite weak export growth which is expected to remain constant. Nevertheless, according to the ICAEW, the region recorded one of the sharpest increases in input prices in the UK over the past year, although this is anticipated to soften. This growing burden of inflation has meant that companies are raising their selling prices at a faster rate than any other UK region, however, growing sales boosted growth for the second consecutive quarter.
BUSINESS INVESTMENT
UK business investment has suffered considerably since the onset of the pandemic, with activity falling to levels last seen in 2011. Recovery has been strong over the last year with business investment returning to pre-pandemic levels, albeit with more tepid increases than predicted – for example, in Q1 of this year, ONS data showed an increase of 0.5% which was lower than the initial estimate of 0.9%.
Since the financial crisis, research from the Confederation of British Industry (CBI) has shown that business investment has continued to be a challenge for the UK, having consistently recorded the lowest total investment in the G7, in addition to also holding the lowest rank of the 37 OECD countries in this regard. Specifically, in the private sector, businesses have been investing far less as a proportion of their value added since 2000, dropping significantly in the financial crisis and further stagnating since 2016, while public sector investment also stagnated during the same period. The CBI found that the two main reasons for firms’ lack of investment are that UK-specific factors have led to lost investments (as cited by 33% of businesses consulted in research on investment decision-making) and negative sentiment around the UK economy (as cited by 57% of the sample involved in this research).
GEMMA DILKES Policy Officer, Greater Birmingham Chambers of Commerce
“The Q3 results of the Greater Birmingham Quarterly Business Report Survey (the largest business sentiment survey of its kind in the city-region) show … optimistic sentiment is on the rise for turnover and profitability projections over the next 12 months. 65% of businesses anticipate seeing an increase in their turnover, having increased by 7 percentage points since the previous quarter’s projections, and 57% predict an increase in their business’ profitability, which is 2 percentage points higher than in Q2 2024. ... the Q3 Greater Birmingham Quarterly Business Report Survey highlights mixed trends in business sentiment across the city-region, but also signs of resilience and a positive focus on the near future.”
“The economic environment has significantly improved recently and the outlook is brighter than it has been for years. A return of political stability, low and stable inflation, falling interest rates and an acceleration of economic growth means that business confidence has risen to its highest level since the Brexit referendum. This newfound business confidence is starting to be reflected in increasing investment.
... Investment requires confidence in the economy over the long term. While the government has said there will be tax rises and tough choices made in the budget it is also important to stimulate rather than dampen those animal spirits. That will help generate the business investment and spending that is crucial to boosting productivity and putting the fiscal position on firmer footing.”
THOMAS PUGH Economist, RSM UK Management Limited
JOHN WEBBER Head of Business Rates, Colliers
“The Chancellor’s announcements concerning business rates in the Autumn Budget were desperately disappointing. Despite pre-election promises of business rates reform, nothing of significance was announced. There is to be no consultation, just a discussion document, and the measures announced hardly put a sticking plaster over the gaping wound rather than bringing in any fundamental reform. …
Moreover, in 2026/7, despite the two permanent lower multipliers for retail/ hospitality/leisure, many businesses in the sector will still see their rates bills rise significantly as a result of the 2026 Revaluation.
Through discussions with the Valuation Office Agency, we have also learnt that these measures, together with freezing of the smaller business rates multiplier, will be funded by introducing an even higher multiplier for larger businesses (those with an RV of over £500,000). This will include businesses in the retail, hospitality and leisure sectors too. …
I fail to see how any of these measures help the high street in the long term.”
BUSINESS LENDING
Early 2020 saw rapid growth in lending for both large and small and medium sized enterprises (SMEs), according to the Bank of England. For SMEs, this high lending rate continued until summer 2021, while larger firms saw a fall in mid-2020, followed by a sustained negative annual growth rate from late-2021 which was subsequently reversed by an uptick in early 2022 following the invasion of Ukraine and rising inflationary pressures. The latter trend is most likely explained by the fact that businesses were not taking on the same level of debt as they were during the pandemic. Although large firm lending has also been in decline since late 2022, with the annual rate continuing to fall through 2020 and 2024, unlike SME lending, large enterprise lending has remained positive in this 2022/23/24 period, though the rate has declined.
In the latest Financial Stability Report from the Bank of England, the risk environment in Q2 2024 has remained relatively unchanged since Q1 2024. The prices of many assets such as shares and bonds remain high compared to historical norms and some have continued to rise, which suggests that investors expect an economic recovery and falls in inflationary pressures. Less weight is being placed on geopolitical tensions or continued high inflation, which might cause weaker growth or interest rates to remain higher than anticipated. These risks increase the likelihood of sharp corrections in asset prices, ultimately making it costly and difficult for UK households and businesses to borrow.
GROSS EXPENDITURE ON R&D
Gross Expenditure on Research and Development (GERD) is the total amount of money spent on R&D in a country. This includes both current and capital expenditures. ONS data indicates that in the West Midlands in 2022, GERD was £4.9bn – 7.0% of all GERD in the UK. Comparatively, outside of the South and East of England (including London), the West Midlands was the second largest region for GERD expenditure in the UK after the North West (£6.5bn). The largest sector of expenditure was in Business, which accounted for 78.2% of the total West Midlands GERD. The second highest area of expenditure, as a proportion of total regional expenditure, was in the Higher Education sector, which accounted for 19.8% of total GERD expenditure in the West Midlands.
BUSINESS EXPENDITURE ON R&D
According to the ONS’s available annual data for 2022, the West Midlands generated £3.8bn in Business Expenditure on Research and Development (BERD), accounting for 7.7% of total UK BERD. Similarly to the GERD, outside of the South and East of England (including London), the West Midlands was the second largest region for BERD expenditure in the UK after the North West (£4.8bn). The East of England has the highest level of BERD accounting for 21.4% of total UK BERD, followed by London (17.9%) and the South East (17.4%) – alone those three regions account for 56.8% of total UK BERD expenditure.
AVALON MAISON
Innovation and Business Advisor, Greater Birmingham Chambers of Commerce
“The West Midlands is well-positioned to be a leading centre for innovationdriven business growth. With the extensive support systems offered by Innovate UK, universities, Catapults, and banks, innovative SMEs have the opportunity to scale and succeed. However, simplifying access to this support through a clear roadmap will be key to ensuring that businesses can fully capitalise on these resources.
By working together, stakeholders can foster a thriving ecosystem where innovation is not just supported but celebrated—ensuring that the West Midlands remains a leader in business innovation for years to come.”
ALEX COUSINS Director of Regional Engagement, Connected Places Catapult
“Innovation plays a central role in helping to grow successful businesses and thriving places, and is on show here in abundance in the West Midlands through the DIATOMIC programme.
The programme [part of the West Midlands Innovation Accelerator] is supporting the region to foster inclusive innovation, drive investment and harness technology through a series of targeted initiatives.
... across all of this work, we have been focusing on how innovation can be made truly inclusive. ... By embracing an inclusive approach to innovation, we can ensure that more ambitious businesses have access to the right kinds of networks, expertise and resources, and we can ensure that the benefits of our innovation economy reach deep into our communities.”
“As a company, Pi-KEM is focused on enabling innovation and working with universities and research and development departments of commercial companies. We are here to support them achieve their objectives and successfully complete their cutting-edge projects.
We achieve this through a number of means, including ... networking and ensuring that we are part of bigger conversations so we can plan for new innovation and be ready with a secure supply chain in place, ... proudly supporting future skill development in battery engineering, partnering with University College Birmingham as they prepare to train the Battery Engineers of the future, ... participating in schemes such as Help to Grow and the Amazon Innovation Accelerator allowing our senior team to continually develop the skills to allow growth and resilience, ...[and] championing STEM career development as these sectors have huge growth potential in the Midlands and we want our local young people to be part of it.”
FRAN THOMAS Policy and Projects Assistant, Greater Birmingham Chambers
of Commerce
“As AI and other technological advancements continue to impact the already fast-paced business environment, leveraging the benefits of digitalisation and innovation can be a key factor in both growth and success, particularly for smaller, emergent organisations….
In June, Greater Birmingham Chambers of Commerce partnered with Amazon, delivering a free programme to 25 small businesses from across the region. The Amazon Innovation Accelerator (AIA) offered select organisations the opportunity to explore innovative training systems which utilise virtual reality and AI integrated data management … and provided each delegate with new skills, concepts and experiences to employ within their own organisations.
Feedback from the delegates was extremely positive and highlights the importance and impact of such programmes.”
FIONA ROUSE Director, Pi-KEM
FINANCIAL DISTRESS
The number of company insolvencies has continued to increase since the economy began to slowly re-open in 2021 following the pandemic. According to the Insolvency Service, in 2019, the total number of company insolvencies was 17,171, which fell dramatically in 2020 to 12,631, a 26.4% decline from 2019. This reduction was partly due to the protection provided to businesses during the pandemic. In 2021 as protections were reduced, insolvencies then began to increase again, with total company insolvencies in the year totalling 14,058, albeit still significantly below the pre-pandemic 2019 level. By 2022, insolvencies had increased by 57.4% since 2021 and were 28.9% higher than the pre-pandemic 2019 level. In 2023, the total number of company insolvencies was 25,162, 13.7% higher than the previous year and 46.5% higher than pre-pandemic 2019 levels.
PwC data from 2023 shows that the construction sector saw the highest number of insolvencies. This is unsurprising given the sector is facing pressures from inflation, which is driving up costs and delaying builds, coupled with higher interest rates which are increasing the cost of capital borrowing. Retail and the accommodation and food sector have also seen high levels of insolvencies, accounting for 15.7% and 14.8% of total insolvencies respectively. Both of these sectors have struggled with the impact of the cost-of-living crisis on consumer spending and inflationary pressures on input costs and wages.
REEN BLAKE-CARR City-REDI
“Although inflation has fallen to its lowest level in three years, ... consumers are still cautiously spending their money due to the persistently high prices of goods. This has had a knock-on effect on businesses, with Red Flag Alert identifying a 10% increase in the number of businesses in significant financial distress in the second quarter of 2024.
Across the Greater Birmingham region, 4.34% of total businesses currently have a one red flag rating, meaning they are financially at risk but still able to reverse their financial uncertainties.”
BUSINESS SURVIVAL RATES
In 2021, ONS data showed that 92.6% of businesses in the Greater Birmingham area survived for one year, which is the lowest rate of one year survival in the last five years, and significantly below the England rate of 93.5%. The rate of businesses surviving more than two years has also been in decline since 2018, most notably, with the 2020 two-year rate of survival being 10% below the England rate (71.1%) in Greater Birmingham (60.3%).
There has also been a decline in the three-year survival rate. For businesses born in 2019, 34.2% survived three years to 2022, which is significantly below the England rate of 55.9%. Overall, the survival rate data suggests that businesses within Greater Birmingham are likely to survive the first year, however, it begins to decline quickly after this, particularly when compared to national figures. It is therefore crucial for support to be provided to businesses after the first year of operation to improve survival rates.
PEOPLE:
CHALLENGING TIMES
Greater Birmingham is a region of great diversity and talent, though it unfortunately has relatively high levels of economic inactivity and poverty. Economic, technological and social changes, such as digitalisation, de-industrialisation and globalisation, have widened spatial inequalities both inter and intra-regionally. This makes vulnerable households less well equipped to deal with economic shocks, such as those seen in recent years.
Whilst labour markets in the region have been resilient over the last couple of years, the region remains behind national averages in terms of unemployment and earnings – though this gap is closing. The region has also been closing skills attainment gaps with the national outlook, growing its skills base and attracting international companies.
DEMOGRAPHICS
According to ONS population estimates for 2022, more than two million people, representing 3.5% of England’s population, live within Greater Birmingham. More than half (57.9%) of the Greater Birmingham population lives in Birmingham, and Solihull has the second largest population, accounting for 10.9% of the total for the city-region. The area with the smallest population is Tamworth, accounting for around 3.8% of the total for Greater Birmingham.
The region’s population is also relatively young and diverse, with 20.5% being aged 0 to 15 years, compared to 18.5% for England. The youngest population is in Birmingham where 22.1% of the population is within this age bracket. The median average age in the Greater Birmingham area is 36 years old, which is 3 years younger than the England average of 39. 73.3% of people in Birmingham were born in the UK, compared with 84.8% in the West Midlands region and 82.6% in England.
LIFE EXPECTANCY
Between 2020 and 2022, the ONS’ healthy life expectancy across the West Midlands area was 61.9 years for males and 62.2 years for females, which is shorter than the national average by 0.8 years and 0.7 years respectively. Life expectancy in the West Midlands was 78.1 years for males and 82.2 years for females, compared to life expectancy in England which was 78.9 years for males and 82.8 years for females. There has been a fall in both healthy life expectancy and life expectancy since the previous two-year period (2017 to 2019), as 2020 to 2022 includes the Covid pandemic and then an ongoing backlog for medical treatment.
JO TONKIN Interim Director of Public Health, Birmingham City Council
“We all know that good employment protects health, and that income and employment are key determinants of health and drivers of health inequalities.
... Years lived in good health ... varies across the city. There is a almost 20-year difference between those who live in the least deprived and most deprived communities. There are also differences between ethnic groups and vary starkly between those with and without a disability and between those with and without a mental health condition. ...
The causes of such health inequalities are complex. They are not just about people’s behaviours but also about their income, education and housing, racism and discrimination, access to health information and services. There is so much that we can do together to better promote good health, prevent ill health and treat conditions early on.”
EARNINGS
Between 2022 and 2023, ONS data shows that total median weekly earnings in Greater Birmingham rose considerably by 9.2% from £498 to £544, above the UK rise of 8% from £524 to £566.
According to The Resolution Foundation, one of two key drivers behind this is a tight labour market. While the pandemic-induced increase in the number of job vacancies begun to ease last year, they remain higher than pre-pandemic levels as unemployment remains low. Nevertheless, it is anticipated that as the labour market continues to loosen, wage growth will begin to slow as employers no longer need to compete for employees by offering higher salaries to the same extent as before. The other significant driver of higher earnings has been the cost-of-living crisis. Rapidly rising inflation over the last few years has applied upward pressure to earnings, with workers increasingly seeking higher earnings to offset rising prices. The Bank of England has found that while the tightness of the labour market contributed to around 13% of private sector pay growth, inflation expectations accounted for 52% in 2023.
According to NOMIS, full-time and part-time earners did see variation in pay rises over the last year. In Greater Birmingham, there was an increase in earnings of 3.7% for full-time workers between 2022 and 2023, whereas part-time workers in Greater Birmingham saw a lower increase in earnings at 1.3%. In England, there were higher increases in earnings across both full-time (6.1%) and part-time (5.8%) earners compared to Greater Birmingham, however, total median weekly earnings saw a higher annual growth in Greater Birmingham than in England.
There remains a gender pay gap between women and men within Greater Birmingham and England. ONS data shows that in 2022, median full-time pay for men, excluding overtime, was ‘£102 (16.2%) higher than for women. In 2023 this gap has reduced, with men in Greater Birmingham earning £98 (14.4%) more per week than women, though this remains higher than the England pay gap of 12.5%.
GROSS DISPOSABLE HOUSEHOLD INCOME
Gross Disposable Household Income (GDHI) is the amount of money that all the individuals within a household sector have available for spending or saving after they have paid direct and indirect taxes and received any direct benefits. As of 2022, ONS data shows GDHI per capita in Greater Birmingham is £19,125, 16.1% below the UK GDHI per capita of £22,789. Only 3 local authorities within GBSLEP have a GDHI above the UK average, being Bromsgrove, Lichfield and Solihull. Birmingham has the lowest GDHI, followed by Tamworth and Cannock Chase.
GDHI has been on an upward trajectory from 2012 onwards in Greater Birmingham, including during the pandemic with an average increase of 3.2% year-on-year over this period. In 2020, this rate slowed down, with GDHI only increasing 0.7% from the previous year – well below the average rate for the years before. This was followed by a strong recovery in 2021, seeing a rise of 2.9% on the year before, then a further annual increase of 5.4% in 2022.
CHILD POVERTY
According to the House of Commons, here is no singular universal definition of poverty. In general, however, it refers to when people lack the material resources to meet minimum needs. The UK government publishes two key measures, these being:
• Relative poverty: households with an income below 60% of the median household income.
• Absolute Poverty: households with an income below 60% of the median household income, once adjusted for inflation.
Since the start of the Department for Work and Pensions data timeseries (2015) on children in low-income families, the Greater Birmingham child poverty rate has been rising. Relative poverty has been rising at a median rate, over the 2015 to 2023 period, of 6.2%, whilst absolute poverty has been rising at a median rate of 2.8%. As of 2023, relative poverty in the region is 32.2% and absolute poverty is 25.1%, therefore, over a third of children in Greater Birmingham are in relative poverty and a quarter are in absolute poverty.
Child poverty also greatly varies by geography. Birmingham has the highest rate of child poverty within Greater Birmingham, with 40.8% of its children in relative poverty and 32.4% in absolute poverty, which is significantly higher than the average rates for Greater Birmingham, the region and the UK. The area with the lowest rate of relative poverty is Solihull at 15.3% and for absolute poverty is Solihull and Lichfield both at 10.7%.
FUEL POVERTY
The West Midlands region has the highest incidence of fuel poverty of all English regions at 19.5% compared to 13.0% of all England households as of 2021 (latest update). However, fuel poverty was higher in Greater Birmingham, at 20.1%. It should be noted that this high rate in the Greater Birmingham area is partially due to the poor efficiency of housing stock and a lower median income.
Fuel poverty varies greatly by local authority within the city-region – in Birmingham, more than 1 in 4 people are in fuel poverty (24%), whereas this falls to 14.1% in Solihull.
While it was anticipated that fuel poverty would increase in the last couple of years as a result of the substantial growth in energy prices, it did not do so at the rate anticipated, partially as a result of the government’s interventions to support households with energy bills. Given that the government cannot control prices set by the global energy market, a focus on improving the housing and energy infrastructure in the UK would be wise and would also mean that UK households would be less susceptible to global energy price market fluctuations in the future.
UNEMPLOYMENT
The ONS defines unemployment as people without a job, that have been actively seeking work in the past four weeks and are able to start work within the next two weeks.
Historically, the Greater Birmingham area has had high levels of unemployment, however, NOMIS statistics show that, as of the year to March 2024, the Greater Birmingham unemployment rate fell to 4.0%, which is significantly lower than the rate of 7.3% recorded during the year to March 2021. The rate is also similar to the UK rate for unemployment for the year to March 2024 which was 3.9%. Unemployment in the region has been declining since 2014, with only one significant spike in unemployment in 2020/21 during the pandemic.
Specifically, Birmingham has consistently high unemployment, currently sitting at 6.9%, although compared to historical standards this unemployment rate is low, having come down from 14.5% in 2013/14.
PROFESSOR
“Using a definition of underemployment as a lower level of actual employment for a particular ethnic group than predicted employment based on the employment rate by qualification and age across the population, ... in 2022 the estimate of underemployment for minority ethnic groups was 38.3 thousand (or 9%) lower than it would have been if employment rates by qualification matched the average.
Looking forward, it is important to help realise the ‘untapped potential’ of these population groups for the benefit of the individuals themselves, employers, the regional economy and society.”
ANNE GREEN City-REDI
ECONOMIC INACTIVITY
Economic inactivity refers to people not in employment who have not been seeking work within the last 4 weeks and/or are unable to start work within the next 2 weeks.
Economic inactivity had been decreasing in the build-up to the pandemic in the city-region, however, in 2021, ONS data shows that the percentage of those economically inactive (aged 16 to 64) increased to 25.3% from 23.2% in 2020. This was 4.1% higher than the England rate in 2021 which was 21.2%. After the peak in local economic inactivity in 2021, it began to decline and as of 2023 was 23.7%.
Economic inactivity within ethnic minority groups in the city-region was in decline both before and during the pandemic however, 2022 saw this increase. This coincides with an increase in the number of migrants, largely due to high levels of immigration for humanitarian purposes, especially from countries such as Ukraine and Hong Kong. In 2023, economic inactivity for this group dropped down to 30.6%, though this is 5% higher than the England rate.
After rising during the pandemic, NOMIS data shows that economic inactivity in Greater Birmingham amongst both men and women decreased and in 2023 was 18.8% and 28.6% respectively. Nevertheless, around 1 in 3 women of working age remain economically inactive, compared with 1 in 5 men. Economic inactivity amongst both of these groups was also higher than the England averages.
Of those that were economically inactive, the main reason cited was the individual being a student, as cited by 32.0% across Greater Birmingham in 2023, compared to the England rate of 27.2%. Historically, the second most cited reason for economic inactivity has been ‘looking after the family/home’, however, there has been a significant decline in the number of people reporting this and this now makes up 21.3% of economically inactive persons within Greater Birmingham. As of 2023, the second most prevalent reason is long-term sickness, as cited by 27.8% in Greater Birmingham which is higher than the England rate of 26.3%.
ASSOCIATE PROFESSOR
DARJA REUSCHKE
City-REDI
City-REDI
“Economic inactivity in the West Midlands metropolitan areas has risen sharply in the last year between the first quarters of 2023 and 2024.
... The rise in economic inactivity due to sickness and disability in the West Midlands metropolitan area has been particularly pronounced, in line with some other metropolitan regions [and] inequality within the West Midlands in economic inactivity is greater than in any other region of England. ...
Tackling illness is important for the labour supply in the West Midlands metropolitan area. Integrated employment and health policies are needed that are sensitive to gender and ethnicity and their intersectionalities.”
PROFESSOR
DONALD HOUSTON
HIRING ACTIVITY
After a high number of job vacancies following the pandemic in 2021 and 2022, ONS figures suggest that job vacancies have now returned to below pre-pandemic levels. As of 21st June 2024 regional job vacancies are 24.0% below the February 2020 baseline. Comparatively, across England, job vacancies are 22.5% below their February 2020 baseline.
As of June 2024, the greatest number of vacancies in the region were for part-time and weekend work. Looking at individual sectors, education is also facing high volumes of vacancies. Vacancies in education are 79.5% higher than in February 2020, although it should be considered that the education sector has a long-term supply issue, particularly as austerity saw earnings fall dramatically over the decade, with NASUWT The Teacher’s Union estimating that the real terms salaries of teachers have fallen by 19%.
Other sectors which have seen a significant reduction in vacancies since February 2020 include health and social care which has seen a 44.2% drop, construction and trade (a 43.6% drop) and graduates (a 42.1% drop).
It remains to be seen whether Make Work Pay legislation and recent announcements in the Autumn budget, such as increases in employer National Insurance Contributions, will impact hiring activity across the region.
“Communication skills appear in 36.8% of online job postings in 2024, manifesting their growing importance. Management skills remain highly valued, as they feature in 27.4% of postings. Engineering skills increased their share to 15.0%, despite fewer job advertisements overall. Assertiveness and customer service skills also saw slight increases. These shifts demonstrate evolving job market needs, with a greater emphasis on interpersonal and technical skills.”
“The proportion of workers who mainly work at home is lower in the West Midlands metropolitan area than in some other regions and metropolitan areas in England but the shift in work location has been substantial across all regions. This shift in work location and the greater location choice gained by some workers, may enable the West Midlands metropolitan area to attract high-skilled workers for whom the need to live in London has diminished thanks to Working from Home (WfH). The region may also be able to retain some of their young talent who previously moved away after graduation. There are international examples of comparator regions (e.g. Nova Scotia in Canada) that have developed strategies to use WfH as a means of regional economic development which the West Midlands metropolitan area may learn from.”
ASSOCIATE PROFESSOR
DARJA REUSCHKE City-REDI
DR KOSTAS KOLLYDAS City-REDI PROFESSOR
ANNE GREEN City-REDI
SKILLS ATTAINMENT
In 2023, 6.5% of working-age people within Greater Birmingham (16-64) had no formal qualifications, which was slightly higher than the England 6.2%. The local authority (LA) within Greater Birmingham with the highest percentage of working-age people with no formal qualifications is Birmingham at 9.4%, which is significantly higher than other LAs within Greater Birmingham and significantly above the England rate.
The Regulated Qualifications Framework (RQF) is the national credit transfer system for education qualifications in England, Wales and Northern Ireland. 3.2% of the working age population in Greater Birmingham have RQF level 1 qualifications alone, above the England rate of 2.6% and 21.6% of the working age population in Greater Birmingham have RQF level 2 qualifications alone, slightly above the England 19.1% rate. Of the working age population in Greater Birmingham, 19.6% have a level 3 qualification alone, slightly below the England rate of 20.7%, whilst 43.2% have RQF level 4+ qualifications, compared to 46.7% across England.
Though the gap between the city-region and England averages for RQF level 4+ qualifications is closing, there is significant variance in the attainment of Level 4+ qualifications across the Greater Birmingham geography. In Bromsgrove, 62.3% of the working-age population have a qualification of level 4 or above, whereas, in Tamworth, only 23.6% have a qualification of level 4 or above.
To improve the skills attainment in the region, greater focus should be placed on facilitating those at RQF levels 1 and 2 to achieve higher qualifications to better support employment mobility and skills development which will help them access higher-paid employment.
JODH DHESI
Chief Executive Officer of King
Edward VI Foundation (King Edward VI Academy Trust, Birmingham, and the Schools of King Edward VI in Birmingham)
“At King Edward VI Foundation, we educate one in ten of Birmingham’s secondary aged pupils across our fourteen schools. We are a unique mix of state schools (both comprehensive and grammar) and independent schools working together as equals with a shared mission to make Birmingham the best place to be educated in the UK. Our values of excellence, accessibility, collaboration, ambition, care, and integrity sum up the way in how we seek to transform lives and futures through educational experience and opportunity, serving Birmingham and influencing beyond.
... We also collaborate with other organisations in shaping future developments, for example being part of a team of 23 Multi-Academy Trusts from across England in publishing a pathfinding report setting out a guidance framework for those leading AI in schools, and a set of practical recommendations for school system leaders, as well as contributing to the IFIP and UNESCO World Inclusion Conference in Paris this year.”
RAJ KAUR West Midlands and Warwickshire LSIP Project Manager, Coventry and Warwickshire Chamber of Commerce
“The West Midlands and Warwickshire (WMW) Local Skills Improvement Plan (LSIP), delivered in partnership with the Coventry and Warwickshire Chamber of Commerce, Greater Birmingham Chambers of Commerce, and Black Country Chamber of Commerce builds on the extraordinary spirit of collaboration across the West Midlands and Warwickshire, by putting businesses at the start of the process and using innovative ways of delivery, focus and, engagement, to ensure that talented local residents can access job opportunities, and local firms have the skilled talent they need to innovate and grow.
And the ongoing activities of the WMW LSIP and the Local Skills Improvement Fund are just one part of a bigger picture of devolved skills funding that is changing the face of our regional economy.
We look forward to continuing to work with education and training providers, stakeholders, and local businesses to support them in the delivery of skills provision across the region.”
“Often referred to as the UK’s second city, Birmingham is so much more than just that. It’s a city on the cusp of a huge amount of opportunity. ... You just need to look around to witness this in action: there’s lots of construction underway and plenty of new buildings springing up all the time. Barely a week goes by without reports of a new skyscraper being given the green light.
HS2 will further boost this. Faster connections to the capital will enable the city to really punch above its weight, not only nationally, but internationally too. ...
At South and City College Birmingham (SCCB) we’ve been working hard over the last year to ensure that both our industry facilities and curriculum provision have been updated so that employers can access the skills and qualifications that will position them to take advantage of opportunities that are coming their way.”
ANWAR KHATTAK BEM , Founder, BYSA Foundation
REBECCA WATERFIELD Head of Employer Engagement, South and City College Birmingham
“The BYSA Foundation was formed in 2002 to deliver multi sports, mentoring programmes, tutoring sessions, centre of excellence player development programme, educational/apprenticeship support, employment/ work experience placement and vocation trips/experiences. To the young people of our community no matter what age, race, size, gender and ability they are – BYSA caters for them all. Making a safe, happy, enjoyable, challenging, competitive, respectful and disciplined community project it has delivered just that making that massive impact and delivery ... going that extra mile above and beyond for the next generation as they are our leaders of the future.”
PLACE: SUSTAINABLE COMMUNITIES AND PRIDE IN PLACE
The Greater Birmingham city-region is one of the bestplaced and most well-connected areas of the country, both geographically and digitally. It has benefitted from continuous investment in digital, transport and sustainable infrastructure, which have improved communities’ geographical and digital mobilities and opened up opportunities to the Greater Birmingham community.
HS2
Since HS2 was approved by Parliament in 2017, the number and scale of planned developments within 1.5 miles of Curzon St Station, Interchange Station and the Washwood Heath Depot has increased significantly. These new places to live, work and visit have been projected to add £10bn to the local economy over the next 10 years.
Once complete, HS2 will be the first new intercity railway to be built north of London in over a century. Over 350 active construction sites are working on delivery of the railway between London and the West Midlands and work has begun on two-thirds of HS2’s viaducts and over half of its bridges.
Despite the cancellation of HS2 north of Birmingham and the connection between Old Oak Common and London Euston stations last year, the Chancellor of the Exchequer, Rachel Reeves, has recently announced the allocation of new funding for tunnelling from Old Oak Common to London Euston, to catalyse private investment into the station and local area.
MOBILITY
During the pandemic, changes in preferred modes of transport included increases in walking and cycling, however, this trend has largely reversed back to pre-pandemic habits. Data from the Department for Transport shows that cars and vans remain the principal mode of transport in the West Midlands, accounting for 68.5% of journeys per person per year. This is above the England (excluding London) average of 62.2%.
According to the West Midlands Combined Authority, walking remains the second most common mode of transport in the West Midlands, accounting for 22.3% of trips per person per year, which has reduced by 7.3% since the pandemic and is 3.3% lower than in 2018/19. Comparatively, walking in England is 4.2% higher than its pre-pandemic level and has fallen only 0.9% since its height in the pandemic.
AIR TRAVEL
Air travel was very heavily impacted by the pandemic, with passenger numbers at Birmingham Airport dropping to virtually zero in the second quarter of 2020. UK Civil Aviation Authority figures indicate that throughout the majority of 2023, total air traveller numbers remained 9.2% lower than the 2019 average, however, the first quarter of 2024 saw passenger numbers exceed 2019 levels for the equivalent months that year.
SIMON RICHARDS
Chief Financial and Sustainability Officer, Birmingham Airport Limited
TOURISM
“2024 has been a defining year at the airport as we unveiled more projects than ever before and invested heavily in our future. The busiest ever summer, further strengthened forecasts that demonstrate we are on our way to serving 18m passengers by 2033. ...
Indirectly, the airport generates up to 6,700 jobs, all expected to help grow the economic contribution of the airport to £2.1bn in 2033, supporting 30,900+ jobs regionally. ...
We have ambitious but realistic growth plans and a runway that could take up to 35m passengers a year in the future. ... Already seeing the benefits of £50m invested this year, Birmingham Airport is ‘Well On Our Way’ and will be coming to a screen close to you soon…”
Data published by Visit Britain suggests that in 2022, Birmingham was the 4th most visited city in the UK (803,444 visits) after London (16,117,939 visits), Edinburgh (1,796,354 visits) and Manchester (1,230,133 visits). As a region, in 2023, the West Midlands was the 5th most visited, with 1.9 million visits.
In total between 2019 and 2023, tourism visits to the West Midlands fell by 22.2%, from 2.4m to 1.9m. Comparatively in England, visitor numbers are 7.3% below their 2019 level in 2023. Despite this, according to Visit Britain, total spending from visitors to the West Midlands increased 1.4% above pre-pandemic levels in 2023, increasing to £1.06bn from £1.04bn in 2019.
Data from the New Economics Foundation shows that business visits have also not returned to their pre-pandemic levels, with business visits being 27.3% below their 2019 level. Similarly, business visits in England remain 22.3% below their 2019 level in 2023, though these had been declining for a prolonged period before the pandemic.
Visits for study purposes have almost returned to their pre-pandemic level, only now 0.6% below their 2019 level. In this regard, the West Midlands is performing much better than England, where visitor numbers for study purposes remain 33.5% below their 2019 level.
OFFICE SPACE
Despite a challenging local economic backdrop of high interest rates and inflationary pressures, Birmingham has had a strong year for office take up. Savills report that in Q1 of 2024, office take-up has been 32% higher than in Q1 2023, with the BBC acquiring the largest local deal in Typhoo Wharf. The Deloitte crane survey has found that the city continues to successfully attract and retain new office occupiers, proving its status as a thriving commercial hub.
Deloitte report that the number of office refurbishments has also increased, which is largely attributable to businesses changing their space to accommodate more collaborative and flexible ways of working postpandemic, but also to create more environmentally friendly spaces that integrate new green technologies.
DAVID MARTIN
BSC DIP CONST MAN & ECON MRICS Principal, Building and Project Consultancy,
Avison Young
BROADBAND
“Occupier demand continues to be resilient across the Birmingham office market, with average annual take up of space totalling a robust 670,000 sq ft. Return to office is continuing to trend upwards, with many occupiers mandating a 3 days a week minimum return. Average office occupancy now stands at 2.6 days a week, increasing from 2.3 days in 2023.
Peak headline rents for central Birmingham have reached £46 per sq ft, having seen 5% growth over the last 12 months, with further growth anticipated over the course of the next three years, and Avison Young forecasting peak rents at £50 per sq ft by 2027.”
Ofcom’s Connected Nations data shows that broadband performance and coverage vary across Greater Birmingham. Tamworth has the best superfast broadband coverage with this being available to 99.3% of all premises, with East Staffordshire having the lowest coverage at 96.1%. Solihull has the best ultra-fast broadband coverage at 92.4% of premises and East Staffordshire has the worst coverage at 54.5%. Cannock Chase has the best full-fibre coverage at 71%, whereas Tamworth has the worst coverage at 12.7%. Solihull also has the best gigabit availability (92.3%), whereas East Staffordshire has the worst (52.7%).
Improving connectivity and performance in the long run, across the city-region, is imperative to unlock the potential of the digital economy, improve accessibility and boost productivity.
HOUSING AFFORDABILITY
ONS data indicates that after an initial drop in the house-to-price ratio in 2022 in the Greater Birmingham area, this increased to 7.54 in 2023, meaning that house prices are 7.54 times the median annual residential earnings. This is lower than the England house price ratio, which was 8.26. The increase in the house price ratio from the previous year was propelled by house prices climbing faster than earnings – in Greater Birmingham, house prices increased by 2.1% whilst earnings only increased by 0.9%. Another part of the reason that house prices have risen so high over the last decade is an undersupply of housing, particularly affordable housing. Whilst the number of houses built in 2022/23 was more than double (124.6% higher than) those built in 2010/11 in the region, the proportion of affordable housing built has declined.
Nevertheless, there is significant variance in house price ratios by local authority within the Greater Birmingham area. Bromsgrove and Solihull all have a house price ratio above 8. Whilst 3 other local authorities have a ratio below 7, these being East Staffordshire, Cannock Chase and Tamworth.
GLENN HARRIS CEO, Midland Heart
“One hundred years ago, Midland Heart’s first legacy organisation, COPEC Housing Improvement Society was founded in the city to raise the standard of housing for its citizens. The housing challenges of today are different but no less pressing.
... in 2023/4 we built 670 new affordable homes, a mix of social and affordable rent, and shared ownership. In doing this, we’ve worked with local authorities to regenerate disused former industrial sites, providing new homes as well as breathing new life into wasteland and former industrial land. ... Just building new homes is not good enough for us, however. As well as building the homes the region needs, we’re also leading the battle against climate change.
... In 1925, COPEC Housing Improvement Society, was founded to be at the forefront of providing good quality housing and services for the people of Birmingham. In 2025, Midland Heart will still be at the forefront of providing the housing and services that our customers rely on, making our homes fit for the next century and beyond.”
AIR POLLUTION
Data from the Department for Environment, Food and Rural Affairs’ Daily Air Quality Index shows that in the West Midlands in 2023, 91.0% of days were scored as having low pollution levels, 8.5% of days had a moderate level, 0.5% of days had high levels, and 0.0% of days had very high levels. Comparative to the previous year this is a moderate improvement in terms of the number of low pollution days, with 89.1% of days in 2022 being low pollution, 0.9% fewer than in 2023.
Comparatively, however, the UK fared better in terms of air pollution in 2023. Nationally in 2023, 94.8% of days were low pollution days, 5.2% were moderate air pollution days and there were no high or very high pollution days.
Based on the data it would appear that the number of days with high to very high levels of pollution have fallen since the introduction of the Clean Air Zone (CAZ) in Birmingham. However, this also coincides with people working from home more often than pre-pandemic, therefore it is difficult to understand the main driver of this fall in pollution.
SUSTAINABILITY
The reduction of emissions is extremely important in the fight against climate change, which is continuing to increasingly disrupt economies around the world. In total, according to data from the Department for Business, Energy & Industrial Strategy, the estimated greenhouse gases emitted in the city-region in 2022 was 9042.9 KtCO₂e, falling 5.1% from the previous year. The largest share of emissions in the city-region derives from the transport sector, which accounts for 35.8% of emissions. The domestic sector, which is emissions largely generated by households, accounted for 26.5%. Industrial emissions then accounted for 11.8% of total emissions. Commercial emissions account for 11.5% of total emissions. All other sectors accounted for less than 7% of total emissions.
Significant progress has been made with efforts to reduce emissions in the region. Between 2005 and 2022, there has been a 37.2% reduction in total emissions, though this is below the average reduction in England of 42.9%.
In the long run, British Gas anticipates that emissions will continue to fall, particularly as sustainability policies take effect. These include the ban on new gas boilers in newly built homes from 2025, the ban on the sale of new fossil fuel-based cars and the reduction in tax on energy-saving products, as referenced by the BBC and the UK Government.
“The Sustainable Development Goals (SDGs), adopted by the United Nations in 2015, represent a global call to action to achieve peace and prosperity by addressing pressing issues such as poverty, inequality, climate change, and environmental degradation.
While the region has made significant strides in affordable and clean energy and climate action, it faces persistent challenges in gender equality and marine conservation.
By focusing on these areas, WMCA can contribute meaningfully to achieving the SDGs locally and globally.”
DR ANNUM RAFIQUE City-REDI
ELECTRIC VEHICLES & CHARGING INFRASTRUCTURE
Whilst transport is one of the most significant pollutant industries in Greater Birmingham, the Department for Transport reports that there has been rapid growth in private ownership of ultra-low emission vehicles (ULEVs) within the city-region. At the end of 2019, before the pandemic, there were 2,876 privately owned ultra-low emission vehicles in the city-region, and this figure has now reached 10,971 as of the end of 2022, reflecting a 281% increase in ULEV ownership.
OFGEM emphasise that widespread adoption of ULEVs in the medium-term largely depends on the availability of charging facilities as the current lack of charging infrastructure is one of the main reasons slowing the uptake of ULEVs by private owners.
As of July 2023, data from the Department for Transport shows that in total there are currently 870 public charging points in the region, which has increased by 32.2% since July 2022. The number of publicly available chargers greatly differs by local authority, with those in Birmingham accounting for 54.3% of electric vehicle (EV) chargers within the region and serving around 8.8 EV cars per charger. Looking across the region, whilst 9.8% of total EV cars are registered in Lichfield, there are only 23 public EV chargers in Lichfield (2.6% of the total in the Greater Birmingham region). This means there are about 46.6 cars registered in the LA per publicly available EV charging point. Across the region in total per EV charging point there are around 12.6 cars, compared to around 11.2 across England.
DR MAGDA CEPEDA ZORRILLA City-REDI
“Research has stated that efficient and sustainable charging infrastructure is crucial for the transition to EVs. The UK government plans to have at least 300,000 public charge points by 2030. In the West Midlands, so far there are charge points at train stations such as Bromsgrove, Longbridge, Solihull, Rowley Regis, Tile Hill, and Yardley Wood. The WMCA is identifying nine sites for ultra-rapid charging stations near key routes. It is also important to highlight that local businesses are also contributing towards the adoption and support of EVs, with … the UK’s largest EV charging hub in Birmingham (able to charge 180 cars simultaneously) and National Express West Midlands investing £150 million to introduce 300 zeroemission buses by 2024.”
CHALLENGES AND OPPORTUNITIES: TACKLING CHALLENGES AND BUILDING ON STRENGTHS
The last few years have been very challenging for both businesses and residents due to a range of events and crises having a regional, national and global impact. Nevertheless, there are several key opportunities on the horizon for the city-region, to benefit from greater devolution and drive economic growth in new and emerging sectors.
BUSINESS COMMISSION WEST MIDLANDS
Convened in 2023 and delivered by the Greater Birmingham Chambers of Commerce’s Insight & Intelligence Unit, in partnership with the Black Country and Coventry & Warwickshire Chambers of Commerce, in 2024 the Business Commission West Midlands published a roadmap for unlocking business growth across the region.
An apolitical body, the Commission is led by an independent Chair and a panel of leaders in enterprise from a range of industries, supported by an expert advisory panel.
Over 130 organisations participated in the evidence hearing stage of the Commission and a further 400 local businesses were surveyed as part of the evidence base for the Roadmap for Business Growth.
Following the publication of this Roadmap, the Chambers are now working with stakeholders and partners to make the Commission’s recommendations a reality as well as directly supporting businesses in embracing the opportunities and overcoming the challenges identified.
RAJ KANDOLA Director of External Affairs, Greater Birmingham Chambers of Commerce
“The Business Commission West Midlands was set up to present a clear voice to regional and national stakeholders on shifting the dial on the region’s economic growth potential and embedding long-term change.
... three overarching themes emerged from our engagement with the wider business community ... Firstly, businesses found the publicly funded business support ecosystem too fragmented and difficult to navigate –it was clear that enhanced levels of devolution would offer an opportunity to create longer-term simpler structures aligned to local business needs.
Secondly, businesses wanted the government to show a palpable sense of urgency and ambition across areas such as Net Zero and AI otherwise they felt the UK would risk falling behind our international competitors. Finally, it was essential for national and regional actors to create the conditions for businesses to upscale and grow at every stage of their journeys – whether that is start-ups, scale-ups or existing large and multinational players.”
DEVOLUTION
In 2023, the West Midlands Combined Authority secured a Trailblazing Devolution Deal and budget windfall of more than £1.5bn to drive economic growth in the region. The deal includes, amongst other measures, greater retention powers over business rates, greater flexibility on brownfield regeneration, funding to deliver affordable housing at pace, a grant to support the devolution of bus service operators and greater funding to retrofit housing. This will provide greater capacity, flexibility and capital for local leaders to respond to local challenges and needs.
Most recently, at the 2024 Autumn budget, the WMCA also secured a departmental-style ‘single settlement’, giving local leaders unparalleled control over spending on devolved areas including adult skills.
“Research conducted by City-REDI in collaboration with the Chartered Institute of Public Finance and Accountancy has shown that city-regions with established devolved powers can create stability by developing and implementing clear strategies and visions. ... A shift towards greater local autonomy could lead to several outcomes for the West Midlands, including opportunities for policy innovation and influencing national policy, and more responsive governance. While these changes offer significant potential benefits, they also come with increased responsibilities. The future of devolution in the West Midlands and its impact in the region will partly depend on how well regional leaders can leverage new opportunities.”
DR CHARLOTTE HOOLE City-REDI
DR ABIGAIL TAYLOR City-REDI
JEFFREY WRIGHT
Strategic Lead for Policy and Devolution, West Midlands Combined Authority
“The deeper devolution deal was a landmark moment in the region’s devolution journey ... By March 2023, when the trailblazer deal was signed, it had reached over 70 pages, contained over 190 commitments, and was worth approximately £1.5bn to the region.
... The single most important commitment in the deal, the one other mayoral combined authorities are most eager to see extended to them, is the commitment to devolve an ‘integrated funding settlement’ –combining the majority of the funding we receive for adult skills, housing and regeneration, local transport, decarbonisation and local growth. The settlement is not about giving the region more funding, but providing more flexibility over how funding is used and what it can be spent on –so that we can better align the investments we make to our circumstances, needs and opportunities.
To really seize the opportunities of devolution, we need to do what Whitehall cannot – and leverage local and regional partnerships, insights, intelligence and ideas to inform what we deliver, and how we deliver it.”
INVESTMENT ZONES
Investment Zones are areas in the UK where the government, local authorities, businesses, and other partners work together to encourage investment and innovation. The goal is to create more high-quality jobs and boost economic growth.
In the 2023 Autumn statement, then-Chancellor Jeremy Hunt announced a new Investment Zone in the West Midlands.
The West Midlands Investment Zone will be powered through three specific sites: Birmingham Knowledge Quarter, Coventry & Warwick Gigapark, and Wolverhampton Green Innovation Corridor. Each site will be catalysed by a combination of public capital investment, and in some instances, tax incentives.
This Investment Zone is expected by the West Midlands Combined Authority to create £5.5bn of growth and 30,000 jobs across the West Midlands within the next ten years. It will focus on driving growth in advanced manufacturing, green industries, health tech and underlying digital technologies and seek to draw in a private sector investment of £2bn.
INDUSTRIAL STRATEGY
In October this year, the UK government launched its industrial strategy green paper. The strategy aims to improve the UK’s economic growth, with a white paper to be published in Spring 2025. Key sectors of focus, which the government feels can bring about the most robust growth include advanced manufacturing, clean energy industries, creative industries, defence, digital and technology, financial services, life sciences and professional and business services.
The government has established a council of regions and nations, including government ministers and mayors, to ensure successful collaboration and it is anticipated that mayors of devolved authorities (such as the West Midlands Combined Authority) will be given new powers to grow sectoral clusters.
STEVE RIGBY Co-CEO, Rigby Group plc
“We have to invest in and nurture the young people that businesses need. This means closer integration with the business community, local authority, local education bodies and charities.
The long-term prospects for our city remain positive, though for many of its inhabitants, it may be an uneven path. To achieve the best results and get the most from our existing resources, mapping a long-term regional industrial strategy and getting the vision to be understood and integrated by the other stakeholders will be key. If we have a shared vision, the young of tomorrow will have a fighting chance of success and building their futures here in the West Midlands.”
ARTIFICIAL INTELLIGENCE
The potential opportunities of Artificial Intelligence (AI) and advanced digitalisation are immense. Research by Goldman Sachs suggests that tools using advances in natural language processing could raise global GDP by 7%, while Amazon Web Services and Strand Partners estimate that digital technology could add £520 billion to the UK economy by 2030.
Research by the Business Commission West Midlands indicates that at the end of 2023, 52% of firms in the West Midlands were expecting to increase their investment in technology and artificial intelligence over the following 12 months.
However, West Midlands data from the British Chambers of Commerce’s 2024 Workforce Survey indicates that just 24% of organisations are currently (knowingly) using AI technology. Nevertheless, 50% anticipate AI will slightly (32%) or significantly (18%) increase their organisation’s productivity. 51% of organisations reported that they are confident (42% fairly confident, 9% completely confident) that their organisation is able to apply new AI technologies, however, 30% are ‘not really confident’ and 19% ‘not confident at all’. Supporting the development and adoption of AI in the region will be critical to increasing business productivity and driving local economic growth.
REEN BLAKE-CARR City-REDI
“Artificial Intelligence (AI) has become increasingly prevalent in business practices over the past few years. Companies are leveraging AI to enhance operational efficiency and strengthen cybersecurity. As numerous businesses adopt AI and demand grows, there is a new wave of AI companies that are emerging.
Currently, there are 91 AI businesses within Greater Birmingham, making up 0.05% of total businesses. The highest concentration of these businesses is in Birmingham.
... Despite its growing popularity, AI remains a relatively new sector with significant growth potential.”
“Legislation on Artificial Intelligence (AI) has an important role to play in ensuring worker protections are up to date with emerging trends. Furthermore, global cooperation in legislation is needed to provide a framework for accountability and fairness. Strategy and planning for AI disruption is critical to minimizing risks (job losses) and maximizing benefits (productivity gains). This may include investing in technological infrastructure such as high-speed internet and improving digital literacy to ensure greater inclusion.”
NET ZERO
While more is yet to be done, businesses continue to make good progress to decarbonise their operations and remain engaged in net zero initiatives across Greater Birmingham.
Independent research by the Greater Birmingham Chambers of Commerce found that in 2023 72% of organisations implemented measures aimed at reducing their environmental impact, which was a 7 percentage point increase compared to 2022. Of those businesses who have already implemented measures, 29% of organisations stated that they intend to introduce additional measures in the short term whilst 34% of organisations stated that they intend to introduce additional measures in the longer term.
Surveying by the Business Commission West Midlands in November 2023 found that 42% of businesses in the region were expecting to increase their investment in regards to reducing their carbon footprint over the following 12 months, and 78% felt that it was important to ensure the region has the energy resilience to meet future requirements.
The Greater Birmingham Chambers of Commerce’s Sustainable Business Series, sponsored by Lloyds Bank and University College Birmingham Business School, is supporting local businesses to reduce their environmental impact further by sharing peer-to-peer best practice advice and guidance through events and digital content.
The transition to net zero represents a major opportunity for growth in Greater Birmingham, given the city’s industrial legacy, world-class automotive cluster, leading business services and emerging strengths in cleantech and green energy.
The ONS estimates that turnover and employment in the low carbon and renewable energy economy (LCREE) in the UK are both at their highest level since the first comparable figures in 2015. UK LCREE turnover (in current prices) increased by an estimated 28.0% between 2021 and 2022, from £54.2 billion to £69.4 billion, and UK LCREE employment also increased, by an estimated 8.0% between 2021 and 2022, from 252,300 to 272,400 full-time equivalents (FTEs). The low carbon electricity group within LCREE had the highest turnover (£29.0 billion) in 2022, while the energy-efficient products group had the largest employment (134,900 FTEs).
Collaborative initiatives to further the development of low-carbon technologies in the region include work being undertaken at Tyseley Energy Park to stimulate innovation, demonstrate new technologies and create commercially viable energy system solutions. Located at Tyseley Energy Park, the University of Birmingham’s £8.5m Birmingham Energy Innovation Centre has been designed to promote innovation in waste, energy, and low-carbon vehicle systems. Additionally, the University of Birmingham’s Climate Innovation Platform, supported by HSBC UK and part-funded by the European Regional Development Fund, delivers a series of business development opportunities to support firms committed to driving innovation in energy technologies.
DR MATT LYONS City-REDI
CONTACT US
For queries related to the Birmingham Economic Review for 2024, please contact:
GEMMA DILKES
Policy Officer, Greater Birmingham Chambers of Commerce g.dilkes@birmingham-chamber.com
ALICE PUGH
Policy and Data Analyst, City-REDI, University of Birmingham a.pugh@bham.ac.uk