Birmingham Economic Review 2022 Summary

Support. Grow.

The annual Birmingham Economic Review is produced by the City Region Economic and Development Institute (GBCC) 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 2022. 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 (October 2022).

“Brexit, COVID-19; recent years’ editions of the Birmingham Economic Review have all opened with reflections on once in a generation events, unprecedented global disruptions and their impact on the local business community. And following Russia’s brutal invasion of Ukraine precipitating an energy crisis this, our sixth edition of the Birmingham Economic review, continues that extraordinary precedent.

“The resilience of the local business community continues to be tested, but there remain significant opportunities for the city-region, not least in ensuring we make the most of the legacy benefits of the Birmingham 2022 Commonwealth Games.

Henrietta Brealey

“We must also maximise the connectivity benefits of investment in both HS2 and localised transport infrastructure, and capitalise on associated opportunities in business decarbonisation and energy resilience.

“While challenges persist, we are encouraged to see positive sentiment about the future of the region reflected in commentary throughout this report from academics, industry leaders and experts. As a Chamber, we have championed the voice of local business since 1813 and we will continue to do so throughout the ongoing economic circumstances, with the persevering aim to make Birmingham the best place to start, grow, move and invest in a business.”

Chief Executive, Greater Birmingham Chambers of Commerce

“The UK has now experienced a series of economic shocks, from Brexit, through the Covid pandemic, the Ukraine situation and subsequent increases in energy costs and food prices, to ongoing uncertainties around interest rates, debt and the strength of our currency. The West Midlands region has been hit harder than most by the effects of these shocks. Regional GVA declined by 11.8% in 2020 and recovery has been slower than in other UK regions.

“Once again, lower income communities are feeling the impact most and we are seeing a growing polarisation between deprived communities and those with the capital assets, skills and income to ride through the downturn.

“We report on the economic and social impacts of these shocks, presenting data and indicators as evidence of the severity of the regional downturn, on businesses and households. But we also highlight that there are significant growth opportunities in the region, many of which would also improve inclusivity. Future growth, which is sustainable and inclusive, partly depends on improvements in our regional innovation infrastructure, which in turn depend on improvements in our skills base.”

DPVC for Regional Engagement and Director of the City-Region Economic Development Institute (City-REDI and WMREDI), Birmingham Business School, University of Birmingham

Prof Simon Collinson

2022: A Year of Change

Global events rock the economic landscape:

• Russia invades Ukraine: causing Europe’s largest refugee crisis since WWII and a global food shortage. The international community imposes sanctions on Russia, pushing energy prices to historic highs.

• The fight against Covid-19 persists: with a varied global response causing an unpredictable and volatile market.

Businesses and individuals face challenges at home:

•

Businesses report pressure to raise prices: The GBCC’s Q2 Quarterly Business Report sees record levels of businesses reporting pressure to raise prices, driven by energy costs and staff shortages.

• The cost-of-living crisis bites: as the ONS report that inflation hits 9.9% in August 2022, driven by price increases in food, energy and fuel.

•

The leadership of the UK changes: Rt Hon. Elizabeth Truss MP is appointed Prime Minister on 6th September, two days prior to the death of Her Majesty Queen Elizabeth II and succession of His Majesty King Charles III.

• The UK economy struggles to recover from the pandemic: Upwardly revised ONS estimates show the UK economy grew by 0.2% in Q2 2022 rather than contracted by 0.1% as previously thought. However, the economy was still 0.2% smaller than pre-pandemic (Q4 2019) and is the only G7 economy to not have recovered yet.

Population - a young and diverse city:

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A young and diverse population: Birmingham is the youngest city in Europe and home to 180 different nationalities. Almost one in two residents belong to an ethnic minority group and more than one in four were born overseas.

• Skills attainment continues to improve: the number of people at NVQ4+ increased from 31.8% in 2017 to 39.7% in 202. The number of people with no qualifications increased in 2021 to 8.7%, but remains significantly lower than 2017 (10.3%).

•

Regional unemployment rates have decreased from pandemic highs: the unemployment rate for the three months to July 2022 was 4.7% for the West Midlands, down from 6.5% in Q4 2020, although slightly up on Q1 2022 when the rate was 4.6%.

• A rise in economic inactivity contributes to tight labour markets: economic inactivity was declining across the city-region pre-pandemic and hit a low of 23.3% in 2020. It rose by 2.1 percentage points in 2021.

• High levels of deprivation: 41% of Birmingham’s lower super output areas are in the top 10% most deprived nationally.

Connecting the city with new opportunities:

• High Speed 2: Construction of the London-Crewe High Speed 2 route is well underway, with almost 25,000 jobs, over 800 apprentices and more than 2,400 UK-registered businesses are already involved.

• Investment in sustainable transport: The Department for Transport has confirmed a five-year, £1.05 billion City Region Sustainable Transport Settlement for the West Midlands Combined Authority, intended to support further extension of the Metro, improvements to bus services, development of new rail stations, multi-modal transport accessibility, sustainable travel, infrastructure maintenance and the improvement of local networks.

• The legacy of the Birmingham 2022 Commonwealth Games: It’s estimated hundreds of millions tuned in globally to watch the Games. Almost £800m of public investment continues to drive regeneration and investment across the city and the Business and Tourism Programme aims to continue the legacy of the Games by promoting the region’s reputation as a leading destination for tourism, trade and investment.

Economy: Crises and Resilience

Already battling through the twin headwinds of Brexit and Covid-19, the national and regional economy have faced new hurdles this year as inflation hit a 30-year high and Russia invaded Ukraine, fuelling the cost-of-living crisis and causing energy costs to surge. The pandemic severely impacted growth, and more so in the West Midlands than other regions, although a robust economic recovery had given local firms cause for cautious optimism.

However, tight labour markets, global supply chain issues and escalating energy prices have created an inflationary environment and drastically changed the economic outlook. Indeed, in September the Bank of England signalled the UK economy may have already entered into a recession projected to last until 2024, coming even as it raised interest rates.

The global, national and regional economy is facing a turbulent and uncertain time and regional resilience continues to be a key factor for long-term success.

Macroeconomic context:

• Latest figures from the Office for National Statistics (ONS) show the UK economy fell by a record 11.0% in 2020, followed by a 7.5% rebound in 2021. Organisation for Economic Co-operation and Development (OECD)’ data shows the pandemic hit the UK harder than the G7, OECD and EU27 averages.

• Upwardly revised ONS estimates show the UK economy grew by 0.2% in Q2 2022 rather than contracted by 0.1% as previously thought. However, the economy was still 0.2% smaller than prepandemic (Q4 2019) and is the only G7 economy to not have recovered yet.

• The Bank of England, although projecting UK GDP growth of 3.5% for 2022, signalled potential for a recession starting in late 2022 and lasting until 2024. Growth projections released in August were for negative growth of 1.5% in 2023 and 0.25% in 2024. This was prior to the release of the government’s Growth Plan on 23 September.

• The Consumer Prices Index (CPI) rose by 9.9% in the 12 months to August 2022, following a new 40-year high reached in July 2022. Inflation is expected to peak at 11% in October, revised down from previous estimates of 13% due to the government’s energy support package for domestic and nondomestic customers. Future inflation may be affected by the new Growth Plan.

• Wholesale gas prices rose by a factor of 27 between May 2020 and March 2022 and electricity by a factor of 11 over a similar period. Energy is directly contributing between a third and a half of CPI inflation.

• Interest rates rose to 2.25% on 22nd September, the highest level in 14 years, as the Bank of England attempted to curb spiralling prices.

• Real household post-tax income is projected to fall sharply in 2022 and 2023, while consumption shrinks.

• A record number of local firms report feeling pressure to raise prices in the Q2 Quarterly Business Report, the second time a new record high was set in six months.

• The Chancellor published The Growth Plan 2022 on 23rd September. The bold Plan introduced tax cuts and supply-side reforms aimed at raising UK trend growth to 2.5%. The Plan caused serious concern amongst the global investor community sparking a run on the pound and pushing up gilt yields. Uncertainty over the reforms and fiscal implications remains.

• UK government debt was 99.6% of GDP at the end of Q1 2022 up from 83.8% in 2019.

The Regional Economy

Latest available figures from the ONS show that Greater Birmingham contributed an estimated £52.6 billion in Gross Value Added (GVA) to the national economy in 2020, accounting for 3.1% of England’s total. In that year, GVA declined by 11.8% – a greater fall than London and other core English cities – as economic activity was significantly hampered by the pandemic and social restrictions. It’s notable that the city-region had been growing at a slower rate than all other core cities in the three years prior to the pandemic.

Some areas suffered more acutely than others: Solihull’s output fell by 14.4% in 2020, whilst Birmingham’s fell by 9.8%. In the three years prior to the pandemic, Solihull had been growing at an annual average of 3.2%, compared to 0.9% in Birmingham and 1.9% across England.

Oxford Economics is forecasting Greater Birmingham’s GVA to be £56bn in 2022 (at 2019 prices), above the city-region’s pre-pandemic level. GVA is then forecasted to grow at an annualised rate of 1.4% to £71.8bn by 2040 (at constant 2019 prices). This is slightly above the growth rate for the three years to 2019 (1.3%).

Productivity

In 2020, workers across Greater Birmingham produced £33.80 of GVA per hour of work compared to the UK average of £37.73. The city-region’s productivity compares reasonably well against other core cities, behind only the West of England (Bristol) at £36.40 and Greater Manchester at £34.00.

Productivity remains weak in comparison to London which produces £50.70 of GVA per hour worked, highlighting the need for levelling up to close the productivity gap, boost competitiveness and deliver prosperity for the city-region. This may seem an insurmountable challenge given the deteriorating economic outlook; however, it must remain a priority for the region’s leaders.

“[The Oxford Economics forecast] reflects the significant impacts places and people have faced but overall suggests the city will get back on track in the long term. In the short term though we can see that Birmingham, like many places globally, faces significant challenges as seen in the data and analysis provided in previous WMREDI monitors. However, this is a baseline and there are potential downsides, such as continued war in Ukraine and Covid-19…but there also significant upsides, not least the longer-term effects of investment from HS2 and Commonwealth Games, both of which have long term impacts difficult to predict [but] could kick start the previous accelerated growth seen in the latter end of the last decade.”

“With a deteriorating economic outlook, it would be prudent for the new Prime Minister to not lose sight of the intrinsic link between the cost of living crisis and levelling up. … For example, proposals outlined in the White Paper relating to skills and recruitment –including the £2.5 billion Skills Fund – could not come at a better time: more than three quarters of firms in Greater Birmingham reported experiencing recruitment difficulties in the Greater Birmingham Chambers of Commerce’s Q2 Quarterly Business Report. … Successfully addressing the region’s skills gap will not only improve prospects on an individual level, it will also ensure that firms can employ skilled workers to boost their output and help rebuild the economy.”

Rebecca Riley Associate Professor for Enterprise, Engagement and Impact, City-REDI, University of Birmingham

Erin Henwood

Policy Advisor, Greater Birmingham Chambers of Commerce

Business Activity

Following the outbreak of Covid-19 and the first national lockdown, the Natwest Business Activity Index for the West Midlands collapsed to a low of 10.9 in April 2020. A reading below 50 indicates contraction. The Index then registered growth in the region for all but two months since February 2021 although at a slowing pace. It slipped to 49.3 in the most recent reading, with nine of twelve UK regions seeing a contraction in business activity as of August.

The New Business Activity Index was also showing decline for nine regions, including the West Midlands which registered 48.5 – although this was a better reading than most.

Concerns about inflation remain high with almost all regions posting record, or near record, increases in input and output prices in the spring although pressures have since eased.

“Over the past four quarters (Q4 2021- Q3 2022) the Greater Birmingham business community has seen a steady downturn in their turnover and profitability expectations… It is perhaps no surprise that confidence has taken a hit when 55% of firms are expecting to increase their prices over the next three months. Energy prices are a major concern for employers at present- of those businesses that are expecting to increase their prices over the next 3 months, 31% cited rising utility costs as the primary factor behind the decision.”

Consumer Activity

National ONS data shows that domestic consumer spending remained 1.9% below pre-pandemic (2019) levels for the first six months of this year, adjusted for inflation. Spending in certain categories has grown with communications being +12%; education +8%; furnishings, household equipment and house maintenance +6%; restaurants and hotels +6% and food and drink +5% over the same time period. Spending on transport has declined by 20% and health by 14%.

High inflation and a squeeze on household incomes are dampening consumer spending. The GfK Consumer Confidence Barometer decreased to a record low of -41 in June, with measures relating to personal finances and purchasing intentions worsening further. Indeed, consumer moods are now lower than at the start of the pandemic and during the 2008 financial crisis. The Bank of England stated at its September Monetary Policy Meeting that spending had already peaked.

International Trade

Regional trade partially recovered in 2021 with goods exports growing by 3.8% and imports by 13.2% although remained a respective 19.3% and 7.5% below pre-pandemic (2019) levels. Provisional HMRC data for Q1 2022 indicates a continued recovery – with goods imports recovering more quickly than exports - although figures are subject to change and complicated by a new reporting methodology. The trade deficit on goods has widened over the past few years.

West Midlands’ goods exports were hit harder and are recovering more slowly than nationally. The region exported £25.5bn of goods in 2021 accounting for 11% England’s total, down from 13% in 2019.

Machinery and transport equipment accounted for nearly three quarters of the decline in exports to the European Union (EU) and almost all of the decline to the rest of the world. The drastic decline is a result of pandemic-related disruption to global supply chains and suppressed demand for automotive and aerospace vehicles.

Beth Clewes

Insight and Intelligence Services Manager, Greater Birmingham Chambers of Commerce

Goods imports from non-EU countries recovered quickly and are now significantly higher than at the end of 2019, whilst imports from the EU have only recently surpassed this level, similar to the national trend. Though significant changes to EU trade may be attributed to Brexit, the turbulence of the pandemic and its resulting impact on global supply chains also played a major role in disrupting the United Kingdom’s trade activity.

EU trade continues to be impacted by Brexit and the EU-UK Trade and Cooperation Agreement. These changes and their associated barriers have disproportionately affected small and medium-sized businesses who are less likely to have the resources needed to navigate bureaucratic changes to trade effectively. The Greater Birmingham Chambers of Commerce, with the support of the West Midlands Combined Authority (WMCA), has spent the past several years working to inform businesses of the latest Brexit-related developments. This year, the Chamber is delivering a range of activity – including events, briefing resources, and expert videos – to update local firms on ongoing Brexit-related issues.

“There has never been a better time to explore markets outside the EU, notably in the Commonwealth countries and emerging economies, as well as some under-explored markets in North America. Our research finds that firms have increased activities in exploring these markets since the Brexit Referendum… supporting firms to export should be the priority, especially small and medium sized firms that are productive enough to have exported in the past but facing hurdles to continue exporting.”

“Many of the challenges [experienced last year] are still present: the complexities associated with Brexit compounded by the coronavirus pandemic; the global supply chain is still in a vulnerable position; the soaring costs of shipping and demand on transportation is causing businesses to review their suppliers and their finances. In addition we have the difficulties of the cost of living crisis with businesses seemingly left out of support packages, the hike in energy costs… as well as the impact of the war in Ukraine. These factors have all exacerbated an already difficult situation for businesses.

…The year has been a reflective, challenging but exciting year in many respects for international trade and overseas engagement and whatever the situation, know that the Chamber can support your business to navigate the international trade challenges and opportunities ahead.”

Foreign Direct Investment

Statistics from the Department for International Trade show that 62 inward investment projects to the Greater Birmingham area in 2021/22 – both single and multi-site – created 2,063 new jobs and safeguarded 93 existing jobs, the fourth highest number of investment projects for a LEP area in the country. Figures for prior years are not available at the LEP level. In the same year, the wider West Midlands region received a total of 143 inward investment projects, just two less than 2020/21 but 14 less than 2019/20. Nationally, there was a slight increase in the number of projects in spite of a steep decline to recover from in the previous year. Total job creation and safeguarding at the regional level has declined 11% over the past two years, despite increasing 42% nationally.

Jun Du

Professor of Economics, Aston Business School

Mandy Haque

International Director, Greater Birmingham Chambers of Commerce

General trends indicate Biotech, Pharmaceuticals, Environment, Infrastructure and Transportation, and Renewable Energy are growth sectors, whilst investment into Advanced Engineering, Aerospace, Business and Consumer Services, and Creative Media has fallen.

Sector Performance

As a result of the pandemic and the associated disruption, the composition and demography of Greater Birmingham’s economy saw a number of changes in 2020 – figures are based on the most recent available regional data up to 2020 and national data up to Q2 2022 from ONS:

Business, Professional and Financial Services remained the largest sector, accounting for a third (£17.2 billion GVA) of the city-region’s economy in 2020. Though the sector declined nationally by 8.3% in Q2 2020, it had made a full recovery by Q2 2021. As of Q2 2022 the sector was 4.6% above pre-pandemic levels.

Advanced Manufacturing and Engineering suffered a 17% decline across the city-region in 2020. It fell from the second to fourth largest sector by GVA share. Nationally, manufacturing output recovered quickly and was strong throughout 2021. As of Q2 2022 the sector was 6% above its pre-pandemic level. The sector is benefitting from reshoring activity as manufacturers look to increase the resilience of their operations and supply chains. A Make UK survey showed that 42% of manufacturers have increased their proportion of suppliers in Great Britain in the past two years.

The Public Sector increased in size over the course of the pandemic and became Greater Birmingham’s second largest sector with 13% share of total GVA.

Life Sciences and Healthcare saw strong growth (+13.4%) year on year, increasing its share to 10% of the city-region’s economy.

Digital and Creative experienced slight growth to £3 billion GVA, attributable to the increasing pace of digitalisation.

Cultural and Sport – including Accommodation, Food, and the Arts and Entertainment industries –suffered a 43% decline across the city-region, reaffirming the difficulties experienced by the beleaguered sector during the pandemic. Accommodation and Food Services was the worst affected, with national output dropping to 15.3% of 2019 levels in Q2 2020, although had recovered to 106.8% by Q2 2022. The sector has faced supply chain, cost and labour shortage challenges. Hospitality businesses that survived the pandemic are in a precarious state as the energy crisis bites.

Retail was acutely impacted by protective measures introduced to control the spread of Covid-19 with the sector falling at a national level to 69% of 2019 output in Q2 2020 and struggling to recover since. Newly released data from the ONS shows it remains 17.5% below its 2019 level as of Q2 2022. Bricks and mortar retail has been particularly hard hit whilst internet sales climbed from 19.2% of total sales in 2019 to 36% in Q1 2021. Over 27,000 shops closed nationally between 2020 and 2021 with two thirds being independent retailers according to the Centre for Retail Research.

Construction output fell nationally to 63.4% of 2019 levels in Q2 2020 although the sector has made a gradual recovery and was 2.9% above 2019 output as of Q2 2022. The sector has been struggling with material shortages, input cost inflation, and skilled labour shortages.

Transport, Storage and Communications was 1.8% above its pre-pandemic level as of Q2 2022.

Automotive remains significantly down. Data from the Society of Motor Manufacturers and Traders shows that UK monthly volume of output in 2021 was almost 40% down on 2019 and is still not showing signs of recovery in 2022. More than a third of all automotive employment is clustered in the West Midlands.

The main risks to the regional economy include: persistent inflation and its erosion of purchasing power; rising Covid-19 infections which could lead to further disruption; the long-term consequences of Brexit, not least on trade and the labour market; investor concerns about the UK’s fiscal outlook which could push up borrowing costs; economic, social and spatial inequality and the consequences of failing to deal local and regional disparities; and skills shortages which were identified as the most pressing threat for the next 12-18 months in a Russell Reynolds survey.

“The Automotive sector is a source of innovation and competitive advantage for the West Midlands if this is in decline new areas need to be identified and supported to soften the landing of a shock in the sector…. Automation and electric vehicles are potential sources of growth for the region. However, it is likely that the skills lost to [internal combustion engine] automotive manufacturing decline might not be a close match to those in demand from these new industries. As such, a long-term view of the future skills required for the region should be taken to ensure a successful transition.”

“At this point last year, we had just progressed to Stage 4 of the Government’s roadmap … Cut to the present and we continue to operate under ‘normal’ conditions externally but recovery conditions in all of the markets we serve. We continue to face extreme challenges of price volatility, across power consumption and a high inflationary environment across all other costs, including the highest salary challenges I have seen in 30 years of leading businesses. However, the Group has an ambitious plan to return revenues, service offers and profitability back to pre-pandemic levels. And as things currently stand, things are progressing well.

“…The Birmingham 2022 Commonwealth Games has served the region well - a global advocate for our arts, culture, and diversity. This has already provided us with the opportunity of huge legacy benefits as a business, primarily because of our Proud Host Venue status.”

Partner and Solicitor, Wildings Solicitors and Committee Member, Asian Business Chamber of Commerce

“The disproportionate challenges faced by ethnic minority led businesses have further been impacted by the coronavirus crisis, inflation, energy prices and the Commonwealth Games.

… At a national level, there needs to be better-quality data by the Government, which is collated and published, identifying better access to finance and support, implemented through coherent plans to support businesses, and a strategic approach to addressing the impact of economic factors which disproportionately affect ethnic minority ledbusinesses. This must be addressed within the Government’s strategic plans for levelling up in the Midlands.”

Dr Matt Lyons

Research Fellow, City-REDI, University of Birmingham

Paul ThandI CBE DL CEO, NEC Group

Neelam Afzal

Business: Disrupted Markets

Recent years have proven difficult for businesses with the pandemic being a greater challenge for many sectors than any time since the Second World War. Whilst the economy has largely recovered from the direct hit brought on by the pandemic, supply chain issues, staff shortages and inflation all continue to pose challenges. Meanwhile, traders have been adjusting to new post-Brexit trading arrangements with the EU following the UK’s formal departure in 2020.

Businesses have a critical role to play in delivering regional growth and levelling up aims. They are essential drivers of growth, investment, jobs, productivity and innovation necessary for progress across economic, social and environmental domains. Achievement of objectives in these areas becomes much harder without a strong and dynamic business base.

Business Demography

As of 2021 there were 75,005 enterprises registered in the Greater Birmingham region. More than a third (34%) were in the Business, Professional and Financial Services sector, with a further 17% in Retail and 13% in Construction. The count fell by 5% from 2020 with the year over year change entirely accounted for by an unexplained fall in the number of enterprises in the Business, Professional and Financial Services sector. However, this looks to be an anomaly within the ONS data and the count remains 2.5% above that in 2019.

There were year-over-year increases in the number of enterprises in Public Sector and Education (+6.7%), Retail (+3.5%) - which reversed the decline seen in 2020, Life Sciences and Healthcare (+2.4%), Construction (+2.4%) and Cultural and Sport (+3.3%). Logistics and Transport fell back by 9.4% as the pandemic-related boom subsided although was still 9.2% higher than in 2019. Discouragingly, the number of enterprises in the Low Carbon and Environmental Tech sector declined by 5.3% and is below that in 2019.

Nine in ten private businesses in the city-region are micro-sized (0-9 employees). Only 290 businesses (0.4% of the total) are large in size (250+ employees) although the count has continued to grow since at least 2016.

Survival Rates

Following several years of decline, business survival rates notably improved in 2020 despite the challenges presented by the pandemic. ONS figures show that out of 17,665 businesses born in 2019, 92% remained active in 2020 – the highest one-year survival rate since the cohort born in 2016. Two-year survival rates improved for businesses born in 2018, with 66% still active in 2020 – a markedly better rate than for those born the previous year (51%).

The extensive range of Covid-19 related business support measures introduced in 2020 was instrumental in helping businesses through the health and economic crisis. Despite this, the long-term trend for business survival rates remains downwards.

Sector level detail is only available at the national level and indicates that businesses in Property and Finance and Insurance sectors may have struggled to survive during 2020, whilst those in Education and Health fared better.

Lending

2020 and 2021 saw rapid growth in lending to small and medium-sized enterprises (SMEs). Though the pace of lending has since declined, it remains at a higher level than prior to the pandemic. Lending to large businesses also increased at the start of the pandemic, however the rate of growth has since remained relatively steady.

Despite worsening economic conditions, the Bank of England has reported that debt servicing remains affordable for most businesses and major UK banks have considerable capacity to support lending. However, businesses in sectors more exposed to non-essential household goods or volatile energy prices, such as Transport or Manufacturing, are at higher risk of distress.

Financial Distress

The number of company insolvencies across England and Wales remained relatively low during 2020 but has steadily risen since Q1 2021, almost tripling between June 2020 (741) and March 2022 (2,119). There has been a slight decline in recent months but the number remained relatively high at 1,933 for the month of August 2022.

The rise in insolvencies coincides with the unwinding of Covid-19 support schemes, including Bounce Back Loans and Business Interruption Loans, which closed in March 2021. Whilst they were replaced by the Recovery Loan Scheme, running between April 2021 and June 2022, ongoing disruption in supply chains and customer markets combined with rising interest rates and energy prices has added to financial pressures.

Covid-19 support may also have allowed some businesses to continue trading that would otherwise have folded, under normal (i.e. non-pandemic) trading conditions. These so called ‘zombie companies’, which are unable to pay down their debts, are vulnerable to collapse as the economy stutters and interest rates rise. Think-tank Onward has estimated that one in five British businesses may be ‘zombies’.

“…following the publication of the Levelling Up White Paper at the start of 2022 the Department for Levelling Up, Housing and Communities, in collaboration with the Department for Business, Energy and Industrial strategy, set out a framework for integrating Local Enterprise Partnerships into local democratic institutions…

“The last thing an SME business owner needs to be confronted with as they seek support to survive and grow is another round of re-arranging the policy deckchairs in the context of a stagnating economy. As in Scotland and Northern Ireland, and to a lesser extent in Wales, over many decades, we need a highly visible and effective public policy framework of business support that is respected by the private sector.”

“Office for National Statistics data showed more than 137,000 British businesses closed in the first quarter of 2022, which was a 23% increase on the first quarter of 2021, but this data showed considerable regional disparity with West Midlands business closures being more than double those for London. … Predicting macroeconomic trends is –notoriously – a dismal science but it appears clear that the short term will be rocky for many businesses, whether in Birmingham or the wider UK, and particularly for the construction and manufacturing sectors given their greater exposure to supply chain disruption and inflationary pressures.”

Jayne Hussey

Professor Mark Hart

Deputy Director, Enterprise Research Centre, Aston Business School

Partner, Head of Birmingham Office, Mills & Reeve

Business Confidence

Despite strong headwinds, businesses in many regions remain optimistic about the future, although there has been a softening in outlook since the start of the year. Business leaders in the West Midlands are more optimistic than in most other regions. NatWest’s Future Activity Index posted a reading of 67.8 for the region in August, higher than all other regions except Yorkshire and Humber (74.0), South East (68.3) and London (68.0). The reading has fallen from a recent high of 80.3 at the start of the year.

Investment

Business investment across the UK has suffered considerably since the onset of the pandemic, with activity falling to levels last seen in 2011, and is considered one of the major contributors to poor UK productivity. Though recovery appears to be underway, investment in Q2 2022 was still 6% below Q4 2019. There has been a notable lack of growth in business investment since Q3 2016, following the Brexit referendum.

Innovation

Innovation - the development, commercialisation and adoption of new products, process and services - is essential to address the UK’s productivity and wider societal challenges. It has garnered much attention in recent years through the Innovation Strategy, Levelling Up White Paper and stated intentions to make the UK a science superpower on the world stage.

UK investment into Research and Development (R&D) lags many other industrialised nations. The OECD average for total spending – including public and private sources - was 2.5% of GDP in 2019 having risen steadily throughout the course of the 21st century. Some nations, including Germany and the USA, now spend more than 3% annually. In contrast, the UK spent just 1.7% of GDP on R&D in 2019, barely changed since the 1.6% spent in 2000.

Much R&D investment is spatially concentrated in the Greater South East (GSE): London, South East and East of England regions. The Levelling Up White Paper seeks to increase public investment in R&D by at least 40% outside the GSE by 2030 and leverage at least twice as much in private sector investment.

Gross expenditure on R&D

ONS data shows that West Midlands’ expenditure on R&D from all sources totalled £2.9bn in 2019, representing 8.5% of England’s total and more than Wales, Scotland or Northern Ireland. Regional per capita spending was £492 compared to the England average of £606, although this falls to £402 per head excluding the GSE.

West Midlands R&D activity is undoubtedly driven by business with the sector accounting for 81% of the region’s total R&D investment in 2019, far more than the average for England as a whole (69%) and unsurpassed by any other region. The region receives a relatively small share of government, UKRI, higher education and non-profit R&D funding.

Business expenditure on R&D

West Midlands business expenditure on R&D has increased over the past decade at a faster rate than nationally. It reached £3bn in 2018 (at 2020 prices) accounting for 12% of the England total, up from 6% in 2010. However, expenditure fell between 2018 and 2020 to £2.26bn, or 9.3% of England’s total. Most recently available figures for 2019 show that a very high proportion of regional business R&D investment is into transport and other manufacturing related areas.

“Analysis of overall UKRI funding…show[s] that London is the main location of partners on UKRI funded projects with West Midlands-based participants. This pattern dominates over intra-regional collaborations in the West Midlands, and relatively little collaboration takes place with other UK regions.

“These patterns of publicly funded R&D collaborations raise several questions in light of the government’s future agenda and UKRI’s delivery strategy. These investments appear to be reinforcing long-term patterns of growth, focusing on past strengths, like automotive manufacturing in the West Midlands. They also seem to be maintaining the dominance of London.”

Innovation potential

The region is primed to deliver innovation-led growth. It is host to several research-intensive universities, including University of Birmingham and University of Warwick, and benefits from high levels of business investment in R&D. Government intentions to boost R&D outside the GSE present a huge opportunity for Birmingham and the West Midlands, especially if increased public funding follows business-led R&D.

Analysis by City-REDI found that the metropolitan (WMCA) area has a higher science and technology intensity than most other comparable UK areas as measured using scientific publication and patenting data. Translating these innovation inputs into new products, services and processes is important for generating prosperity. Whilst the UK as a whole underperforms international comparators in this area, City-REDI analysis suggests the West Midlands does relatively well.

The region’s five universities could have a significant role in levelling up local communities through R&D activities - a study by London Economics has shown research and knowledge exchange activities can account for half their economic impact.

The region is also home to several internationally leading centres of innovation – known as STEM assets - that help to bridge the ‘valley of death’ between basic research and commercialisation by bringing scientists and industry together. This includes the Warwick Manufacturing Group, the Manufacturing Technology Centre, Tyseley Energy Park, and the forthcoming Birmingham Health Innovation Campus due to open in 2023. The West Midlands is also one of three areas set to receive a share of £100m investment into an innovation accelerator in the coming years.

Professor Simon Collinson

DVPC for Regional Engagement and Director of City-REDI and WMREDI, Birmingham Business School, University of Birmingham

Dr Fengjie Pan

Productivity Research Fellow, City-REDI, University of Birmingham

Dr Pei-Yu Yuan

Research Fellow, City-REDI, University of Birmingham

Innovation challenges

“Enabling SMEs to improve their productivity and competitiveness has a wider range of potential regional impacts. Improving skills is key to both better firm-level productivity and higher wages for employees. This in turn increases household incomes, and in many cases this helps reduce the vulnerability of low-wage communities. SMEs become more resilient and less likely to fail (increasing unemployment), and the regional economy as a whole is stronger in the face of economic shocks.

“… Significant local barriers to innovation can only be reduced meaningfully and sustainably through longterm, embedded relationships and a deep understanding of businesses’ challenges and how to resolve these with new technologies, expertise and skills. Further research at City-REDI is underway to understand more about the specific local and national impacts of these organisations, in the context of current (or the next wave of) government policies.”

“…in recent years Birmingham has become a hub for technology innovation, especially with the recent creation of an innovation hub at Tyseley Energy Park. Innovation is at the forefront of the Birmingham technology scene and can present plenty of opportunities for sectors, such as manufacturing to improve its productivity and efficiency, but whilst this kind of technological disruption can provide plenty of opportunities it can also present/highlights risks that can impact manufacturing negatively and hinder its performance.”

The UK Innovation Survey 2021, covering 2018-2020, showed that the West Midlands region has a high proportion of businesses engaged in innovation activity (48.6%) versus the national average (45.7%).

Despite this, and the relatively high degree of business-led spending on R&D in the region, the Survey showed that only 36.4% of businesses are innovation active in Greater Birmingham. This is second lowest amongst the 38 LEP areas in England.

Whilst businesses in the city-region are more likely to engage in internal R&D (17.2%) than average this is also low relative to other LEP areas. Businesses in the wider West Midlands allocate a lower share of innovation expenditure to internal R&D (32%) than nationally (52.2%).

Professor Simon Collinson

DVPC for Regional Engagement and Director of City-REDI and WMREDI, Birmingham Business School, University of Birmingham

Dr Carolin Ioramashvili

Research Fellow, City-REDI, University of Birmingham

Reen Blake-Carr

Data and Policy Analyst, City-REDI, University of Birmingham

Founder,

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People: Challenging Times

Recent years have proven challenging for residents and workers of the region, with Brexit followed by the pandemic and now the cost of living crisis which is placing a tight squeeze on household incomes. These challenges have more acutely affected the West Midlands and its most vulnerable inhabitants than many other places.

Although the region’s labour market has demonstrated remarkable resilience and skills and wage levels continue to improve, there are also long-standing and deep rooted challenges that are being made more difficult by the circumstances.

Demography

According to Census 2021, more than two million people – 3.6% of the English population – now live in Greater Birmingham, with 56% of the city-region’s residents living in Birmingham and 17% in Solihull. Oxford Economics has forecasted the population to increase by 2.7% to more than 2.1m people by 2040.

The population is relatively young and diverse, especially in Birmingham where 21% of residents are aged between zero and 15 years and 66% are of working age (16-64 years) compared to 17% and 64% respectively for England. Almost one in two residents in Birmingham belong to an ethnic minority group compared to 16.2% nationally and more than one in four were born overseas compared to 15.9% across England. The city is home to over 180 different nationalities and is the youngest in Europe.

“The Race Equalities Taskforce will work with a wide range of stakeholders to address disparities – including within jobs and skills. We have already demonstrated that the ‘Levelling Up’ agenda is dependent on unlocking the potential of our minoritised communities who face additional barriers to success. The Taskforce has secured commitment from the West Midlands Combined Authority’s policy leads that opportunities created through further devolution will be used to advance equality and Inclusive Growth.

Yetunde Dania

Chair, West Midlands Combined Authority Race Equalities Taskforce

“…When the eyes of the world were focused on the Birmingham Commonwealth Games 2022, we celebrated the diversity of our City and region. We must ensure a legacy so that by the time we hopefully host the Olympic Games in 2033, the experience of our diverse communities is more inclusive in every way as this will unlock benefits for us all.”

Dr Nik Kotecha OBE DL

“The time for talking is over, it’s time to act.” That was the McGregor-Smith Review soundbite, when its final report considering the issues affecting black and minority ethnic groups in the workplace was published over 5 years ago. Note the following quote from the report: “For decades, successive governments and employers have professed their commitment to racial equality yet vast inequality continues to exist. This has to change now. …”.

“… We are at a tipping point in history; the pandemic, “me too” and the Black Lives Matter movement created an awareness, empathy and momentum for us to collectively make a difference. A sustained and concerted effort from all of us to tackle the lack of representation of diverse communities will see a significant boost the Birmingham economy.”

Deprivation

The city and region suffer from high levels of deprivation, as measured using the 2019 English Indices of Multiple Deprivation. Out of 1,192 lower super output areas (LSOAs) in the Greater Birmingham area, one quarter are in the top 10% most deprived nationally. 264 of these are in Birmingham, meaning 41% of the city’s LSOAs are in the top 10% most deprived nationally.

Greater Birmingham scores poorly across all seven domains of deprivation but particularly on income and employment where a disproportionately high number of LSOAs sit in the bottom decile nationally. The scores also indicate significant barriers to housing and services and poor living environments. There are also many LSOAs in the least deprived deciles, highlighting spatial inequalities across the region and the need for local levelling up action.

“FareShare Midlands takes good quality surplus food from the food industry into one of six warehouses across the region… teams then redistribute the food to Community Food Members (CFMs). CFMs are local charitable and community organisations who tackle hunger, poverty and the escalating effects of the cost of living crisis.

“This has been another challenging year. The amount of food redistributed has grown to 7,185 tonnes reaching over 60,000 people every week. Last year this food helped over 550 frontline groups provide 16 million meals.

“… By 2019, vulnerable families and individuals were already unable to afford to put basic food on the table and the Pandemic only exacerbated this. By the start of 2022 people already living in poverty found themselves facing the challenges of the current cost of living crisis.”

Fuel Poverty

The West Midlands region has the highest incidence of fuel poverty of all English regions at 17.8% compared to 13.2% of all households across England. In Greater Birmingham 18.2% of households live in fuel poverty, although they are not distributed evenly across the city-region. More than one in five households in Birmingham city are fuel poor compared to 11.7% in Bromsgrove.

Fuel poverty is made worse by the poor energy efficiency of the city’s housing stock. Birmingham has a low average Energy Performance Certificate (EPC) score of 63 compared to 66 across the whole of England. Only one in three properties in the city have an EPC Band of C or above compared to 42% nationally.

Karl George MBE Partner and Head of Governance, RSM UK

Simone Connolly CEO, Fareshare Midlands

“In September 2022, the government introduced the Energy Bills Support Scheme (EBSS)… However, with bills almost doubling the support scheme is not as progressive particularly for low income households. Other policy options are still needed to target the energy crisis and accompanied fuel poverty…Firstly, exploring deeper price protection options or a new social tariff for low-income energy customers…Secondly, quickly managing the repayment of utility debts across the UK to provide financial support for households that have a debt repayment plan with their energy supplier… Thirdly, accelerating the improvement of energy efficiency in fuel poor homes…Other options include considering removing VAT or policy costs from energy bills.”

Household Income

In 2019, Greater Birmingham had a gross disposable household income (GDHI) of £17,988 per head, lower than the average for England of £21,978. GDHI is defined as the amount of money that individuals in the household sector have available for spending or saving after both direct and indirect taxes and direct benefits, reflecting the ‘material welfare’ of the sector.

The GDHI of the city-region has notably declined over the past decade relative to the UK average whilst London’s has continued to increase. The South East region has remained relatively flat although significantly above the UK average. Even after redistribution, incomes are falling relative to the more prosperous South East and London, highlighting the levelling up challenge.

Life Expectancy

Healthy life expectancy across the West Midlands metropolitan area is 60.8 years for males and 61.3 years for females, shorter than the national average by 2.3 years and 2.6 years respectively. Life expectancy varies within the region: females in Birmingham can expect to live 5.5 fewer years in good health, and males can expect to live 8.2 fewer years. The Levelling Up White Paper seeks to shrink the gap between the highest and lowest places by 2030.

“As we look towards the future with the ambition of a golden decade for Birmingham, rightfully taking the stage as England’s second city and the economic, cultural and innovation hub of England, we should be positive and hopeful. However, we also need to be honest and authentic about the challenges behind us and those ahead.

“…The health of the city is directly linked to the wealth of its citizens. Being in a good job is good for your health and being unemployed is bad for your health. But health can also be a barrier to employment, especially for those living with long term health issues, a disability or addiction. As employers we want to have the best people working with us and we want them to be productive and effective in work, this means being good inclusive employers because the current reality is that most of us will face health challenges in our lifetimes unless things radically change.”

Dr Sara Hassan Research Fellow, City-REDI, University of Birmingham

“The rise in the energy price cap will significantly impact households within the West Midlands …

Dr Justin Varney Director of Public Health, Birmingham City Council

“Over the past ten years, there has been a growing recognition in both international organisations…and national governments…that a policy focus on economic growth (as measured by GDP) alone will not necessarily translate into widespread and sustainable improvements in people’s quality of life.

“Evidence from previous economic downturns has shown that young people experiencing the ‘scarring’ effects of a period of unemployment or financial insecurity early in their working lives are more vulnerable to suffering from poorer employment prospects and health outcomes throughout their future lives.

“Even as the threat from COVID-19 fades into the background, the impending financial impact of the growing cost of living crisis on vulnerable young people means that a focus on wellbeing will remain a key feature of any effective levellingup programme.”

Redundancies

Despite the challenges facing the general economy, redundancy rates have remained low so far this year. Although redundancies in the West Midlands did rise during the pandemic, hitting a peak rate of 15.5 per thousand employees between July and September 2020, they subsequently fell back again in 2021. For the three months between May and July 2022, there were 2.0 redundancies per thousand across the region, in line with the national average. It is likely the rate will increase if the UK enters recession and interest rates continue to increase.

Claimants

The number of claimants (of unemployment support) in Greater Birmingham rose dramatically during 2020 and Q1 2021, although it had already been increasing prior to the pandemic. The number of claimants peaked at 113,850 in February 2021 before falling back to 80,270 by June 2022 – although this figure remains significantly higher than pre-pandemic level. The claimant count rate for the wider West Midlands was 4.9% in June 2022, significantly higher than the English average of 3.8%.

The pandemic disproportionately affected younger age groups, with 16-24 year olds comprising a fifth of overall claimants in 2020. That share fell to 17% as of June 2022 although the number of young claimants remained 13% higher than in February 2020.

Unemployment

Employment markets have proved remarkably resilient this year and national unemployment rates have fallen to historic lows. Job losses and unemployment was lower than widely anticipated over the course of the pandemic on account of the Coronavirus Job Retention Scheme which closed on 30th September 2021.

Quarterly ONS data shows that regional unemployment rates have trended downwards from their pandemic highs in late 2020. The unemployment rate for the three months to July 2022 was 4.7% for the West Midlands down from 6.5% in Q4 2020, although slightly up on Q1 2022 when the rate was 4.6%. The rate of unemployment across England was 3.8% for May to July, down from a Q4 2020 high of 5.5%.

Quarterly data is not available at the city-region level. Annual data for Greater Birmingham shows that unemployment continued to rise from 6.3% in 2019 to 7.0% in 2020 and then 7.2% in 2021, a greater rise than nationally.

At 7.6%, unemployment in the region remains higher for males than it does for females, 6.8% of whom were unemployed in 2021. The unemployment rate for ethnic minorities aged 16 and over remains very high at 13.9%, a 2.8% increase since 2019.

Dr Paul Vallance

Research Fellow, City-REDI, University of Birmingham’

Persistent tightness of the labour market continues, with many sectors struggling to recruit suitable workers: indeed, 76% of firms reported experienced recruitment difficulties in the Q2 2022 Quarterly Business Report, the joint highest figure since Q3 2007 and the same as Q4 2021. In response to ongoing hiring difficulties, earnings growth remains strong as firms utilise bonuses to attract and retain skilled workers. However, the Bank of England has recently indicated that labour demand may be starting to weaken and recruitment difficulties moderating.

“As the economy has opened up former concerns around unemployment were superseded by a focus on labour and skills shortages. In some of the sectors hardest hit by the Covid-19 pandemic substantial numbers of workers have left, fuelling a rather different kind of jobs crisis.

“[there is a] need for a focus on active labour market policies to encourage more of the economically inactive – especially, but not solely, older people and those with health conditions, as well as marginalised young people – into work… There is also a requirement to strengthen the supply of skills, among both new entrants to the labour market and the existing workforce.

“However, levelling up is not just about the supply of skills; it is also about the upgrading of job quality to make jobs more attractive and fulfilling.”

Economic Inactivity

A rise in economic inactivity over the course of the pandemic has been a primary contributor to tight labour markets. Economic inactivity was declining across the city-region pre-pandemic and hit a low of 23.3% in 2020. It rose by 2.1 percentage points in 2021 and at a faster rate than nationally (0.7 percentage points).

Rising inactivity was particularly significant amongst 16-24 year olds, increasing from 40.7% in 2020 to 47.7% in 2021 which coincides with a five percentage point rise in inactivity due to study in 2021. Student status is the biggest reason for inactivity accounting for one in three people.

A continued rise in inactivity amongst older working aged people (aged 50-64) from 24.5% in 2019 to 27.9% in 2021 is partly driven by early retirement. Early retirees now account for 10.6% of inactive persons, higher than before Covid-19 (9.8%).

Inactivity caused by sickness has also increased and now accounts for 20.7% of inactive persons up from 19.5% in 2019.

Positively, economic inactivity amongst ethnic minorities has decreased in recent years: down from 37.6% in 2017 to 30.6% in 2021, significantly narrowing the gap between minorities and non-monitories in the workforce. The share of females in the workforce has also increased, though still remains lower than for males. Almost one in three females were inactive in 2021 compared to one in five males.

Hiring Activity

Hiring activity returned to strength quickly in early 2021 and has remained elevated for the past 18 months. Adzuna data shows that the number of online job adverts in the West Midlands peaked in November 2021 at 53% above February 2020 levels. Data indicates the regional job market has been stronger than nationally, although the gap has shrunk in recent months as hiring activity has softened. Regional online job adverts were still 8% above the pre-pandemic benchmark as of early September but were on a downward trend.

On a national level, demand for workers in Transport, Logistics and Warehousing, and Manufacturing remains strong although is softening. Online hiring activity in Construction/Trades has steadily declined back to levels seen in February 2020. Hiring for Wholesale and Retail remains strong.

Professor Anne Green

Professor of Regional Economic Development, City-REDI, University of Birmingham

Paul Daniels

“High demand for skills within financial and professional services in 2022 (up by 58% from June 2020) has created critical shortages across the UK. Birmingham’s position as a major economic and cultural hub with rich talent pools across industry sectors means that the city has become a vital source of talent for the bank. … Crucially, the talent market in the area is able to provide the blend of established expertise and future potential that we’re looking for.

“We are equally focused on ensuring that our existing talent build long and successful careers with us. Leveraging internal talent via internal mobility and providing access to new opportunities ensures their continued development and retains institutional knowledge and expertise within the business.”

Attainment

Skills attainment continues to improve, with the number of people at NVQ4+ increasing from 31.8% in 2017 to 39.7% in 2022. The number of people with no qualifications increased to 8.7%, but remains significantly lower than 2017 (10.3%). Despite the continued and positive improvement, the region still lags behind the national average of 43.1% of adults aged 16-64 having skills at NVQ4 or higher.

The Government announced new plans in its Levelling Up White Paper to devolve control over funding and policy relating to skills and education. In the West Midlands, this includes control over the allocation of the Shared Prosperity Fund – intended to replace EU Structural Funds – to improve education and training facilities across the region. The region’s digital and retrofit skills bootcamps will be extended, with additional bootcamps added in green skills, manufacturing, healthcare and professional services.

Coventry and Warwickshire Chamber of Commerce, Greater Birmingham Chambers of Commerce and the Black Country Chamber of Commerce have also been selected by the Department for Education to deliver a Local Skills Improvement Plan for the West Midlands and Warwickshire. This work will seek to build a stronger, more dynamic partnership between employers and further education providers to ensure that skills provision can be as responsive as possible to local labour market needs.

Dr Abigail Taylor

Research Fellow, City-REDI, University of Birmingham

“Research conducted by WMREDI, indicates that within Birmingham and the wider West Midlands universities and colleges already contribute considerably to up-skilling and reskilling…Nonetheless, the research suggests that to effectively address the skills challenges that the West Midlands is facing and support levelling up, there is need to prioritise expanding partnerships and integration between [higher education] institutes and [further education] institutes and other regional stakeholders. …

“More broadly, the Skills and Productivity Board has emphasised that to fully realise the benefits of individual, firm or government investments in skills, there is a need for complementary investments in other types of capital (namely physical, intangible, financial, social and institutional) - as set out in the Levelling Up White Paper. Longer-term, for levelling up of skills to be fully effective there is need for broader investment across health, education, social services and public transport.”

Employer Brand and Marketing Specialist – Global, Deutsche Bank

Professor Anne Green

Professor of Regional Economic Development, City-REDI, University of Birmingham

“At a time when advanced economies are concerned about ageing populations and labour shortages, Birmingham has one of the youngest and most diverse populations in Europe. We will only, though, be able to yield the benefits of this if we can bring the educational attainment of our young people up to the levels of our competitors.

“…Further devolution heralds the prospect for a more localised approach to improving education and skills… this will be crucial to building the equilibrium between high levels of skills and knowledge, and productive and well-paid jobs, which characterises the most prosperous cities around the world.”

“The scars of COVID-19 will continue to be felt across the screen sector, though in many ways the pandemic’s impact was in tugging at threads that were already loose, highlighting issues with job precarity, a lack of career development pathways and inadequate and mismatched training and skills provision. Though not the only challenge that the creative industries face in 2022, the issue of skills shortages should not be under-estimated. … increased communication and collaboration between industry and the educational ecosystem will ensure a higher proportion of graduates and those entering employment are sufficiently equipped to survive and thrive in both the Television production and video games sectors in the region.”

“Further education colleges have a vital role to play in meeting skills gaps to ensure that our regions businesses have access to a workforce with the right skills to meet current and future demands as well the ability to upskill staff to enable them to progress. Further education colleges are unique in being able to be highly responsive to industry needs along with the ability to combine academic rigour with vocational expertise.

…Through collaboration between education and the business community we can ensure our residents have the skills needed to enter and progress within work, therefore supporting our economy to prosper and grow.”

Professor Chris Millward

Professor of Practice in Education Policy, University of Birmingham

Dr James Davies Research Fellow, City-REDI, University of Birmingham

Rebecca Waterfield

Director of Business Development, South and City College Birmingham

Earnings

A tight labour market is causing earnings to rise quickly, although not enough to counteract the impact of inflation and the squeeze on household finances.

Median gross weekly earnings for Greater Birmingham increased by 6.2% to £491.60 in 2021 (+5.3% to £479.30 when excluding overtime). According to data from ONS, this was a larger increase than for England as a whole, which saw a 5.2% (4.3% excluding overtime) rise.

Full-time and part-time workers experienced larger wage increases than the national average, however this was skewed across the city-region. Wages for full and part-time workers in Birmingham rose slower than the average (2.0% and 6.5% versus 3.7% and 6.9% respectively), whilst they rose much faster in Solihull (4.5% and 19.9% respectively).

The gender pay gap for full-time earnings increased again in 2021: medium full-time weekly pay for females – excluding overtime – increased by 2% to £514.40, but increased by 5.5% to £608.50 for males. The full-time pay gap increased from 12.6% to 15.5%. Female part-time workers still earn more per week than their male counterparts at £214.20 versus £188.30.

Place: Connecting Sustainable Communities

The city-region is one of the best placed and most well-connected areas of the country, both physically and digitally. Continued investment in digital and transport infrastructure alongside the development of high-quality places is necessary for future success and sustainability. Improvements had been taking place for a number of years although the Covid-19 pandemic has complicated the picture by altering mobility and working patterns.

Levelling Up

The Levelling Up White Paper has set out plans for the West Midlands to become a trailblazer region for devolution of ‘London-style’ powers over housing, transport and development. This includes the plans for the West Midlands to become the UK’s first Smart City Region, funding for brownfield regeneration for homes and jobs, a share of the Towns Fund (for Wolverhampton at least), and more say over running local railways. This will enable the region’s leaders to respond to local challenges and needs, not least addressing housing affordability, sustainability and the climate crisis.

Transport Connectivity

Transport connectivity continues to improve across the region with existing projects progressing at pace whilst new plans and funding have been announced for further works.

Construction of the London-Crewe High Speed 2 (HS2) route is well underway with almost 25,000 jobs, over 800 apprentices and more than 2,400 UK-registered businesses already involved. This includes over 160 suppliers from Greater Birmingham of which approximately 130 are SMEs. The Crewe to Manchester Bill was submitted to Parliament earlier in the year whilst revisions to the eastern leg have been made to speed up delivery and save on cost.

The Metro network continues to expand. The Westside extension to Centenary Square in the city centre is already open with the completion of the route to Edgbaston Village due to open imminently. The first phase of the Wednesbury to Brierley Hill extension to Dudley town centre is expected to open in 2024. The Eastside extension is well underway with public realm improvements and utility works taking place in Digbeth.

The Government’s £96bn Integrated Rail Plan was published in late 2021 setting out investment and delivery plans. The Plan seeks to introduce integrated and contactless ticketing systems in the Midlands and commits to progressing work on the Midlands Rail Hub which would improve connectivity across the region and beyond. Capacity between Birmingham and Nottingham and Manchester could treble, whilst journey times could fall dramatically.

A five-year City Region Sustainable Transport Settlement (CRSTS) of £1.05 billion for the West Midlands Combined Authority was confirmed by the Department for Transport in the summer. It is intended to support further extension of the Metro, improvements to bus services including Sprint, development of new rail stations, multi-modal transport accessibility, sustainable travel, infrastructure maintenance and the delivery of local network improvement plans.

As one of the first four UK Future Transport Zones, the West Midlands (with £22m Department for Transport funding), has also been leading in trialling new transport technologies – including connected and autonomous vehicles, e-scooters, demand responsive bus services, Mobility-as-a-Service (and the ‘One-App’), mobility credits, and mobility hubs (bringing together eco-friendly travel information and options). Trials are delivering data-driven insights to help build a more sustainable transport system here, and nationally.

The West Midlands has seen significant improvements in active travel (cycling, walking, and wheeling) too, following Local Cycling and Walking Improvement Plans, and success gaining shares of the £2bn Department for Transport active travel funding announced in 2020 with the national ‘Gear Change’ vision and target that half of all urban journeys will be active travel by 2030 (the West Midlands Cycle Charter targets 10% of all trips to be by cycle in 2033).

“HS2’s mission is to build the best railway in the best way; levelling up the UK economy, setting new standards for sustainability in construction, and creating opportunities for businesses and individuals to deliver the project.

“In January we hit a significant milestone as we deposited the Phase 2b hybrid Bill into Parliament, extending the railway from Crewe into Manchester. The Bill passed its second parliamentary reading in June 2022, winning the vote by a large majority. This is a huge step forward to linking the Midlands to the North of England and opening up further economic opportunities.”

Mobility

Current data supports predictions that the pandemic would cause long-term change in transport patterns. Whilst car usage returned to near pre-pandemic levels quickly following the series of lockdowns, other modes have seen persistent altered usage rates.

Nationally, public transport usage remains below its pre-pandemic level with both rail and bus usage for the year to mid-September being down by almost a quarter. In contrast, light commercial vehicle (LCV) usage remains 16% higher than pre-pandemic with seasonality appearing to be only a minor cause.

Trends in the West Midlands look similar with bus travel still almost 20% below normal demand as of September, although showing a slowly improving trend. Metro ridership looks to have returned to prepandemic levels, although the data is complicated by the total suspension of services between March and June due to issues with the trams and more recently by increased demand during the Birmingham 2022 Commonwealth Games.

Meanwhile, micromobility has grown in popularity over the period, with significant numbers of people now using e-scooters, and the West Midlands Cycle Hire scheme that now includes e-bikes. Everyday cycling and walking surged in popularity at the start of the pandemic, as these were permitted exercise in lockdown, when people were working from home/furloughed in the mild spring weather – walking increased from a 32% share of personal trips to 86%, and cycling from 1% to 4%. Active travel has now returned to more normal levels but still has an elevated share, and the West Midlands aims to continue this, building on the legacy of the Birmingham 2022 Commonwealth Games.

Mark Thurston Chief Executive Officer, HS2 Ltd

“Buses are the mode the most deprived people in our society rely on. DfT data shows that bus passengers are less male, less white, less able-bodied and less educated than the average. 77% of all job seekers - and 87% of young jobseekers - have no access to a car, van or motorbike and are completely reliant on local bus networks.

“…Just as in the pandemic, our bus driver key workers are still getting young people to education, getting adults to work and getting older people to medical care. And they’re helping to save the planet too. Buses remain absolutely crucial to the prosperity, health and happiness of our communities.”

“We are now ‘living with Covid’ – freight and public transport networks operate without restrictions – but personal travel in our city region looks different than in 2019.

“Covid has certainly changed local travel, and ‘pre-Covid’ will not return. Not all the implications are yet clear, and not all are positive, but…Transport for the West Midlands and partners are showing how uncertainty can be managed through interventions that will contribute to sustaining positive change in any scenario –towards a better-connected HS2-ready region, meeting the needs and aspirations of our communities, and Local Transport Plan and WMCA goals of levelling-up, and sustainable and inclusive economic growth.”

Air Travel

Air travel was very heavily impacted by the pandemic with passenger numbers through Birmingham Airport dropping to virtually zero in the second quarter of 2020. A proper recovery did not get underway until the second half of 2021. 2022 has seen continued, albeit incomplete, recovery with passenger numbers at 80-85% of their pre-pandemic level in June and July. The number of passengers through the airport in 2019 was 12.7m. There have been 5m passengers through the first seven months of 2022 according to data from the UK Civil Aviation Authority.

Daljit Kalirai Sales Director, National Express

Charles Prothero Transport Planning Officer, Transport for West Midlands

Nick Barton Chief Executive, Birmingham Airport

“Birmingham Airport (BHX) exists not just for the benefit of BHX but to facilitate and support the strong trajectory of growth that Birmingham and the West Midlands are on. We are uniquely placed to do this. Using our existing runway capacity, we’re on course to serve +18m customers a year by 2033. That’s 50% more than the 12m we served in 2019 (before Covid effectively closed down aviation and reduced our customer volumes and revenue by more than 90%, and our workforce by 43%).

“… In the coming decades the major potential blocker for aviation is carbon emissions. We have this existential threat clearly in focus. By 2033, we aim to have become a net zero carbon airport by implementing genuine low-carbon operations and minimal use of offsets. … We know how to achieve the first two thirds of this. But the final third of our journey to net zero is very challenging. We will need help from innovative minds across this region.”

City Centre

New patterns of mobility, work and tourism have become embedded as remote and hybrid working has become the norm in some sectors and professions. Google Community Mobility Reports show commuting for work was still down by 30-40% on weekdays in Birmingham as of August/September this year. Travel for retail and recreation was also still down but by less than half that amount.

This profound shift could change the long-term role and function of the city centre. Potential scenarios include an eventual return to work, a shift towards more culture, leisure and retail, but also, and worryingly, general decline which would have negative impacts on the built environment, high street and local businesses and levelling up aims.

Despite these trends, Deloitte’s annual Crane Survey demonstrated some recovery in city centre construction activity in 2021. Whilst the number of schemes under construction was equal to 2020 at 34, the number of new starts almost doubled from 10 to 18, including 14 residential, two offices, one hotel and one student accommodation scheme.

“Amidst the uncertainty of the pandemic, the Future Business District study built on work on ten Megatrends in the West Midlands to form a range of potential outcomes for future city centres… [It] showed that people want to travel with purpose, to meet, collaborate, socialise and enjoy leisure time. Whilst it is still too early for the data to show exactly where Birmingham is right now, data from the West Midlands Data Lab shows that prior to 2020 employment in the arts, entertainment, and recreation sectors in Birmingham grew compared to stagnant job growth overall. Nationwide, the Local Data Company found the proportion of leisure units in city centres had also grown from 2016 – 2021.

“…the trend data shows that Birmingham is moving in the direction of a City Playground scenario with increasing culture, leisure, and hospitality offerings in the city.”

Johannes Read Policy and Data Analyst, City-REDI, University of Birmingham

Office Space

Changes in working practices have had major implications for the office market. In May, the ONS reported that 24% of workers were hybrid working and 14% were working exclusively from home. Very few had intentions of returning to the office full-time. Whilst some employers are now pushing for a return to the office this is being met with resistance. A survey by infinitSpace found that two-fifths of UK business leaders were seeking new workspace to meet changing needs and that flexible working and downsizing were on the minds of around half.

Deloitte’s Crane Survey 2022 for Birmingham shows that the total volume of office space under construction continues to fall from the high in 2016 and was approximately 25% below the ten-year average of approximately 800,000 sq ft in 2021. However, strong demand for office developments just outside of the city centre survey area was noted.

Birmingham Office Market Forum statistics show office take-up was 26% higher in 2021 but was still short of its pre-pandemic level. Take-up for the first half of 2022 was 292,860 sq ft, 16% up on the same period last year but still 27% lower than 2020.

There have been many major moves announced over the past year, including to the recently completed landmark 103 Colmore Row and Two Chamberlain Square at the Paradise development. In March, Grade A office development One Centenary Way topped out and will see built environment consultancy Arup relocate its Midlands office and 1,000 staff to the building in 2023.

“We can all see the transformational effect of the recent investment in the city. Our investment makes this a globally significant hub for Arup. We hope this acts as a further signal of our confidence in the city region – not only for an outstanding office – but also for the confidence that we have in developing people, creating new jobs and skills and being at the forefront of the Built Environment for the next 25-year horizon of city growth and wider UK infrastructure investment. The region refers to the Golden Decade post-Games and I think that is the right ambition – but we see it going way beyond that.”

“The announcement in August 2022 that the BBC is intending to relocate the headquarters of BBC Midlands to a new home at the old Typhoo Tea factory, located in the Digbeth Creative Quarter at the heart of Birmingham, offers a great opportunity to consider the key role that creative industries can play in post-pandemic recovery.

“...as we await the publication of the UK government’s sector vision later in 2022, it is hoped priorities will reflect the huge collaborative potential creative talent has outside of its own industries. as the digital revolution continues to envelop all aspects of work and life, and the skills and competencies for all forms of digital production (film, television, video games, AR/VR) share more and more commonalities, Digbeth is wellplaced to return to, and exceed, its pre-pandemic growth.”

Mark Jones Birmingham Office Leader, Arup

Dr James Davies

Research Fellow, City-REDI, University of Birmingham

“The annual amount [of business rates] collected across the city pre-covid was £500 million. With various covid reliefs granted over the last couple of years that amount was reduced, but £500 million is unsustainable, and with a commitment from our new Prime Minister and Chancellor, there must not be a return to that figure.

“…As well as believing the Government has a moral and economic responsibility to completely remove downward transition in Revaluation 2023, we also believe it should restrict the increases for those businesses that have seen significant growth in values since the last list, particularly those in the industrial and logistics sector. … we believe no business should have to pay more than a 15% rise including inflation. For smaller and medium sized businesses, these increases should be limited to no more than 5/10% including inflation. “

New Homes

The number of new homes delivered in the city-region declined in 2020/21 to 6,748 from a high of 7,974 the year before, although the rate of delivery has been steadily increasing over past decade. 1,469 affordable homes were delivered up from 1,368 the year before. The percentage of new homes classed as affordable has averaged just 21% over the past six years and has declined over the past decade. The affordability - house price to earnings - ratio continues to worsen and reached a multiple of 8.0 in 2021. Affordability varies across the region with Bromsgrove, Solihull and Redditch having multiples above 9.0 whilst Birmingham is at 7.1 and Cannock Chase the most affordable at 6.4.

“According to official figures, over 12,000 households live in temporary accommodation in the city, and there are over 14,000 households on Birmingham City Council’s housing waiting list. Affordability doesn’t fare much better, according to the Halifax building society you need an income at least seven times the local median wage to buy an average priced house in the city. Private renting is no more affordable … On top of all that, we know that twenty per cent of all UK carbon emissions come from the ways we power and heart our homes, so we need to address that too if we are to reach the government target of net-zero carbon by 2050.

…I’m extremely proud to say Midland Heart have recently completed building the first homes in the country that meet the Future Homes Standards, some three years ahead of the government target. … Midland Heart has also kept a sharp focus on making our existing homes as energy efficient as possible with well advanced ‘retrofit’ programme to fit new boilers, insulation, and heating.”

Digital Connectivity

Digital connectivity has become even more important during the past few years and is key to realising opportunities in markets such as future mobility, data driven healthcare and life sciences, creative content and modern services. The WMCA’s Digital Roadmap for 2021-2026 aims to improve access to digital opportunities, especially for those in poverty, realise the economic potential of digital, increase usage of digital public services and for the region to become the UK’s best-connected.

Ofcom’s Connected Nations data shows that broadband performance and coverage vary across Greater Birmingham. Birmingham city has relatively low coverage (95.5% of all premises) of superfast broadband (30mbits/second and above) but relatively high levels of coverage for connections capable of 100mbits/ second and above (90% of all premises) and full fibre availability (40.6% of all premises).

John Webber Head of Business Rates, Colliers

Glenn Harris

CEO, Midland Heart

“Connecting to the internet is more important than ever. Openreach – the UK’s largest phone and broadband network - is at the heart of this digital transformation, with our new full fibre network already providing consistent, fast, and reliable broadband, which is future-proof for decades to come.

“More than 700,000 homes and businesses across the West Midlands can already use the new

– an investment in excess of £200 million - and we’re constantly

including Castle Bromwich and Selly Oak recently. … As full fibre

to more communities every week, you’re urged to check if you can sign

to the

speeds available to you.”

5G

According to umlaut, the WMCA area ranks highest in terms of 5G coverage when compared against other UK cities and combined authorities. Geographical coverage was 15.4% in 2021. In terms of cities, Birmingham ranks 3rd at 22.9% behind only Manchester (25.8%) and London (25.6%) and has the highest downlink speed.

Between 2019 and March 2022 the West Midlands was host to the UK’s first region-wide 5G testbed, WM5G. The trial established the region as a leader in 5G and provided case studies based on its use on the road and Metro systems and in the manufacturing and logistics sectors.

Sustainability

Connectivity and place are hugely important in the effort to decarbonise the UK. The largest share of regional emissions derives from the transport sector which accounted for 38% of the total in 2020. The domestic sector, which includes residential heating and cooking as a primary driver, accounted for another third. A shift to cleaner and zero carbon forms of transport and heating, along with more energy efficiency buildings, are a necessity for reaching net zero by 2050 as now enshrined in UK law.

Population adjusted greenhouse gas emissions have been falling since at least 2005 across the cityregion, reaching 3.9 tonnes of CO2 equivalents per resident in 2020, down from 4.4 tonnes in 2019. Provisional data from the Department of Business, Energy and Industrial Strategy suggests that UK emissions increased in 2021 primarily due to increased road traffic, however, emissions remain lower than in 2019, maintaining the downward trend.

Dr Annum Rafique

“The UN Climate Change Conference (COP26) was held in November 2021 in Glasgow, UK. The conference was attended by 120 world leaders and over 40,000 participants.

“…In 2019, ahead of COP 25, the UK became the first major economy to pass the law to reach net zero emissions by 2050. Similarly, local authorities have set their own climate goals and targets. The West Midlands Combined Authority (WMCA) pledged to be the home to the green industrial revolution and be carbon neutral by 2041. Birmingham City Council has developed their own goals through Route to Zero (R20) to be net carbon zero by 2030. Actions are already underway to achieve these goals, and decarbonisation is being promoted in the housing, transportation, energy, and waste sector.”

Kasam Hussain Regional Director, Midlands, Openreach

Research Fellow, City-REDI, University of Birmingham

Air Pollution

Data from the Daily Air Quality Index shows that by the end of September 2022, 88% of days had been scored as having a low-level pollution and 12% as having a moderate level. This compares unfavourably to prior years. By the same point in 2021, 94% of days scored for low levels of pollution and 6% for moderate. The cause is unclear with various factors potentially contributing to the apparent worsening, including atmospheric conditions and travel patterns. Analysis by the University of Birmingham suggests the Birmingham 2022 Commonwealth Games had a negligible impact. Positively, there has not been a day of high of very high pollution since November 2020.

Birmingham City Council introduced a Clean Air Zone (CAZ) to the city centre in June 2021. The CAZ appears to be having a positive impact based on a six-month interim assessment which found early indications of a reduction in pollution and discouragement of non-compliant vehicles from entering the Zone. It does not appear that polluting traffic has been displaced to the ring road.

“Since the Clean Air Zone began operating, the percentage of the most polluting vehicles entering the city centre every day has reduced from just over 15% in June 2021 to just over 7% in June 2022. This reduction has helped reduce the levels of the pollutant, nitrogen dioxide.

“Fundamentally, the purpose of the scheme is to address the issue of poor air quality … The revenues generated by the scheme are also helping support the delivery of a number of transport projects which are being delivered by the Council and Transport for West Midlands. These projects include investing in the trial of hydrogen-fuelled buses, the rollout of fast and rapid electric vehicle charging points, further pedestrianisation of the city centre, additional investment in cycling infrastructure, expansion of the car-free school streets programme, and improvements to public transport.”

Electric Vehicles

There has been a rapid increase in the number of ultra-low emission vehicles (ULEVs) in use across the city-region. At the end of the first quarter 2022 there were almost 8,300 privately owned ULEVs and over 15,200 company owned ULEVs on the roads, representing about 1.7% of all licensed vehicles according to data from the Department for Transport.

Charger availability lags the national average, with there being 32 chargers per 100,000 people across Greater Birmingham compared to an average of 48.7 across England. There is a slightly higher than average concentration of rapid chargers at 9.1 per 100,000 people. Availability varies with Birmingham having a lower concentration than Solihull and Bromsgrove.

Transport for West Midlands/West Midlands Combined Authority is playing its role in helping improve access to charging, for instance via its Mobility Hubs innovation project, and via CRSTS, as part of the Local Transport Plan vision, which lists electrifying transport as one of its three ‘primary changes’. As part of a city-wide Electrical Vehicle charge point strategy, Birmingham City Council are rolling out an initial 394 fast (22kw) and rapid (50kw) charge points across the city by the end of 2022.

Councillor Liz Clements

Cabinet Member for Transport, Birmingham City Council

Opportunity: Building on Strengths

This year’s Birmingham Economic Review paints a challenging picture for businesses and residents in the context of crises affecting the regional, national and global scale. however, great things are happening in the city and region and the best days lie ahead, not least due to the Birmingham 2022 Commonwealth Games which thrust Birmingham onto the international stage and enhanced its attractiveness as a destination to visit, do business and study. Huge opportunity exists to build on growing sectors that benefit from clusters of internationally significant innovation activity.

Birmingham 2022

The hosting of the Birmingham 2022 Commonwealth Games was a major moment for the city. As the largest sporting event since the 2012 Olympics it was delivered successfully and in record time, an impressive feat given disruption caused by Covid-19 in the run up.

An early review by the Department for Digital, Culture, Media and Sport highlights the immediate impact of the sporting event. It is estimated almost half the UK watched or attended the 11-days of sport whilst hundreds of millions tuned in globally. A record 1.5 million tickets were sold and more than 5 million people came to the city centre, a 200% increase on the same period in 2021.

Over 40,000 jobs and skills opportunities were created by the Games, including 14,000 volunteer positions, and over 7,500 people were trained. Almost £800m of public investment continues to drive regeneration and investment across the city.

Sustainment of the positive economic, social and environmental impacts is key to a lasting legacy. The Business and Tourism Programme aims to do this by promoting the region’s reputation as a leading destination for tourism, trade and investment, for key sectors including future mobility, business, data driven healthcare, creative and digital technologies, and the sports economy.

lives of people.

We will have to wait until 2023 to discover the true economic impact and for the first time we will also report on social impact. … There are signs that the Games has kickstarted something special in Birmingham… And it doesn’t just stop. A number of our programmes are already confirmed to continue, and we intend to keep the positive impact flowing through the establishment of a legacy charity: United By 2022.”

“…[using] the Socio-Economic Impact Model for the UK (SEIM-UK)…We [City-REDI] estimate that the Birmingham 2022 Commonwealth Games will lead to an increase in output of £77-£106 million, an increase in GVA by £37-£51 million and create between 1,037 and 1,439 jobs (FTE).

“…for every £1 visitors spent on the games £1.75 was generated throughout the economy [and]…for every £1 million visitors spent 23.7 FTE jobs (or job-years) are created… the impact is largely concentrated in the West Midlands (UKG3) with 90% of the change in GVA as a result of the games being contained in the region.”

Nicola Turner MBE

Director of Legacy, Birmingham 2022 Commonwealth Games

“The

Dr Matt Lyons Research Fellow, City-REDI, University of Birmingham

“…although research has suggested time and time again that the hosting of major sporting events does not create sustainable positive sport and physical activity legacies, the expectation persists that the [Birmingham 2022] Games will generate a legacy for physical activity and wellbeing to ‘inspire and offer targeted opportunities for the people of the West Midlands to improve and sustain levels of physical activity’.

“Our findings offer two key messages concerning policy learning: First, the findings serve as a warning that the legacy promises for major sporting events such as the Commonwealth Games must be realistic. Second, there is a need for proactive planning and concrete, sustainable mechanisms – beyond the hosting of events and the building of stadiums – that support sport and physical activity participation.”

“It has never been more important to showcase our sector strengths and cement our reputation as a truly global region. The Business & Tourism Programme (BATP), led by WMGC in collaboration with the Department for International Trade and VisitBritain and the first programme of its kind to be a formal accredited part of the Games, is designed to boost the economic impact of the Commonwealth Games.

“The 2022 Commonwealth Games served as the ultimate shop window for the West Midlands, shining a spotlight on our outstanding sporting, cultural and business credentials. We now need to ensure the eyes of the world remain firmly on our region as we seek to create a lasting legacy.”

Tourism

Birmingham is the third most visited city in Britain, after London and Manchester, for both day visits and overnight visits. An average of 25.9 million day visits were made between 2017-2019 and there were 205,000 overnight visits in 2021. Prior to the pandemic, inbound international tourism to the West Midlands had been growing significantly faster than for the UK as a whole.

Although recent crises have had a major impact on tourism – Visit Britain forecasts inbound visits to be at 65% of 2019 levels this year – tourism remains a major opportunity. The sector accounted for £9.6bn of economic value in the Greater Birmingham area and 135,725 jobs in the WMCA area in 2018. Although most visitors were domestic or day trippers, just over half of international tourists to the city came for business and have a higher average spend.

Increased awareness on the back of the Birmingham 2022 Commonwealth Games is an opportunity to grow international tourism, also drawing on cultural brands such as Peaky Blinders, Shakespeare and the sports teams. India is a key growth market given strong regional family and business connections.

Green Economy

The UK is arguably a leader in clean growth, having achieved a 44% reduction in territorial emissions between 1990 and 2019 whilst the economy grew 76%, and having been the first major economy to legislate for an 80% reduction by 2050.

Andy Phillips

Head of Research, West Midlands Growth Company

Dr Shushu Chen

Lecturer in Sport Policy and Management, University of Birmingham

Katie Trout Director of Policy and Partnerships, West Midlands Growth Company

Businesses across the city-region have been making good progress to decarbonise their own operations and supply chains but must go further. Despite being a major industrial region, overall per capita emissions and industry specific per capita emissions are lower than average. Greater Birmingham’s industrial emissions have fallen by 57% since 2005 and account for 1.7% of all UK industrial emissions. According to Make UK, almost half of UK manufacturers are either implementing or developing a net zero strategy for their organisation, driven primarily by energy cost reductions, although a quarter also recognise the benefits of accessing higher value ‘green’ opportunities.

The transition to net zero represents a major opportunity for growth given the city’s industrial legacy, world class automotive cluster, leading business services and emerging strengths in clean tech and green energy.

The ONS estimates there are up to 104,000 business in the UK’s Low Carbon and Renewable Energy Economy (LCREE) accounting for between £38.6bn - £43.9bn of turnover, 189,000 - 227,000 employees, and exports of over £6bn (figures for 2020). The manufacturing sector generates more than a third of LCREE turnover and is of particular importance for energy efficient products and low emission vehicles87% of turnover from low emission vehicles comes from the manufacturing sector.

The UK’s automotive industry has become increasingly concentrated in the West Midlands, with almost one third of jobs located in the region as of 2018, more than double the next region. As a leading region for the manufacture of motor vehicles, the transition to low emission models is both a risk and opportunity. The region’s leading brands have already announced plans for electrification of future models, including Jaguar Land Rover, Bentley and Aston Martin. The supply chain will be supported by plans for a gigafactory located south of Coventry which is targeted for production from 2025.

Low carbon heat is another key growth area since domestic sector emissions, primarily driven by residential heating, account for 24% of total UK emissions. Although only accounting for £1.5m or 3.5% of LCREE turnover in 2020, low carbon heat is considered to be one of the most scalable interventions with strong potential for upskilling, job creation and emissions reduction. The opportunity is of significance to the construction sector but would also benefit the manufacturing sector further up the supply chain. Retrofit activity is already gathering pace across the region through Net Zero Neighbourhood Demonstrators and The 3 Cities initiative, both potentially supported by the National Centre for Decarbonisation of Heat which is the subject of a Levelling Up Fund bid.

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“The latter half of the past decade has certainly thrown up some challenges, which, although not unique to Birmingham, acutely affected the region more so than others. Despite these challenges, the United Kingdom’s ‘second city’ holds great promise. Located in the heart of UK manufacturing, with a large business and professional services sector, growing tech, health and digital sectors, all supported by leading higher education institutes, the city-region is well positioned for future growth. Not least in industries that have potential to create high skilled, well paid and good quality jobs, but also that hold potential to tackle climate change and other pressing societal issues.

“Perhaps nowhere exemplifies the scale of potential better than the east of the city-region which stands at the nexus of green growth through major investments into clean energy, vehicle electrification, mixed-use development at Arden Cross and sustainable transport infrastructure, including HS2”

Higher Education

“Birmingham is a region committed to being at the forefront of the Green Economy. … Greater Birmingham and Solihull LEP’s (GBSLEP) Low Carbon and Environmental Goods and Services (LCEGS) sector was worth £6.3bn to the GBSLEP’s economy in 2019/20, indicated by the value of sales in the sector. These sales were generated by over 2,800 businesses that employed 48,000 people in the sector in 2019/20 as highlighted by Sustainability West Midlands. Furthermore, employment across GBSLEP’s Low Carbon and Environmental Goods and Services sector in 2019/20 was 48,322, which increased from 41,408 in 2017/18. It’s clear that the Green Economy has significant value to Birmingham, with increasing levels of jobs, businesses and investment being seen across the region.”

Birmingham’s global reach extends beyond tourism and culture. The city is home to five of the UK’s best teaching and research-led universities, most of which are attended by significant numbers of overseas students. The UK has a world leading higher education sector which is a major exporter of services. UK revenue from education related exports and transnational education activities grew to £23.3 billion in 2018 with higher education accounting for 69% of the total, representing an increasing share.

An increasing number of overseas students are choosing to study at UK universities. Whilst the number of students from EU countries is relatively stable, the number of students from China and India, and to a lesser extent the Middle East, has increased significantly in recent years. This partly follows a change to visa and immigration rules, announced in 2018/19 and coming into effect in July 2021, that allows international students two years to find work after graduation, or three years for PhD graduates.

The number of non-EU international students enrolled at Birmingham’s five universities has increased by 30% since 2017/18, rising from 14% to 16% of the total student count. The share of EU students has declined slightly from 5% to 4%, although this is the same level as in 2015/16.

Universities have an important contribution to make to the Levelling Up Agenda and local economic development through their research, teaching and engagement activities.

Kelvin Humphreys

Policy and Data Analyst, City- REDI University of Birmingham

Kuran Singh

Policy Advisor, Greater Birmingham Chambers of Commerce

Professor John Goddard OBE

Professor of Universities and Cities, City-REDI, University of Birmingham

“…Through collaborative research with business, public authorities, and the community and voluntary sectors, universities can contribute to innovation in all manner of organisations, including helping them confront global challenges like climate change locally. They can use their independent status and analytical insights to bring all stakeholders together in the co-creation of knowledge. Through education they contribute to the skills needed to link research to innovation and ensure that students from less advantaged areas have access to local employment opportunities so that they do not need to move away. Last but not least, they have global reach and can help attract and inward investment to their city and region.”

“Of the total number of UK-domiciled graduates…in Birmingham [universities] who were in employment 15 months after completing their course, 53.1% stayed in the West Midlands for work. The rest…moved to other UK regions (or outside the UK), predominantly to London (14.3%), the South East (7.2%) and the East Midlands (5.8%).

Dr Kostas Kollydas

Research Fellow, City-REDI, University of Birmingham

“… Increasing graduate retention in the West Midlands could be achieved by improving the opportunities in sectors with auspicious growth outlooks that are adaptive to future skills needs. In this context, investing in growing sectors - such as advanced manufacturing, life sciences, low-carbon, hightech and digital industries - can create good jobs in the West Midlands, thus both helping to retain and attract universityeducated talent to the area.”

About GBCC

The Greater Birmingham Chambers of Commerce is a membership-led business support organisation that has acted as the voice of local businesses since 1813. Today, we continue to connect, support and grow local businesses.

We are one of the largest Chambers in the country, with 2,500 member companies covering six geographic areas across the region (Birmingham, Burton, Chase, Lichfield and Tamworth, Solihull and Sutton Coldfield) and four themed divisions (Asian Business Chamber of Commerce, Future Faces, the Transatlantic Chamber of Commerce and the Commonwealth Chamber of Commerce). Members range from young professionals to SMEs and large, high-profile organisations, including 38 Chamber Patrons comprising companies such as RSM, HS2 and The NEC Group.

About City-REDI

City-REDI was established by the University of Birmingham with over £4 million of investment to support regional economic growth policy and practice through engaged and relevant research. Our core objective is to help accelerate economic growth in the West Midlands city-region. We develop forecasts and impact studies to map alternative approaches to improving the region’s economic prospects. But we are equally concerned with ensuring that growth is inclusive, that government policies and corporate practices improve the life chances of all in the region, as well as lift the competitiveness and performance of our regional economy. Reducing inter-regional inequality across the UK and intra-regional inequalities in the West Midlands is a central goal.

Our team is made up of academics and consultancy services staff as a hybrid approach bringing academic rigour to consultancy delivery. Four world leading professors with expertise in international business, local economic development, innovation and investment, skills supply and labour markets and with a cross team focus on a smart specialisation approach to city region growth. We are an integral part of the Triple A rated Business School and Russell Group university.