3. Chamberlink July Aug 57-80.qxp_Chamberlink 29/06/2021 12:02 Page 62
Sector Focus
Finance
Local economy set to rebound in the summer A combination of Covid restrictions lifting, pent-up consumer demand, accumulated excess savings and a range of government incentives are expected to spark a strong lift-off for the West Midlands economy this summer. This will see the region’s gross domestic product (GDP) grow by a massive 9.5 per cent in 2021 (up from 8.9 per cent forecast in September 2020) and 6.4 per cent in 2022, allowing the economy to reach its preCovid level by the end of the year, according to the latest analysis in KPMG’s UK Economic Outlook. KPMG says the sharp contraction the West Midlands suffered last year was mainly caused by falls in the wholesale and retail trade, although as manufacturing operations were not restricted after the first lockdown, recovery was able to begin quickly.
‘Locally we’ve seen a notable uptick in performance within the manufacturing industry’ However, the longer-term outlook for the manufacturing sector remains uncertain, largely due to the ongoing impact of Brexit on automotive manufacturing, and the West Midlands’ post-pandemic economy is expected to be more reliant on the region’s growing IT and financial services sectors. The outlook for all regions and nations of the UK is one of a recovery in both 2021 and 2022, although at varying speed, with strongest growth expected in the West Midlands, London and the East of England. This reflects the uneven impact of the pandemic across sectors and regions, with a relatively quick bounce-back in manufacturing leading much of the early gains in output. However, as the economy re-opens and restrictions lift, the shift towards a services-based economy will resume across most of the UK.
Karl Edge: Manufacturing ‘uptick’
Karl Edge, Birmingham office senior partner and Midlands regional chairman, said: “Our forecast shows that the pace of economic recovery for the West Midlands has picked up speed, with the region leading the way with the highest projected growth of any UK region for 2021. “Whilst the focus for the last year has largely been on resilience and recovery, businesses have also sought growth where possible, and locally we’ve seen a notable uptick in performance within the manufacturing industry. “Our local IT and financial services sectors are also gaining traction and we expect to see further growth supported by these sectors going forwards. “As restrictions continue to ease, I believe that the Midlands has a bright outlook ahead as an attractive place to live, study, work and visit, being wholly supported by a range of quality businesses, educational institutions, vibrant communities and milestone events like the Commonwealth Games 2022 and Coventry as the UK’s City of Culture 2021.”
Region still an attractive proposition for investors
Simon O’Neill: Positive year for FDI 62 CHAMBERLINK July/August 2021
The West Midlands’ attractiveness as an investment destination proved resilient amid the Covid-19 pandemic, with the region seeing only a slight decline in projects and an increase in its share of the UK market in 2020, according to the EY 2021 UK Attractiveness Survey. The West Midlands secured 61 inbound Foreign Direct Investment (FDI) projects in 2020, down 4.7 per cent from the 64 achieved in 2019. This was a much smaller contraction than the 12 per cent decline in overall UK projects (from 1,109 to 975) and the 13 per cent decline in overall European projects (from 6,412 to 5,578). The good performance relative to the rest of the country helped propel the West Midlands’ share of UK projects from 5.8 per cent to 6.3 per cent. The region secured the fifth highest number of projects among all UK regions and nations in 2020 – maintaining its 2019 ranking.
London secured the most projects in the country with 383. The West Midlands’ top sector was digital technology, which saw 11 projects in the region in 2020, slightly down on the 13 in 2019 – a decline in line with UK trends. The next largest sectors were transportation manufacture and supply with nine projects (down from 13), agri-food with seven (up from six), machinery and equipment with seven (down from 13) and business services with four projects (up from three). Projects were most likely to involve sales and services activities (29 projects, up from 23 in 2019). Meanwhile, manufacturing activities have seen a continuous decline in the West Midlands over the last four years, and although there were 11 manufacturing projects in 2020, this is significantly below the 2015 high point of 38. Logistics activities doubled from five projects in 2019 to 10 in 2020.
Simon O’Neill, office managing partner at EY in the Midlands, said: “Against the backdrop of a global pandemic, the West Midlands delivered a positive year for FDI in 2020. The impact of both the pandemic and the UK’s departure from the EU can be seen in how some of the region’s key sectors and activities have performed too, particularly the big increase in logistics projects as businesses in the West Midlands have reacted quickly to the changes around them.” Birmingham was the West Midlands’ leading location for FDI projects and the only place in the region to feature in the top 10 UK towns and cities, having secured 26 projects in 2020 – a figure above its ten-year average of 19.4. This put the city in fourth position for all UK towns and cities, behind London (383), Edinburgh (36) and Manchester (35). Coventry recorded 10 projects, the joint 12th highest figure in the country.
