Report predicts rapid recovery for East Mids economy
A new economic study has revealed that cities in the East Midlands will all be showing rapid recovery rates at the same time as the government’s extended furlough scheme comes to an end next year.
The latest UK Powerhouse report by law firm Irwin Mitchell and the Centre for Economics and Business Research (Cebr), says that the average annual GVA growth in the second quarter of 2021 across all locations is expected to be 23%.
The report reveals that Nottingham is just above this level at 23.2% whilst Derby is expected to record 25% growth and Leicester at 24.9%.
The study, which assumes a substantial proportion of the UK population will have received a Covd-19 vaccine by the middle of next year, highlights a disjoint between the increase in output and employment growth.
Despite rapid GVA growth, Derby’s employment levels are expected to fall by 0.8% annually at the point when the furlough scheme finishes and Nottingham is predicted to see a similar year-on-year 0.6% fall. Leicester is expected to take a bigger hit on jobs with a 5.8% reduction.
| GVA Q2 2021 % YoY growth | Employment Q2 growth YoY | |
| Derby | 25.0% | -0.8% |
| Nottingham | 23.2% | -0.6% |
| Leicester | 24.9% | -5.8% |
| UK Average | 23.0% | -0.7% |
Source: UK Powerhouse
Looking ahead to the end of next year, Derby’s economic output in the year to Q4 2021 is expected to increase by 7.3% to £6.7bn and employment will move back into positive territory at 5.5% growth.
In the same period Nottingham’s GVA is predicted to rise by 6.6% to £9.5bn and its employment growth will be slightly above Derby’s (5.7%). Leicester’s GVA is expected to increase by 6.4% to £7.8bn but jobs growth is the lowest compared to Derby and Nottingham at 3.4%.
The report finds that the cities in the south of England are expected to emerge from the crisis with the most in-tact labour markets with nine out of the 10 locations for the highest job creation being located in the south.
Victoria Brackett, CEO of Irwin Mitchell’s business legal services division, said: “The encouraging news about vaccines should mean that by that by late Spring, consumer spending and business investment will be able to increase significantly.
“Although the labour market is likely to take a hit when the government’s furlough scheme comes to an end, there are some encouraging signs that the economy will perform well next year and employment levels will start to recover.
“It is striking that the southern city economies are set to recover more quickly than the rest of the country in terms of employment growth. In the last three months of 2021, job creation rates in places like Reading, Exeter and Oxford are predicted to be much higher than in the East Midlands.
“The government has talked a lot recently about its levelling up agenda but it’s time for action, not more words.”
Josie Dent, managing economist at Cebr said: “The decision by the Chancellor of the Exchequer to extend the furlough scheme has saved hundreds of thousands of jobs. The impact of the ending of the scheme in March 2021 is expected to be far smaller than it would have been in October 2020, as there is considerable hope that in Spring 2020 the virus will be much more containable. By the end of next year, all Powerhouse cities are expected to be in recovery-phase, with positive annual GVA growth forecast across the board in Q4 2021.”
