Nottingham set to lead regional recovery from Covid-19, says new report

Nottingham's Old Market Square

It will take four three years for the East Midlands economy to recover to its 2019 size, according to a comprehensive new report on the state of the region.

EY’s latest Regional Economic Forecast shows that the economic growth of England’s cities and the South is on track to outpace towns, the North and the Midlands as the country recovers from the COVID-19 pandemic.

The report also says that the “levelling up” agenda can accelerate with targeted government and local action, and if lessons are learned from the pandemic’s impact on work-life balances.

When measured by Gross Value Added (GVA), the economies of just five out of nine English regions are forecast to be larger in 2023 than they were in 2019. Three of these regions are in the South: London (0.51% annual growth forecast); the South East (0.39%); and East (0.08%). Annual growth is also expected in the North West (0.11%), while marginal growth (0.01%) is forecast in the East Midlands.

The East Midlands’ growth to 2023 will see the region bounce back from being the English region with the third largest decline in GVA in 2020 (-12.45%). Only Yorkshire & Humber (-12.77%) and the West Midlands (-13.58%) are expected to see a larger contraction in 2020.

The region’s growth to 2023 is expected to be led by its cities, which are forecast to see average annual GVA growth of 0.59% compared to 2019. This is the fastest city growth of any region. Nottingham is set to see the fastest growth of all cities in the region, with annual GVA growth forecast to be 0.59% between 2019 and 2023; the city’s employment level is expected to increase 0.4% per year over the same period.

Derby follows with annual average forecast GVA growth of 0.09% between 2019-23. Leicester, however, is expected to see its GVA decline by 2023 compared to 2019 at an average annual rate of -0.14%. Employment in both Derby and Leicester is expected to contract – by -0.16% and -0.13% per year, respectively – by 2023 compared to 2019.

In contrast to the strong forecast for the region’s cities, the East Midlands’ towns are expected to see an annual average decline in GVA of -0.05% per year between 2019 and 2023.

The region’s economic performance in 2020 has been significantly affected by the impact of the pandemic on the manufacturing sector. The sector, which accounts for approximately 15% of the region’s economy saw its GVA decline by -12.14% in 2020 and is expected to be slower than other sectors to recover. Regional economic growth between 2019 and 2023 is expected to be led by the real estate sector.

Simon O’Neill, office managing partner at EY in the Midlands, said: Manufacturing is a vital part of the East Midlands economy, and this sector has been one of the most exposed to the economic impact of the pandemic. Notably, there has been a significant impact on supply chain operations. Alongside adapting to a post-Brexit future, the sector will have plenty of challenges to navigate in the near future.

“However, there are opportunities and manufacturing is one of the sectors which will be most important to supporting the UK’s ‘levelling up’ ambitions. This isn’t just a North-South issue but a Cities-Towns issue, too.

“An estimated 86% of manufacturing activity is in towns or smaller cities outside the South East, while our recent UK Attractiveness Survey found significant investor interest in reshaping manufacturing supply chains and reshoring activity to the UK. Although a difficult near-term is forecast for the sector, opportunities are there longer-term. Across the country and here in the East Midlands, towns are on track to fall further behind our cities unless we take action.

“Technology will play a major role in the sector’s future, so the UK can compete in a way that was not possible when labour costs drove location decisions. A relaunched Industrial Strategy should target emerging opportunities here.”

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