Region’s cities set for rapid economic growth in 2021 as furlough ends
A new economic study has revealed that cities in the West 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 Wolverhampton is above this level with a 26.1% annual increase with Birmingham expected to record 24.7% growth and Coventry at 21.4%.
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, Birmingham’s employment levels are expected to fall by 0.1% at the point when the furlough scheme finishes and Coventry is predicted to see a 0.7% fall.
According to the report, Wolverhampton’s year on year employment levels in Q2 2021 are expected to stay the same.
Looking ahead to the end of next year, Birmingham’s annual output growth in Q4 2021 is expected to increase by 7.8% and employment will move back into positive territory with 6.2% year-on-year growth.
|GVA Q2 2021 % YoY growth
|Employment Q2 growth YoY
Source: UK Powerhouse
In the same period Wolverhampton’s annual GVA is predicted to rise by 8.3% and its employment growth will be slightly above Birmingham’s at 6.3%. Coventry’s GVA is expected to increase by 7.4% but jobs growth is the lowest compared to other cities in the region at 5.6%.
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.
Chris Rawstron, partner and Head of Irwin Mitchell’s business legal services division in Birmingham, 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.
“According to the report, Birmingham with its prominent manufacturing sector, had the highest proportion of employees furloughed up to the end of July 2020, but like many other areas it has become a lot less reliant on it.
“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 with Birmingham and Wolverhampton outperforming the national average for output and employment growth.
“It is however clear that the southern city economies are set to recover more quickly than the rest of the country in terms of employment growth. 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.”