West Midlands towns face being left behind, says new report
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, according to EY’s latest Regional Economic Forecast.
The report also says that the “levelling up” agenda can accelerate with targeted government and local action.
When measured by Gross Value Added (GVA), the West Midlands economy is one of four regions – alongside Yorkshire & Humber, the North East, and South West – not expected to regain its 2019 size by 2023. The region’s GVA is forecast to decline by the equivalent of -0.26% per year between 2019 and 2023. Regional employment is also expected to decline by the equivalent of 0.36% per year over the same period.
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 West Midlands’ GVA is expected to decline -13.58% in 2020, the largest regional decrease ahead of Yorkshire and Humber (-12.77%), and the East Midlands (-12.45%).
Birmingham (-13.47%) is also among the cities expected to see a significant decline in GVA across 2020. As a whole, the region’s cities are forecast to see the equivalent of an average annual decline in GVA of -0.16% between 2019 and 2023, while its towns will see the equivalent of an annual average decrease of -0.29%.
The region’s performance 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 will be led by human health and social work and the public sector.
Simon O’Neill, office managing partner at EY in the Midlands, said: “Manufacturing is a vital part of the West 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, and 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 West 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.”
