Cities worst hit by COVID-19 set to make faster economic recovery

Matthew Hammond

UK cities and towns hardest hit by the economic fallout from the pandemic, such as Birmingham, Wolverhampton and Walsall, are likely to make the fastest recovery but are expected to be worse off than at the beginning of the pandemic compared to more resilient places.

New analysis in the latest PwC-Demos Good Growth for Cities report shows that Birmingham, Wolverhampton and Walsall  have seen their economies decrease by more than 11.7% in 2020, yet are among those with the strongest projected GVA growth rates for 2021.
These cities are predicted to recover more effectively than others in 2021, with growth rates of 4.8% and higher, with Coventry predicted to grow by 4.3% GVA.

As the business sectors most impacted by restrictions reopen, the cities most negatively affected due to their sectoral mix will see faster recoveries.

However, a return to pre-pandemic conditions will not necessarily instigate a dramatic upturn in economic activity and these city economies will still be smaller in 2021 than they were in 2019.

The report highlights the deep seated challenges facing many of the worst hit towns and cities which in many cases are those traditionally vulnerable to volatile economic performance.

Other key findings show Birmingham has one of the highest rates of workers on the UK Coronavirus Job Retention scheme, with Birmingham, Solihull and Stratford-upon-Avon all placing 8.9% or more of its workforce on the scheme during 2020.

Birmingham also has the highest take-up rate of Universal Credit, with 8.8% of its population aged 16 to 64 claiming benefits in November 2020 compared to 4.8% claiming benefits in January 2020. Oxford had the lowest percentage of Universal Credit claimants, at 3.8%.

Matthew Hammond, Midlands region leader and Birmingham senior partner, PwC, said: “As a whole, cities in the Midlands have performed well on the environment, owner occupation and income distribution measures on the index. However, this positive performance is also coupled with lower scores in skills, jobs, income and work life balance, as well as the region suffering with high unemployment rates and a strong reliance by local businesses on the UK Coronavirus Job Retention scheme.

“Cities that have the highest proportion of younger people, such as Birmingham, Nottingham and Leicester are likely to face challenges in finding the right employment opportunities for young people. Young workers are therefore entering the labour force in one of the toughest economic environments, which will exacerbate unemployment rates, make employment opportunities even more competitive and potentially undermine social mobility efforts.

“To counter this, local leaders must look to invest in the skills needs of the region to support the next generation into the workforce.

“The pandemic has also led to people living their life much closer to home and the likelihood is some of these lifestyle changes will stay for the medium-term.

“The report sets out a series of recommendations for leaders from across the region and local government, as well as the private and third sectors, as they plan their recovery strategies. Taking a broad approach to economic wellbeing and building resilience will be essential to create liveable vibrant places where people want to live, work and visit.

“The regions’ significant growth over the past five years and long-term growth ambitions and investments in HS2, Coventry City of Culture and the Birmingham 2022 Commonwealth Games will also encourage strong conditions for a recovery.”