Region faces slower economic recovery from the pandemic
The impact of COVID-19 on the region’s key automotive and manufacturing sectors means the West Midlands is expected to be one of the slowest regional economies to recover from the pandemic.
According to EY’s latest Regional Economic Forecast, the more significant impact of the pandemic on the region’s economy in 2020 and 2021 means the West Midlands’ Gross Value Added (GVA) is forecast to be only 5.3% larger in 2025 than it was in 2019.
By comparison, the UK’s GVA is forecast to have increased by 8.3%.
The region’s GVA and employment will grow at a similar pace to the rest of the UK from 2022 to 2025, with average annual growth rates of 2.8% and 0.9% respectively, aided by a period of rapid growth in 2022.
The report sets out the scale of the task needed to level up the UK economy, and reveals that eight out of nine English regions are expected to have returned to their pre-pandemic levels of output by the end of 2022 – with the West Midlands the exception.
Simon O’Neill, office managing partner at EY in the Midlands, said: “While the automotive sector helped the West Midlands power ahead in the years leading up to the pandemic, the impact of COVID-19 on supply chains and demand means the regional economy has more ground to make up than elsewhere.
“With the data showing London recovering from the pandemic more quickly than much of the rest of the country, action is needed to ensure places like the West Midlands don’t get left behind. Greater flexibility on where people work, aided by the pandemic, could help things – as will improvements to regional connectivity like the next phases of the Metro and the development of HS2. Focusing on what attracts people and businesses to a region, attracting the right mix of sectors and job opportunities, and tackling issues that affect quality of life will be key to taking advantage of this. Events like the Commonwealth Games certainly fit the bill.
“As previous EY research has shown, the UK’s Net Zero and levelling up ambitions go hand-in-hand: the billions of pounds of investment required to reach Net Zero present a golden opportunity to transform not only the environmental sustainability of the UK economy, but its regional balance too. The manufacturing and utilities sectors, for example, are key to the Net Zero agenda – and they are vital to regional economies, including the West Midlands.”
“Post-pandemic, the growing importance of some sectors can also be seen in places like Lichfield, which is forecast to be England’s best performing town between 2022 and 2025. From 2023, the town will be home to a new global fulfilment centre for an online retailer and is expected to see its GVA grow 3.6% per year.”
