Key Sectors of Birmingham

City-REDI, University of Birmingham

This blog post has been produced for the Greater Birmingham Chambers of Commerce to provide academic insight on the findings of the Birmingham Economic Review.

The Birmingham Economic Review 2017 is produced by the University of Birmingham’s City-REDI and the Greater Birmingham Chambers of Commerce, with contributions from the West Midlands Growth Company. It is an in-depth exploration of the economy of England’s second city and is a high quality resource for organisations seeking to understand Birmingham to inform research, policy or investment decisions.

This post is featured in Chapter 5: Key Sectors of the Birmingham Economic Review, which can be found here. You can read the full report and report summary here.

Birmingham has one of the largest concentrations of businesses in the UK outside London. Originally primarily a centre for engineering, over recent decades the Birmingham economy has diversified into primarily a service-based economy, with strong specialisations in financial and insurance activities, education, health, defence, public administration and social work activities, as well as retail, transport, logistics and construction.

The scale and density of the Birmingham economy means that it can generate ‘agglomeration effects’ – those key knowledge interactions between people, firms and organisations – which drive local productivity growth and which allow the city to respond to the challenges arising from global and national changes.

The Birmingham economy is also the key driver within the wider West Midlands economy and its impacts are felt across the whole region and beyond. This justifies the wider economic remit provided for by the creation of the West Midlands Combined Authority, whose formation should allow for a broader and more strategic perspective on policy making.

Both the city and the wider region are today experiencing unprecedented change brought about partly by global economic changes and partly by reductions in public and national expenditure. However, to effectively respond to these changes, crucial to Birmingham’s future success will be its ability to diversify technologically into areas of higher value added and to develop further niche markets for new lines of global trade.

The major challenges and opportunities for Birmingham economy can be summarized as follows:

Challenges:

• Reducing the gap in productivity between Birmingham and the rest of the UK both in the service and manufacturing sectors.
• Securing the city’s long-run competitiveness by diversifying its industries into related sectors with higher value added and with higher technological requirements.
• Attracting and retaining a wide range of skilled workers, from mid-level and applied skills cohorts through to graduate and post-university cohorts, so as to continually upgrade the quality of the local workforce.
• Attracting increased foreign as well as domestic investment in the post-Brexit context

Opportunities:

• With major banks like Barclays, Deutsche Bank, HSBC and RBS relocating parts of their businesses into Birmingham, there is now a significant future potential in the Birmingham financial services sector.
• The greatly improved transport connectivity afforded by the advent of HS2 will boost productivity and growth in knowledge intensive activities such as digital industries and advanced producer services.
• The Birmingham construction sector is booming with the enormous increases in newly available high quality office space for advanced services coming, as well as the new residential schemes to support the development of these crucial sectors.
• The relatively affordable quality of life, public infrastructure and open spaces, allied with strong higher education and major hospital and health services, makes Birmingham a good place for firms and investors to attract and retain highly skilled workers.
• Due to its nationally central geographical location, Birmingham is ideally located to take advantage of ongoing innovations in the logistics, distribution and transport sectors.
• Birmingham’s strong presence in the premium automotive sectors should allow local supply chains to enjoy many of the benefits of the global production and automation revolutions taking place in advanced manufacturing.