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.
Although the UK’s economy has remained one of the stronger economies in 2016, and the labour market continues to be strong with high employment rates, there is continuing concern that this is the wrong type of growth. As an economy we are still too reliant on consumer spending which continues to grow to 2.8% in 2016. Inflation is also outstripping wage growth, which puts the consumer spend growth at risk and retail sales growth is showing signs of faltering in early 2017.
Low employment figures, the lowest for 42 years, hides a trend in the British labour market for empty self-employment, and zero hours contracts. It also raises a concern over why wages are not growing within such a tight labour market, seemingly against economic theory. This is happening globally. ONS estimates that real wage growth was actually 0.4% lower to the end of July than the previous year.
Against this backdrop, official figures show Birmingham’s economy grew strongly in 2015, with GVA standing at £24.8bn, a growth of 5.2% on the previous year.
This gives Birmingham the second strongest growth amongst the 10 core cities, with the largest contribution to growth coming from distribution, transport, accommodation and food sectors growing by 6.8% to £247m.
The city also saw strong growth from business services up by 8.2% to £238m; finance and insurance up by 8.2% to £178m; and construction up by 11.8% to £159m.
The latest West Midlands Purchasing Managers Index (PMI) shows that the region had the 5th highest business activity index amongst the regions, but is showing signs of slowing.
General sentiment in the region is strong. The Chamber’s Quarterly Business Report for Q2 2017 continues to emphasis a positive business outlook in the city-region despite the current world and national climate. However there are things to watch:
Domestic demand: Q2 saw a marginal increase in the proportion of firms reporting a decrease in domestic demand: 15% compared to 13% in Q1.
Birmingham city centre continues to grow with office take up in Q1 2017 39.9% up on Q4 2016.Rents in the city centre are also holding up despite this growth, demonstrating demand remains high.
There are currently 25 schemes under construction in the city, up on last year’s 9 and the 10 year average of 12, and the city was named the most investable city for the second year running by the Urban Land Institute on the back of HS2 and the Curzon Street Regeneration.
This makes for an interesting period, of local growth driven by investor optimism, against a backdrop of national economic uncertainty.