BER20: Growth could become a watchword again
City-REDI/University of Birmingham
This blog post was produced for inclusion in the Birmingham Economic Review for 2020.
The annual Birmingham Economic Review 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 a high-quality resource for informing research, policy and investment decisions.
This post is featured in Chapter 1 of the Birmingham Economic Review for 2020, on Birmingham’s Economic Outlook Before and After the COVID-19 Pandemic.
Click here to read the Review.
Before the emergency health crisis and subsequent government imposed lockdown, Birmingham’s economy was growingly healthily.
In 2018 Birmingham total GVA was £29bn, followed by the next highest, Solihull, at £9.8m, and Coventry at £9.5m. GVA across the Greater Birmingham and Solihull area has increased by 4.5%, compared to the UK (2.7%) and English (2.5%) change on last year.
In 2018, GVA per hour was £32.7 in the WMCA (3 LEP) area, an increase of 3.8% (+£1.2) from 2017 which is above the UK average increase of 2.2% (+£0.7). Whilst GVA per head lags behind the English average, it was growing substantially and making up the dividing ground.
Growth was the watchword for the city.
The pandemic has set back that progress with a steep and sharp shock. KPMG has forecast that the consequence of the pandemic will cause the West Midlands region to contract by 9.1% in 2020, compared to wider UK contraction of 7.2%.
The data we have available shows that when compared to June 2020, monthly national GDP had risen by 6.6% in July 2020. However, GDP was 11.7% below the levels seen in February 2020.
The Monthly Business Survey (MBS) returns and other external data (including comments from 9,500 businesses) shows that after the easing of social distancing and lockdown measures businesses were reporting a continual increase in output due to an increase in demand.
With the ease of lockdown measures, consumer and client demand has resumed, stimulating the economy and supporting the hospitality sector. Since lockdown measures were eased, the NatWest Markit Purchasing Managers Index (which surveys businesses across the region) has suggested that the economy is growing and regaining lost ground.
The resumption of business activity has created some cause for optimism.
The UK government’s lockdown restrictions caused significant economic harm. GDP fell substantially and output fell off a cliff. The fall was historic. But as Birmingham and the rest of the UK has emerged from the pandemic and lockdown measures eased, output has grown as has growth and business confidence. Regional PMI has registered at historical highs for two consecutive months now, indicating a strong rebound in quarter 3 for the region and the wider national economy.
The difficulty ahead will be in maintaining that momentum and that business confidence in to next year, so that the growth lost in the first and second quarter is quickly recaptured.
This city’s economy, after a period of historic contraction, is indeed starting to recover the GDP lost in March and April. If there are no additional emergency measures introduced during the winter, then growth will again become the watchword for the city.
Ben Brittain
Policy and Data Analyst
City-REDI, University of Birmingham