Emerging industries put resilient Birmingham at heart of new economic era – report

Birmingham is poised to become “the beating heart of a new economic era” thanks to high levels of foreign direct investment and excellence in emerging industries such as AI, a new report reveals today.

The 2025 Birmingham Economic Review – produced by the City-Region Economic Development Institute (City-REDI) at the University of Birmingham and the Greater Birmingham Chambers of Commerce – hails the city-region’s resilience in the face of rising costs, inflationary pressures and global trade tensions.

While the regional economy faces a number of short-term challenges, high levels of foreign direct investment (FDI), growing tourism numbers and emerging clusters in AI, clean energy and life sciences are providing optimism for the future.

The West Midlands continues to lead Foreign Direct Investment (FDI) outside London with 130 projects in 2024–25.

However, exports fell amid global uncertainty and proposed US automotive tariffs, which had “an outsized impact” on the region.

And the review warns that businesses are facing new challenges in the labour market due to rising levels of work-limiting disability.

Digital skills shortages and unequal access to technology also risk widening existing inequalities, if unaddressed.

Raj Kandola (pictured), acting deputy CEO at Greater Birmingham Chambers of Commerce, said: “The data in this review tells a story of resilience. The West Midlands remains a leading destination for foreign direct investment outside London.

“Innovation capacity is strengthening, and infrastructure investment continues to underpin long-term competitiveness.

“Nevertheless, challenges remain. Inflation is still the highest among G7 nations, and interest rates have stabilised at 4 per cent, constraining access to finance.

“Export performance has weakened. Though employment is at historic highs, labour market pressures persist, with unemployment and economic inactivity above national averages, and health-related inactivity emerging as a significant barrier to productivity.”

The region is now home to around 180 AI firms - 1.8 per cent of the UK total - and 59 of these were established during first 10 months of 2025.

While digital skills shortages and limited data infrastructure remain barriers to growth, the review says the region’s strong university base and potential for AI-focused infrastructure investment offers growth prospects.

Raj Kandola added: “Against this backdrop, collaboration is critical. Businesses must embrace innovation and digital transformation, while policymakers focus on creating the conditions for investment and skills development.

 “The opportunities are clear - a young, diverse population, a strong university base and emerging clusters in AI, clean energy, and life sciences.

 “Collaboratively, we must leverage these advantages to drive sustained economic growth.”

The review highlights region’s cultural heritage as significant economic asset.

The late Ozzy Osbourne drew global attention to the city’s musical legacy, with his final concert generating £33.8 million in output, £27.6 million of which stayed in the West Midlands.

 According to the review, tourism has rebounded strongly from the shocks of the pandemic, with Birmingham remaining among the UK’s top four destinations behind London, Manchester and Edinburgh.

Major events, such as the 2026 European Athletics Championships and UEFA Euro 2028 are expected to enhance the region’s profile as “a vibrant, globally connected destination, and boost visitor spending further.”

Professor Rebecca Riley, deputy pro vice chancellor for Regional Engagement and co-director of City-REDI, said: “Birmingham is no longer just a city in the middle of the UK, it’s becoming the beating heart of a new economic era.

“It’s where cutting-edge research meets real-world impact, where start-ups scale fast, and where international investors find fertile ground.

 “Globally, we’re forging new trade links, attracting talent from every continent, and showcasing how a diverse, youthful population can fuel creativity and competitiveness.

“With HS2 on the horizon, a thriving university sector, and bold devolution powers, Birmingham isn’t just keeping pace, it’s setting the pace.”