Regional economy set to grow – but lags behind the rest of the UK
The West Midlands economy is set to grow by just 0.7 per cent this year – leaving the region trailing behind the UK overall.
The latest PwC UK Economic Outlook reveals that the predicted GDP growth for the UK sits at 1 per cent – triggering an appeal for business to take action now to “move the dial” on the regional economy.
David Morris (pictured), regional market lead and senior partner for PwC Midlands, said: “We know that the West Midlands region has lagged behind in terms of GDP growth for a number of years, but right now is the perfect time for businesses and local government to take action and set out a localised plan for the future.
“Labour’s economic plan is all about growth and PwC’s recently launched Framework for Growth report highlighted the need for businesses and government to work together to deliver sustainable growth and outcomes for the future.
“Elsewhere in the Framework for Growth report, skills, education and talent was identified as the top priority for growth by 68 per cent of the UK businesses surveyed. We have some world-class educational institutions in the region, and some of the UK’s biggest companies are headquartered here.
“I believe that by investing in skills for younger generations and ensuring our current workforce is equipped with skills for the future, we will move the dial on the West Midlands economy, and the time to act is now.”
PwC expects growth to pick up further to 1.7 per cent in 2025 and 1.8 per cent in 2026 while it is expected that headline consumer price inflation will bounce around the Bank of England’s 2 per cent target for the remainder of 2024, due in part to stubborn services inflation.
Meanwhile, corporate insolvencies are expected to rise again this year despite already reaching a three decade high in 2023.
Around one half of sectors are now experiencing growth and the other half contracting. The three sectors with a large proportion of public sector activity grew strongly; health & social work (2.7 per cent), public admin & defence (2.2 per cent), and education (1.2 per cent).
But consumer-facing sectors, such as retail and hotels, continue to struggle as consumers remain cautious. .
Jake Finney, economist at PwC says: “The UK has gone from being a poor-performing outlier on inflation to being one of the few advanced economies where inflation is currently back on target. However, the disinflation process is not complete. Indeed, our main scenario projection is that inflation will continue to hover in and around the Bank of England’s target throughout the rest of the year.
“There isn’t much scope for goods inflation to fall further, so the key ‘known unknown’ is when services inflation will return to more normal levels. Annual services inflation currently sits at around 5.7 per cent, down from its peak of 7.3 per cent. This is higher than what the Bank of England expected in May 2024 (5.3 per cent) and way in excess of its level the last time inflation was at target in July 2021 (1.6 per cent).”
