West Midlands faces slower economic recovery from the pandemic - report
The impact of Covid-19 on the region 's key automotive and manufacturing sectors means the West Midlands is expected to be one of the slowest regional economies to recover from the pandemic, according to EY 's latest Regional Economic Forecast.
The more significant impact of the pandemic on the region 's economy in 2020 and 2021 means the West Midlands ' Gross Value Added (GVA) is forecast to be only 5.3 per cent larger in 2025 than it was in 2019.
By comparison, the UK 's GVA is forecast to have increased by 8.3 per cent. The region 's GVA and employment will grow at a similar pace to the rest of the UK from 2022 to 2025, with average annual growth rates of 2.8 per cent and 0.9 per cent respectively, aided by a period of rapid growth in 2022.
The report sets out the scale of the task needed to level up the UK economy, and reveals that eight out of nine English regions are expected to have returned to their pre-pandemic levels of output by the end of 2022 - with the West Midlands the exception.
Simon O 'Neill (pictured), office managing partner at EY in the Midlands, said: “While the automotive sector helped the West Midlands power ahead in the years leading up to the pandemic, the impact of Covid-19 on supply chains and demand means the regional economy has more ground to make up than elsewhere.
“With the data showing London recovering from the pandemic more quickly than much of the rest of the of the country, action is needed to ensure places like the West Midlands don 't get left behind. Greater flexibility on where people work, aided by the pandemic, could help things - as will improvements to regional connectivity like the next phases of the Metro and the development of HS2. Focusing on what attracts people and businesses to a region, attracting the right mix of sectors and job opportunities, and tackling issues that affect quality of life will be key to taking advantage of this. Events like the Commonwealth Games certainly fit the bill.
“As previous EY research has shown, the UK 's Net Zero and levelling up ambitions go hand-in-hand: the billions of pounds of investment required to reach Net Zero present a golden opportunity to transform not only the environmental sustainability of the UK economy, but its regional balance too. The manufacturing and utilities sectors, for example, are key to the Net Zero agenda - and they are vital to regional economies, including the West Midlands. ”
“Post-pandemic, the growing importance of some sectors can also be seen in places like Lichfield, which is forecast to be England 's best performing town between 2022 and 2025. From 2023, the town will be home to a new global fulfilment centre for an online retailer and is expected to see its GVA grow 3.6 per cent per year. ”
Between 2022 and 2025, GVA in Birmingham is expected to expand by 2.7 per cent per year, marginally below the regional and UK average (2.8 per cent). This is forecast to be led by activity in the professional, scientific & technical, and wholesale & retail trade sectors.
Employment in the city is expected to grow at an average rate of 1.1 per cent per year between 2022 and 2025, underpinned by gains in human & social work and administrative & support services sectors.
Meanwhile, the manufacturing sector is forecast to have a negative impact on the region 's overall labour market performance over the next three years. Despite this, the sector is expected to remain the biggest contributor to GVA in the region between 2022 and 2025.
After Lichfield, some of the region 's fastest growing locations will include Solihull, Redditch, Stoke-on-Trent, Walsall and Coventry.
Across the UK, service and city centre activities are expected to be the fastest growing between 2022 and 2025, with accommodation and food service expected to improve its GVA by 8.6 per cent per year, followed by other services (up 6.7 per cent), administrative and support services (up 5.5 per cent), and arts and entertainment (up 5.4 per cent). The transportation and storage sector is expected to grow 3.8 per cent per year.
By contrast, manufacturing is one of the sectors expected to undershoot the overall annual UK GVA growth (2.8 per cent), with 1.7 per cent growth forecast.
Simon O 'Neill added: “These sector mixes will dictate the longer-term recovery. The North East 's public sector helped the region 's economy weather the pandemic but may mean slower post-pandemic growth. Conversely, city-friendly sectors like digital, science and technology, and services will eventually bounce back, taking places like London and Manchester with them after a slow start.
“The pandemic 's economic impact will be good news for regions with the right mix of sectors. The East Midlands, for example, has long been a professional services, science and transport hub - and the region 's laboratories and vast delivery and fulfilment centres have become all the more important over the course of the pandemic. ”