The latest from the Black Country 

West Midlands Economy Continues to Outperform Other UK Areas

Birmingham City University and Midlands Economic Forum have recently produced a report highlighting the performance of the West Midlands economy. The report highlights that according to the latest Lloyds Bank regional PMI for October:

  • West Midlands PMI rose to 58.2 in October, up from 55.6 previously;
  • Activity is increasing at its fastest rate since the start of the year;
  • New business is expanding due to firmer economic conditions and the depreciation of pound sterling;
  • Both input and output prices are accelerating at their fastest rate since 2011;
  • Growth prospects across the region remain positive.

Midlands Output Chart

Performance across the English regions was firm at the beginning of the Fourth Quarter, with business activity accelerating further. The West Midlands region was again amongst the leading performers, with economic activity appearing to expand at a faster rate than that achieved nationally.

The impetus for this strength of business activity was attributed to gains in international attractiveness, with the depreciation of the pound seen as the principal factor for this, as demand for British products and services firmed. Nevertheless, the weaker trading range of the currency since the end of June was seen as the main cause for the tightening of input process, which has now recorded the largest increase in average price levels in five and a half years.

In the private sector, performance increased further in October, with output and new business growth rates speeding up. Enterprises in the region also boosted employment levels, notwithstanding work backlogs remaining at the same level since September. Although levels of private sector employment increased again, with 13% of all companies indicating that they had added to payrolls, this was largely the result of services providers increasing staff establishment as there was a marginal decline in manufacturing payrolls. Furthermore, tightening labour market conditions across the region have yet to be seen to be contributing to price pressures.

Overall economic growth was 0.5% in the third quarter, and although this was at a weaker rate than that achieved in the second, performance was much stronger than many commentators forecast as a result of the Brexit impact. Indeed, ONS data to date suggests that the impact of Brexit has been muted, although the rate of recovery over the past few years has been disappointing, with productivity growth particularly worrying. The main driver of growth was the services sector, with the recent positive growth trend bringing GDP to 8.2% above the pre-downturn level. However, official data continues to highlight the relatively slow recovery in other output sectors. In terms of productivity, recorded output per hour worked grew 0.6% in the third quarter, an increase on the previous quarter with output per hour exceeding 2008 levels for the first time. Official estimates of comparative productivity, for 2015, suggests that the UK remains 18 percentage points lower than that achieved on average by G7 economies.

sterling chart

The pound’s recent recovery since the election of President Trump appears to be a temporary boost, and unlikely to offset recent upward price pressures. With both pound sterling and the US Dollar now heavily influenced by market perceptions of political impacts, relative currency differentials are likely to be volatile at least until the Presidential inauguration and the timing of the eventual activation of Article 50.

The future direction of the pound, and indeed regional growth prospects, will obviously be heavily determined by the Chancellor’s Autumn Statement on 23rd November, and whether a serious commitment to rebalancing the economy through a comprehensive industrial strategy is demonstrated.

Corin Crane, Chief Executive of the Black Country Chamber of Commerce, commented: “The local economy keeps performing way above most people’s expectations, which is testament to the high quality businesses and entrepreneurs we have across the Black Country. Clearly there will be tough times ahead, with uncertainty following the American elections and also as we move into negotiations with Europe, but we’ll continue to raise the issues of local business at every opportunity to make sure we are prepared for the months ahead.”

Last modified on Tuesday, 15 November 2016 15:19

News Categories

We use cookies to improve our website and your experience when using it. Cookies used for the essential operation of the site have already been set. To find out more about the cookies we use and how to delete them, see our Privacy Policy.

I accept cookies from this site

EU Cookie Directive Plugin Information