The State of Britain

A material cut in car production impacts the region, the £250m cost of crossing the West Coast Mainline and the UK’s biggest current regeneration project

Reading Time: 4 minutes

Unemployment in the West Midlands decreased by 4,000 to 145,000 between February and April, a drop of 0.1% to 5.0%. At 2.7% and 5.7% the SW of England and the North East had the lowest and highest unemployment rates in the country. The West Midlands had the second highest rate. The UK unemployment rate stands at 3.8%.

West Midland’s average property prices fell by 0.2% to £195,498 during the month which trimmed the annual growth rate to 2.2%. In comparison, UK prices increased by 0.7% to £228,903 during April which held the annual growth rate at 1.4%.

The West Midlands probably contributed to the shrinking of the economy in April with a sharp fall in car production and an easing of stockpiling by manufacturers. The economy contracted 0.4% from the month before according to the ONS which meant growth for the three months to April slowed to 0.3%. Factory shutdowns designed to cope with disruption from a March Brexit cut UK car production in April by nearly half. Jaguar Land Rover shut down production for a week in April which affected thousands of staff at Castle Bromwich, Solihull and Wolverhampton. The firm is to ask more than 2,500 workers to switch to a four-day week to secure the future of the Castle Bromwich plant where production of the XJ model ends on 5 July. The 37 hours employees currently work in five days would be spread over four. In September 2018 c1,000 workers at the plant moved from a five-day to a three-day week from October until Christmas.

In the automotive supply chain, c180 jobs are threatened as car component manufacturer Mahle, considers closing its plant in Telford. German-based Mahle makes engine systems and components used for mobile machinery, rail transport and marine applications throughout the world. In construction, c200 people have been made redundant at design and construction firm the Shaylor Group after it ceased trading. The company provides services across the UK from its headquarters in Walsall but financial pressures has led to administrators being appointed.

There were more job losses in Burton-upon-Trent, when food processor Kerry Foods announced the closure of its factory. The firm – which has 18 factories across Ireland and the UK – had a ready-made meals contract with Tesco for 19 years but lost it to another supplier in October. About 90% of the work of the factory was production for Tesco so the loss of 900 jobs will impact the local economy.

On the trains, Midlands Connect has submitted a proposal for £2bn of improvements to the rail network between the East and West Midlands. The plans would mean direct services between Coventry, Leicester and Nottingham for the first time since 2004. The upgrade would be completed in phases between 2024 and 2033. Midlands Connect was formed in 2014 and is a collaboration of 11 LEPs, Network Rail, Highways England, central government, 26 local authorities and the business community. It is the body behind long-term transport plans for the region. Rail use in the Midlands has risen by 37% over the past decade but rail capacity has not materially increased. The upgrades would create space for an extra 24 passenger trains an hour, 85,000 further seats a day in and out of Birmingham and an estimated six million more journeys each year. The economic benefit is an estimated £649m pa by 2037. Key components of the spend would be £15m to £25m on freight loops and track improvements in Leicester, £150m to £200m on improving the Leicester Corridor to Birmingham and £15m to £25m on enhancements around Nottingham. Going under the West Coast Main Line at Nuneaton or going over it via a flyover would cost £110m to £250m. Midlands Connect has asked the Department of Transport for £25m to firm up the details in an outline business plan.

Also on the trains, stripped of its West Coast Mainline franchise from May 2021, Virgin Trains plans to launch a new hourly train service between Liverpool and London. According to the regulator – the Office of Rail and Road – it must generate extra demand rather than take revenue away from other operators. Few rail operators run services in competition with franchise holders. Virgin was disqualified from bidding on three franchises after a row with the Department for Transport over pensions’ liabilities. The firm has consistently scored highly in National Rail Passenger Surveys with the latest survey showing it was only beaten by the Heathrow Express.

Also on transport, one of the UK’s favourite private sector roads, the M6 Toll, has raised prices for the third year. The cost of driving on the UK’s only toll motorway will increase by c5% or 50p per journey next month say operator Midland Expressway Limited, although a new weekday off-peak rate will also be introduced. Drivers on long north south drives are unlikely to be deterred from using the Toll but the economic impact of forcing more traffic back onto the M6 will not be welcome. The 27-mile road, from Cannock, Staffordshire to Coleshill, Warwickshire, opened in 2003 at a cost of £900m and has largely been loss making due its debt burden. It was sold in 2017 to a group of Australian pension funds who are likely to now see a profit following a debt restructuring. With most of the original investors likely to have taken a haircut and congestion on the M6 now likely to increase, the merits of UK toll roads remain controversial.

One of the UK’s largest economic development projects, the 11-day Birmingham 2022 Commonwealth Games, will cost £778m, with £184m paid by Birmingham City Council. Some of this cost will be funded by a £50m a loan which will be paid back by Birmingham council tax payers over 40 years. Partners including the West Midlands Combined Authority, LEPs and other Midlands Engine local authorities will also share the ‘local cost’ with three-quarters of the public funding coming from central government. Legacy benefits for the city will include 1,500 new homes, better public transport, improved roads, cycling and walking facilities and other infrastructure like the upgraded Alexander Stadium. Estimates of economic benefit range from £300m – £400m locally to £1bn+ nationally.

More positive news for Birmingham, after consultancy company Mercer found the city had become a more affordable place for firms looking to relocate staff to the UK. The weak pound and low inflation are cited as the key reasons why.