The State of Britain

West Midland’s economic growth near the bottom of the UK economic league but the drop in unemployment the best in England

Reading Time: 4 minutes

Growth in the West Midlands was 1.1% in the year to June 2019 according to estimates from ESCoE. The slight drop from the previous quarter’s growth of 1.2% ranked the West Midlands second worst overall (out of twelve UK ‘regions’) and suggests the region’s economy is stalling. At 2.3%, London had the best performance with Northern Ireland at 1% the worst. The national growth rate for the same period was 1.5%. With the UK economy contracting by 0.2% in the quarter, growth in the West Midlands is similar to most other regional economies which have shrunk.

Unemployment in the West Midlands decreased by 14,000 to 134,000 between April and June, the decrease of 0.5% to 4.6% was the best in England. The South West had the lowest rate at 2.7%, the North East had the highest at 5.3% with the UK rate at 3.9%. The South West also had the highest employment rate at 80.5% which compared with 74.4% in the West Midlands. UK employment was estimated at 76.1%, the joint highest since comparative records began in 1971.

In June, average earnings in the West Midlands increased from to £565 to £577 per week. London had the highest average earnings of £831; the North East had the lowest at £537. In the UK average earnings grew by 3.7% or by 1.8% after inflation.

The West Midland’s average property prices increased during the month, the 0.9% uplift to £198,993 took the annual growth rate to 2.6%; the second best in England. In comparison UK prices grew by 0.7% to £230,292 during June, which left the annual growth rate unchanged at 0.9%.

The government has launched a review of the proposed high speed rail link (HS2) between Birmingham and London, with a decision promised by the end of the year. With £7.4bn already spent, Transport Secretary, Grant Shapps, has refused to rule out scrapping it entirely. Phase 1 (Birmingham to London) is due to open at the end of 2026. In July, the current chairman of the project warned that the total cost could rise by £30bn to £86bn, putting the projects value for money into question.

The impact of the HS2 review on the £137m extension to the West Midlands Metro has yet to be assessed. With the funding in place, Transport for the West Midlands needs Ministers to give it the powers to build the extension but these have not been forthcoming. The project will connect Birmingham railway stations, New Street, Moor Street and Snow Hill and was intended to be operational in time for the Commonwealth games but services will not now start until 2026. The revised plan will see the line built in two halves and connected in the middle once HS2 has built its station.

FirstGroup and Italian firm Trenitalia, are to take over the running of the West Coast Mainline (‘WCM’) train route, connecting London Euston to the West Midlands from December, replacing Virgin Trains, which was barred from bidding. The new contract will operate in two phases. The first will run from 8 December to March 2026, when First Trenitalia will operate the existing InterCity West Coast services. The second phase will run from March 2026 to March 2031, when it will operate the HS2 high-speed rail service. Given the HS2 project has been put under review, this may have to be changed even before First Trenitalia starts operating the trains. The firm said its £117m investment would mean 56 Pendolino trains refurbished, more reliable free Wi-Fi, better catering, and more than 260 extra services each week by 2022. FirstGroup also operates the South Western Railway and TransPennine Express. Virgin’s WCM partner, Stagecoach – which refused to take on pensions risk – has won the right to a judicial review of the decision to block it from bidding. Unlike other franchises Virgin is consistently rated highly by West Midlands travellers. In the latest National Rail Passenger Survey, of the 25 operators in the country, it was ranked second.

Wolverhampton born Robert Jenrick is the new ‘Minister for the Midlands’. The Local Government Secretary says he will work to develop a refreshed Midland’s Engine strategy. Jenrick’s job as Local Government Secretary makes him a Cabinet Minister, one rung up from Northern Powerhouse minister, Jake Berry, who is a Minister of State. To avoid the impression of favouritism, Berry is entitled to attend Cabinet.

A report by an All-Party Parliamentary Group (‘APPG’) of MPs which looks at Post-Brexit Funding for the nations and regions has found that the UK would receive additional EU funding in the 2021-27 spending round. Three additional sub-regions, Lincolnshire, South Yorkshire and Tees Valley & Durham are likely to slip below the threshold of 75% EU average GDP per head that would qualify them for ‘less developed region’ status, but no part of the West Midlands has yet fallen below this level.

Additionally, the EU has proposed that ‘transition region’ status should be extended to cover all regions with a GDP per head between 75 and 100 per cent of the EU average, compared to 75-90 per cent at present. Seven additional sub-regions are likely to slip below the threshold of 100% EU average GDP per head qualifying them for ‘transition region’ status. Again, no part of the West Midlands has yet fallen below this level.

The UK government has promised to replace EU funding to the regions with a new UK Shared Prosperity Fund. If the new sub regions are added, the APPG calculates this amounts to c£1.8bn pa, on top of the c£2.2bn pa already committed as part of Local Growth Fund. Integrating the Local Growth Fund into the UK Shared Prosperity Fund could be problematic. The Local Growth Fund allocates funding to LEPs via competitive bidding whereas the allocation of EU funds uses a fixed formula. How the Shared Prosperity Fund will be allocated and mesh with other funding pots like the City Deals is yet to be determined.