West Midlands ‘output gap’ has risen to £15bn

The West Midlands’ economy is less productive than the national average, and the gap is growing, according to new research released by the West Midlands Regional Observatory.

In the 2009 ‘State of the Region’ report, the Observatory has revealed that compared to the UK average, the economic output gap of the West Midlands – caused by the region’s lower economic output per head of population – has risen from a figure of £10 billion in 2005 to a current estimate of £15 billion.

Speaking at the launch of the report, Rosie Paskins – Chief Executive of the Regional Observatory – challenged the region’s decision makers to work more closely with the research community, in order to stop the gap growing further.

Rosie said,

In simple terms, closing the output gap would equate to the West Midlands’ economy being £15 billion richer, but to close the gap the region needs to face some very tough challenges.

For instance, even before the recession, the number of people not working, and hence not contributing to the region’s economy, was increasing. The recession has exacerbated this, and currently almost a third of the region’s working age population are not in employment.

If we are going to deal with this and other issues successfully, then we need to understand them very thoroughly. The Observatory can shed some clear light on what’s happening, and give vital insight to the region’s decision makers in order that they can make the right interventions and investments, based on real lives and real issues.

Also speaking at the launch of the report, Richard Woolhouse from Centre for Cities said,

There has been a lot of talk about a ‘white collar’ recession focussed on financial services in London and the South East, following the cardiac arrest of the financial system that occurred last autumn. But by mapping the rise in Jobseekers’ allowance claimant count across the UK, Centre for Cities has shown that it’s actually the old industrial areas like the West Midlands that have been hit hardest. London and the South East have done much better, demonstrating that this is not a ‘white collar’ recession at all.

Recovery from recession in the West Midlands is likely to be a long slog, and there will need to be a significant period of adjustment. Projections show that it will take until at least 2020-2021 until Birmingham once again reaches the peak levels of employment seen in 2008.

The Observatory is working closely with the region’s leaders and decision makers in the region, to ensure that the research and information needed to inform the region’s recovery from recession is in place.

Much of the evidence produced by the Observatory so far has been about understanding the challenges we face. It has been backward looking, identifying the current ‘State of the Region’.

As the West Midlands prepares for a slow and difficult recovery from recession, the Observatory will focus more and more on finding better evidence to inform the future state of the region. Through shining some clear lights on what’s ahead, the Observatory can help the region’s decision makers to make better decisions – better evidence leading to better policy.