Local Enterprise Partnerships need to act to reinvigorate the private sector

Distilling machine CERAM Stoke-on-Tent

Weaknesses in the structure of the West Midlands economy mean that it was hit particularly hard by the recent recession and is likely to see further job losses over the next five years.

Our latest briefing paper (pdf, 408kb), produced as part of our West Midlands Skills Assessment 2010, reveals that the West Midlands has a weaker private sector than other parts of the country. The West Midlands has poorer representation of higher value added activities and high growth firms with the potential to create new, skilled jobs.

As a result the West Midlands has seen its share of jobs in the public sector rise more rapidly than anywhere else in the country. It is particularly vulnerable to job losses from the spending cuts announced by the government.

We forecast that West Midlands Gross Value Added (GVA) will grow by only 8% (£8.8 billion) between 2010 and 2015 and there will be a net fall in employment of more than 38,000 people.

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Office for National Statistics West Midlands newsletter September-October 2010

Office for National StatisticsThis is the last newsletter from ONS West Midlands – the regional statistician service ceased in the West Midlands as of 21 October 2010.

The newsletter contains information on statistical consultations together with recent and planned ONS publications that might be of interest to you.

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What will spending cuts mean for the West Midlands?

Tomorrow sees the long awaited publication of the government’s Comprehensive Spending Review. It will end months of speculation by setting up where the cuts in government spending will fall and how deep they will be. But what might it all mean for the West Midlands?

To try and answer this question, the Observatory has carried out a number of pieces of work over the last few weeks. These are summarised in a new report published today.  Amongst its findings are that:

  • An estimated £43 billion as spent on public services in the West Midlands in 2008-09 and the public sector employed nearly half a million people
  • More than 80,000 public service jobs could be lost in the West Midlands by 2016
  • Up to 300,000 private sector jobs are at risk due to spending cuts, although actual job losses will be lower than that
  • The places which will be hardest hit in the short term are those with concentrations of public sector jobs, such as Birmingham, Bromsgrove, Dudley, Shrewsbury, Stafford, Wolverhampton and Worcester
  • In the longer term, some of these places are likely to recover well, but others will continue to suffer because they have weaker economies. Places most vulnerable in the longer term include Birmingham, Dudley, Sandwell, Stoke-on-Trent, Walsall, Wolverhampton and Wyre Forest (Kidderminster)

The report draws on information from a number of other reports published by the Observatory in recent weeks. These include a briefing paper on the local impact of public sector job cuts, a series of projections based on our Policy Assessment Model and a report identifying locations vulnerable to cuts in public sector spending.

Local impact of public sector job cuts featured on BBC Politics Show

Andy Phillips interviewed for BBC Politics Show

In advance of the government’s spending review announcement on Wednesday 20 October, the BBC Politics Show West Midlands discussed the impact of public sector job losses in the West Midlands.

They interviewed Andy Phillips, Head of Skills Research at the Observatory, and featured our recent briefing paper which examines the local impact of public sector job cuts (pdf, 351kb).

The story is available to watch on the BBC iPlayer for the next six days.

Efficient use of water – a great opportunity

Blog Action Day 2010 water

Once more the West Midlands Regional Observatory joins Blog Action Day. This is an annual event held every 15 October and unites the world’s bloggers in posting about the same issue on the same day with the aim of sparking a global discussion and driving collective action. This year’s topic is water.

Our low carbon research has highlighted that the greatest opportunities for moving towards a low carbon economy are related to ‘decarbonising’ the current business processes. In other words, have more efficient processes in place. This can be achieved either through using resources more efficiently (for example water, electricity and raw materials) or by reducing the amount of waste produced.

Businesses in the West Midlands are already taking advantage of these opportunities. Here are a few examples of companies using water more efficiently.

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Unemployment in West Midlands levels off

Job Centre PlusThe labour market figures released September 2010 show a mixed picture for the West Midlands, with increases in employment and decreases in unemployment, but evidence of a slowing of the recovery.

The claimant count reduced by just 600 out of 159,700, and the unemployment rate remained steady at 8.4%.

Worryingly, unemployment and the claimant count seem to be levelling off at a higher level than they were prior to the recession. With the impact of cuts in public spending yet to be seen, this could mean any knock-on effects in the form of future rises in unemployment could wipe out the recovery seen so far.

Key headlines

Unemployment in the West Midlands has fallen again, but the rate of decrease is slowing. There are 226,000 unemployed people in the West Midlands – 13,000 fewer than last quarter, and 58,000 fewer than a year ago. However, in order to return to the July 2008 level of 163,000, we would need to reduce the number of people unemployed by a further 63,000.

The number of people in employment rose by 38,000 over the last quarter. However, there are still fewer people in employment than prior to the recession, and those working part-time now make up a greater proportion of those in employment.

The claimant rate saw a very small decrease of just 600 this month.

Overall the indications are that the falls in unemployment are beginning to level off. Furthermore, the upcoming public sector cuts and the knock-on effects in the private sector are likely to result in renewed increases in unemployment.

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West Midlands particularly vulnerable to public sector job cuts

Public sector employment has grown significantly in recent years across the UK and has been the key driver of the economy’s expansion. But proposals announced by the government to make £83bn worth of cuts in public sector spending are forecast to lead to the loss of up to 600,000 public sector jobs across the UK over the next 6 years, according to a study1 by Oxford Economics.

The West Midlands economy is particularly vulnerable to the impact of the cuts. Between 1998 and 2008 (latest available figures), the West Midlands saw the most significant increase in dependence on public sector employment in the country2.

The share of jobs accounted for by the public sector increased from 22% in 1998 to 27% in 2008, a rise of 5 percentage points, bringing total public sector employment to some 637,000.

We forecast that between 2010 and 2016 there will be a net loss of nearly 50,000 jobs across the West Midlands and, based on the ratio of the number of private sector jobs dependent on public sector spending and the associated supply chain nationally, a further 310,000 jobs are at risk at private sector firms directly or indirectly reliant on public sector spending3.

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Hyperlocal Govcamp West Midlands

Hyperlocal Govcamp West Midlands is an unconference for local government with an added hyperlocal flavour, taking place in Walsall on 6 October 2010.

The background to the event is ongoing innovation in public sector digital communications through means such as Facebook, YouTube and Twitter. This event is a chance to listen, learn, exchange ideas, talk and contribute to sessions on best practice.

It’s also a chance to learn more about the rapidly emerging field of open data from the perspective of local government officers and web developers.

An unconference is an event where the agenda is developed collaboratively before the event and on the day itself. Attendees take part in deciding what the event will cover and can run sessions themselves.

The event is open for people across the public sector as well as web developers and hyperlocal bloggers.

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West Midlands skills performance falters

The Observatory has published this year’s review of West Midlands skills performance .

Our summary skills index based on a range of measures (such as GVA per employee, investment in training, and qualification attainment amongst young people and adults) reveals the West Midlands skills performance has begun to widen again, from 1.1 points in 2007 to 2.3 points in 2009. As a result the West Midlands has dropped from 5th to 6th place in the league table of regions.

Skills performance index for West Midlands and England between 2005 and 2009

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West Midlands monthly economic update report August 2010

The August 2010 economic update report (pdf, 482kb) from Advantage West Midlands is now available.

The report includes headlines and statistics, both national and from the West Midlands, on the state of the economy, inflation, the labour market, house prices, manufacturing, automotive, services sectors, construction, and retail.

The updates are published monthly here.

How can small and medium businesses prepare against climate change?

Burst banks of River Severn amid flooding in Worcester

Photo: Worcester bridge by Russell Trow

Climate change has an impact on businesses. Flooding, hot summers, droughts and severe storms and winds can damage business premises and disrupt suppliers and customers.

Here are just a few examples:

  • Business directly impacted by the 2007 floods took an average of 26 weeks to return to normal operating capacity. Some small businesses can take up to two years to recover from a flood – and some do not survive.
  • Rail commuters in Birmingham endured extensive delays on 17 July 2006 as the extreme heat caused railway lines to buckle. Many services from New Street Station in Birmingham had to be cancelled and some passengers had to wait more than two hours.
  • The flooding in July 2007 was caused by a month’s rainfall in 1–2 hours and caused interruptions to electricity and water supplies, and significant disruption to road and rail networks.
  • After the flooding in June and July 2007, insurers received 165,000 claims in the UK, estimated to total £3bn in insured damages. Economic and social costs were far higher, as not all costs to businesses can be insured.

The West Midlands Climate Change Adaptation Partnership knows that it is crucial that businesses understand the consequences of climate change. This is why they released a practical guide explaining how small and medium businesses in the West Midlands can save and make money from climate change (pdf, 357kb).

Planning and being prepared are the way forward as opposed to just reacting whenever disaster hits. This will allow businesses to save money in the long term, continue operations in spite of the weather and identify potential business opportunities.

The guide provides a series of questions that business should consider around:

  • Insurance
  • Premises
  • People
  • Utilities
  • Information technology and security of data
  • Suppliers, logistics and delivery and products
  • Processes, stock and raw materials
  • Agricultural and horticultural rural business
  • Emergency contacts and important documents

The guide also provides examples of opportunities for small businesses, useful tools and contact details of regional support available.

Photo credit: Worcester bridge by Russell Trow.

Unemployment in West Midlands fallen but still not back to pre-recession levels

Updated monthly data on the West Midlands labour market were released today by the Office for National Statistics.

Key headlines

  • Unemployment in the West Midlands has fallen — by 66,000 people over the last year, and 27,000 people in the last quarter. There are, however, 59,000 more unemployed people in the West Midlands than in February 2008.
  • Unemployment has fallen faster in the West Midlands than anywhere else in the country over the last year and in the last quarter. However, unemployment rose more sharply here than elsewhere earlier in the recession, so essentially this is a rebalancing of employment levels.
  • We’re not out of the woods yet. Employment levels have not yet reached their pre-​recession levels, and we’re expecting a significant loss of public sector jobs in the coming months, which could wipe out the recent drop in unemployment altogether.

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Inward investment into the West Midlands 2009/10 – a local analysis

In 2009/10 there were 84 inward investment successes in the West Midlands and another four knowledge-based investments. These investments created over 1,500 new jobs and safeguarded another 4,300.

Although these 88 investments represented the lowest number of jobs created or safeguarded since 1992/93, they also represented the 7th highest total number of projects since 1991.

Pie chart shows 38 inward investments in West Midlands metropolitan areas and 49 inward investments in the shire counties over 2009 to 2010Inward investment is usually spread reasonably evenly between the West Midlands metropolitan areas and the shire counties. In 2009/10 the shire counties attracted the majority of inward investment projects (55%). See left.

However, the metropolitan areas of Birmingham, Coventry, Solihull, Dudley, Sandwell, Walsall and Wolverhampton have attracted perhaps just over half of the projects over the years – see below. The number of jobs created and safeguarded also generally follows a similar pattern.

Stacked bar chart shows percentage of inward investments into West Midlands metropolitan areas versus shire counties between 1991 and 2010

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The multiple risk factors of worklessness

By isolating the ‘risk factors’ and certain combinations of ‘risk factors’ associated with a person’s chance of being out of work, new analysis from the West Midlands Observatory can help decision makers get to grips with the complex interplay of issues behind the current high rate of worklessness across the West Midlands.

The research is already informing the Department for Work and Pensions in its review of welfare policy, as it provides insights into the major factors influencing a person’s chances of being in or out of work. It shows that these chances can vary greatly according to the individual’s background and personal characteristics. The research demonstrates how combinations of factors such as having no formal qualifications or a long-term health problem or disability, or being a lone parent, affect a person’s chance of being out of work.

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Up-skilling and diversification are key to growth and job creation across the West Midlands

Targeting investment on higher value added sectors such as digital media and medical technologies, and developing a workforce with the right skills to service those sectors would significantly increase job growth and the prosperity of the West Midlands according to new research.

The research (pdf, 498kb), undertaken by the West Midlands Observatory, shows that the potential benefits of targeting investment are substantial. If workforce skill levels in the West Midlands were increased to match the England average, growth in Gross Value Added (GVA) — the measure of economic output per head of population — over the next 5 years would increase by 2 percentage points from 10% to 12% and net new job creation would nearly double from 11,000 to 21,000. If in addition more businesses in higher value added sectors and clusters were attracted to the West Midlands, so that their share of economic activity reflected the position nationally, GVA would grow by some 23% by 2015 and more than 200,000 net new jobs would be created.

Local authorities, business groups and other key partners across the West Midlands are looking to achieve sustainable economic growth in jobs and GVA over the next 5 years. This new research shows how, in a time of austerity and funding cuts, the Observatory can provide authoritative and objective research to help decision makers target limited resources and do more with less.

The research (pdf, 498kb) provides an insight into the region’s existing and likely future skill needs. It has been produced to inform the development of skills and investment priorities that focus shrinking levels of public sector investment in areas that will maximise  impact.

A range of key investment locations across the region, including Longbridge and Eastside in Birmingham, Ansty Park in Coventry, i54 in Staffordshire, Coventry and Wolverhampton city centres and Dudley, Telford, Walsall and West Bromwich town centres, can play a key part in diversifying local economies.

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