Weaknesses in the West Midlands economy act as a drag on future prospects

There’s a need to drive sustainable economic growth in the West Midlands, which in turn can foster the investment and business success that will create job growth. This requires giving priority to growth sectors and the development of a world class skills base.

However, the Observatory’s new report, The West Midlands economy post recession: key issues and challenges (pdf, 844kb), highlights continuing under representation of higher value added sectors.

Lower value added private sector activities such as low value business services, wholesale and retail, hotels and catering, and cultural, recreational and sporting activities make a particularly significant contribution to the regional economy. These account for more than half of GVA and employment.

Share of employment in the West Midlands by broad sector in 2008

Share of employment in the West Midlands by broad sector in 2008

Source: Office for National Statistics Annual Business Enquiry
Share this chart | Data on Google Docs

Traditional private sector industries such as engineering and transport technologies, other manufacturing activities such as the interiors and lifestyle, and food and drink clusters, construction and building technologies also make a significant contribution. So do public sector activities such as public administration, education, and health and social care.

These sectors are an important source of jobs for people with fewer skills and can play a key role in reducing worklessness and economic and social deprivation.

But reducing the dependence of the West Midlands economy on these activities and attracting and developing more businesses in higher value added sectors such as higher value added business & professional services, environmental technologies, digital media and medical technologies is key to improving the West Midlands’ economic performance and generating more new highly skilled jobs.

However, to date, these sectors have generated only limited levels of GVA and employment.

As a result, the private sector in the West Midlands has grown relatively slowly in recent years. Between 1998–2008 employment increased by just 30,000 (growth of 2% which compares to an increase of 19% across the UK as a whole).

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