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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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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NESTA offering local authorities £30k to spend with digital businesses on open data projects

Cutout figures connected by green light

Brian MacAulay, Director Innovation Index at NESTA, mentioned the Make It Local initiative to encourage collaboration between local authorities and digital media developers. It’s timely in the light of our open data: challenges and opportunities event last week and the government’s consultation on underlying data publication announced today.

Make It Local, the NESTA initiative, aims to:

…encourage collaboration between local authorities and digital media developers, to provide innovative, web-based services for their communities.

Make it Local is encouraging local authorities to release publicly-owned data in a linked way which allows developers an opportunity to build new services using the information.

Local authorities hold significant amounts of public data– such as transport, carbon emissions, population and crime data – which may help to power a range of useful, digital services. In developing partnerships between local authorities and digital media businesses, NESTA wants to show the value to local authorities of releasing their data to developers who can make use of it.

NESTA is calling for digital agencies with ideas for new applications to approach their local authority and encourage them to enter.

NESTA is offering three local authorities up to £30,000 to spend with a digital media business in their area.

The criteria for applications, application process and application form are available on the NESTA website.

Transformational change can generate substantial new jobs in West Midlands over next five years

The pace of economic growth in the West Midlands over the next five years is forecast to be modest. Only 11,000 net new jobs (representing growth of 5% in total employment) are expected to be created between 2010 and 2015.

However, the Observatory’s new report The West Midlands economy post recession: key issues and challenges (pdf, 844kb) includes scenarios illustrating the benefits for the West Midlands in terms of new job creation — if action is taken to support fundamental, transformational change.

Scenario one: up-skilling the workforce within existing businesses

If workforce skill levels in the West Midlands were raised to match the England average, it’s estimated that net increase in employment over the next five years would almost double to around 21,000 jobs.

The main beneficiaries would be sectors where skill gaps and shortages act as a significant constraint on growth, such as:

  • ICT
  • High value added business & professional services
  • Wholesale & retail distribution
  • Transport

Scenario two: up-skilling plus diversification of the economy

If more businesses in higher value added sectors and clusters were also attracted to the West Midlands, such that their share of GVA matched the England average, the impact would be much more significant with the creation of more than 200,000 net new jobs.

High value added activities such as high value added business & professional services (where more than 100,000 net new jobs would be created) and ICT (30,000 net new jobs) are notable beneficiaries.

There would also be modest increases in employment levels in engineering (nearly 3,000 net new jobs) and manufacturing (nearly 6,000 net new jobs).

Related links

Read more about the future of the West Midlands economy in our report:

Research published on prospects for the West Midlands economy post recession

Report cover: The West Midlands economy post recessionAt the end of June, the Observatory published The West Midlands Economy Post Recession: Key Issues and Challenges (pdf, 844kb), a major piece of research exploring the changing needs of the region’s economy and labour market as it emerges from recession.

The research is informing the decisions of employers, individuals, providers and the skills system as they look to focus their investment in key areas to maximise impact.

Firstly, the research considers the region’s recent poor economic performance and the key factors that have contributed to this.

We detail the weaknesses within the region’s economic structure and, in particular, the dependence on public sector and lower value added private sector activities, in terms of GVA and jobs, and the limited representation of high value added, knowledge-based sectors.

We also highlight the low rates of productivity in many of the sectors that dominate the regional economy and assess the skill gaps and shortages businesses in the West Midlands face and the impact on productivity and performance.

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Observatory enterprise and innovation team update: May 2010

This is the second post in a new series of weekly Observatory research updates; there will be one post from a different research team each week. We’re doing this in response to feedback we received in our recent website user survey. Please do get in touch with any feedback.

It’s rather a brief update from the Enterprise and Innovation team this month as during April and May we’ve been busy researching and compiling two interesting reports on different aspects of enterprise and employment in the West Midlands.

Aspirations of businesses in West Midlands

Our first piece of research is focused on uncovering emerging trends and issues related to aspirations of the region’s businesses and what is constraining their growth ambitions.

Our initial analysis is drawn from existing data following a scoping exercise to uncover what information sources were available on the topic. This proved particularly challenging; information regarding aspirations and barriers to growth is rather scarce. However, the report will outline a number of findings that we hope partners will find interesting.

Employment trends from Annual Business Inquiry data

Our second piece of research looks at trends in employment in the West Midlands using the latest Annual Business Inquiry data.

Initially reviewing the performance at a broad sector level, our report compares the trends of the West Midlands against the UK average and other regions.

The report also looks at the underlying drivers behind notable headline sector trends, providing in-depth analysis using the most detailed to Standard Industrial Classification (SIC) codes to fully examine what has been driving growth. Using predefined SIC groupings, the research looks at the recent trends in employment, the research looks at the recent trends in employment of high tech and knowledge intensive industries and Advantage West Midlands’ clusters. We also explore the breakdown of employment demographics.

We’ll publish these reports on the Observatory’s enterprise and innovation research pages in the coming weeks.

OECD project on leveraging training and skills development in SMEs

Thanks to Anne Green, Chair of the Observatory’s Economy & Labour Force Group, for contributing this post.

Logos of University of Warwick and Organisation for Economic Co-operation and DevelopmentResearchers at the University of Warwick—Anne Green from the Institute for Employment Research and Laura Martinez-Solano from Warwick Manufacturing Group—are involved in an Organisation for Economic Co-operation and Development (OECD) Local Employment and Economic Development Programme project on leveraging training and skills development in small and medium-sized enterprises (SMEs).

This is an international project focusing on analysis of SMEs in a selected territory.

SMEs are an important component in regional and national economies, and the project aims to identify training and skills development policies that promote growth, job creation and innovation.

The project is intended to inform OECD policy advice on how governments can best support SMEs in their skills development activities.

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