Centre for Cities update annual index of UK cities

Cover of Cities Outlook 2011 by Centre for Cities

The Centre for Cities have published Cities Outlook 2011 (pdf, 2.4mb), identifying the UK cities best placed for a private sector-led recovery.

According to the report, five cities to watch are Milton Keynes, Reading, Aberdeen, Leeds and Bristol. These cities have high potential to create private sector jobs and are less vulnerable to public sector job losses and spending cuts.

The report identifies five vulnerable cities that may not gain the benefits of national economic recovery for some time: Sunderland, Liverpool, Birkenhead, Swansea and Newport.

Performance of large cities, including Birmingham, will remain crucial in providing private sector jobs.

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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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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.

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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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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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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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).

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