Replacement demand set to be key source of jobs in West Midlands over next 5 years

An under–representation of higher value added sectors means that the pace of economic growth in the West Midlands over the next 5 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.

But the Observatory’s new report The West Midlands economy post recession: key issues and challenges (pdf, 844kb) predicts an additional 860,000 job vacancies are expected to arise between 2010-2015 due to ‘replacement demand.’

It’s estimated that nearly 510,000 jobs (58% of all job vacancies) will be due to labour turnover and more than 350,000 jobs (40% of all vacancies) will be due to older workers retiring.

Pie chart shows overall job vacancies forecast in West Midlands between 2010 and 2015

Text description of this chart available. Chart prepared by West Midlands Regional Observatory based on Cambridge Econometrics forecasts and Office for National Statistics Labour Force Survey.

Replacement demand is forecast to be more significant in traditional private sector industries and public sector activities which have an ageing workforce. For example:

  • 59,000 vacancies are expected to arise in manufacturing
  • 50,000 vacancies are expected to arise in engineering
  • 37,000 vacancies are expected to arise in construction

In health and social care, meanwhile, nearly 70,000 vacancies are expected to arise. The figure is more than 45,000 in education and more than 30,000 in public administration.

Many of the jobs on offer due to retirements are likely to require specific skills, qualifications and experience. Around 90% of these jobs are expected to be filled by people already in employment.

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Recovery from the recession remains fragile in the West Midlands

According to recent research by the Observatory, recovery from the recession has been fragile. After rising in the second half of 2009, recruitment activity faltered in the early months of 2010.

Geographically, the areas expected to experience the most fragile economic recovery in terms of growth in GVA and jobs are traditional industrial areas, such as the Black Country and Stoke-on-Trent. These areas have historically been dependent on industries such as engineering, manufacturing and construction.

Recovery is expected to be strongest in areas clustered in the south and east of the West Midlands, in Solihull and Warwickshire. These areas benefit from a strong presence of high value added knowledge-based industries,  good communication links and environmental quality.

The pace of economic growth in the West Midlands over the next five years (2010–2015) is forecast to be modest. GVA is forecast to grow by 11% (£9 billion) over the period. This compares with growth of 15% (£11 billion) between 2000–2007.

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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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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 low carbon team update: June 2010

Black and white illustration representing an environmently friendly economyOpportunities for businesses in the low carbon economy have been the main focus of the team in recent weeks. We’ve also been producing our annual raft of monitoring work looking at all aspects of sustainable development and climate change.

Low carbon economy

Back in March, we published our report into the opportunites for growth into a low carbon economy in the West Midlands.

The research suggested that, in the West Midlands, sectors with prospects for growth into the low carbon economy include automotive & transport equipment, construction and public services amongst others.

The report highlights a number of potential low carbon opportunities. The manufacture of products for low carbon buildings is one, through providing insulation products, technical tiles and ceramics, and prefabricated building elements for construction.

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Skillset launch Creative Media Workforce Survey 2010

Reception area at Codemasters in Warwickshire

Skillset, the sector skills council for the creative industries, have launched the national Creative Media Workforce Survey 2010:

Whether you are an employer, an employee or a freelancer, what you tell us about your skills needs, experience of training and recruitment, future plans and working patterns will help us produce the most comprehensive profile of working life in the UK’s Creative Media Industries.

D’log highlights why this survey is especially important this year.

For more details about the survey, visit www.skillset.org/playyourpart.

Observatory skills research team update: April 2010

This post is the first 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.

April was a very busy month for the Observatory’s Skills Team as we completed existing work and started new projects. This post rounds up recently published research and current projects.

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