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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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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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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A tough year for inward investment in the West Midlands

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.

Of these 88 successes, Advantage West Midlands were involved with just under half but this assistance helped create over 60% of the new jobs.

Some of these inward investments were high-profile including Kraft’s acquisition of Cadbury in Bournville, Birmingham affecting nearly 3,000 employees at their head office as well many more around the country.

Other investments in the news included the acquisition of Birmingham City Football Club by Far Eastern businessman Carson Yeung’s Grandtop International, the continued expansion of the ex-Longbridge car plant by SAIC of China where a new engine test facility is to be built and the taking on 50 skilled engineers by Indian Tata Group’s Jaguar Land Rover.

Some other notable inward investments included:

  • Expansion of Japanese tool-maker Makita‘s manufacturing facility in Telford, which created 70 jobs
  • Expansion of TK Maxx‘s distribution depot in Newcastle-under-Lyme, Staffordshire, which created 100 jobs
  • FourStar from the Netherlands is to open a new UK headquarters in Birmingham employing over 250 people to provide employment and skills training to the unemployed

Two other investments from the United States also catch the eye. Remotec in Coventry, a subsidiary of Northrup Grumman, expanded its facility designing and manufacturing robotic bomb disposal units.

But it’s the opening of a new computer games design studio in Digbeth, Birmingham by Microsoft-owned Rare Games that’s hoped will give a boost to games design in the Midlands. 90 new games designers will be employed there.

Analysis of West Midland inward investment

Further analysis of the inward investment figures show that, with 88 investments, 2009/10 saw the fewest number of investments in the  West Midlands since 2005/06 when investment numbers were still recovering from the falls in global investment since 2001. This highlights the fact that the global economic crisis began to seriously affect investment decisions.

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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: