Local Enterprise Partnerships need to act to reinvigorate the private sector

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.

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.

West Midlands monthly economic update report August 2010

The August 2010 economic update report (pdf, 482kb) from Advantage West Midlands is now available.

The report includes headlines and statistics, both national and from the West Midlands, on the state of the economy, inflation, the labour market, house prices, manufacturing, automotive, services sectors, construction, and retail.

The updates are published monthly here.

Unemployment in West Midlands fallen but still not back to pre-recession levels

Updated monthly data on the West Midlands labour market were released today by the Office for National Statistics.

Key headlines

• Unemployment in the West Midlands has fallen — by 66,000 people over the last year, and 27,000 people in the last quarter. There are, however, 59,000 more unemployed people in the West Midlands than in February 2008.
• Unemployment has fallen faster in the West Midlands than anywhere else in the country over the last year and in the last quarter. However, unemployment rose more sharply here than elsewhere earlier in the recession, so essentially this is a rebalancing of employment levels.
• We’re not out of the woods yet. Employment levels have not yet reached their pre-​recession levels, and we’re expecting a significant loss of public sector jobs in the coming months, which could wipe out the recent drop in unemployment altogether.

Related links

• Read our full analysis of the latest data
• Dataset: proportion of working age population in West Midlands claiming Jobseeker’s Allowance (xls, 220kb)
• Dataset: 18-24 year olds claiming Jobseeker’s Allowance (xls, 220kb)
• Map: proportion of working age population in West Midlands claiming Jobseeker’s Allowance – by local authority district
• Map: proportion of working age population in West Midlands claiming Jobseeker’s Allowance – by ward

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.

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:

• The West Midlands economy post recession: key issues and challenges (pdf, 844kb)
• Dataset: xls, 136kb | Available on Google Docs

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.

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.

New research shows targeted welfare to work provision is necessary to reduce worklessness

Welfare to work programmes aimed at getting people back into work should take a ‘whole person’ approach, rather than tackling factors such as age, ethnicity or disability in isolation, according to new research from the West Midlands Regional Observatory carried out on behalf of the West Midlands Economic Inclusion Panel.

The research findings confirm those of other studies by the Observatory, that the West Midlands has one of the highest rates of worklessness in England, with some disadvantaged groups experiencing much higher rates of worklessness than others.

The latest research provides insights into the major factors influencing a person’s chances of being in or out of work and shows that these 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.

Skillset launch Creative Media Workforce Survey 2010

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.

Economy and Labour Force newsletter: April 2010 issue

We sent out a new issue of our Economy and Labour Force newsletter today.

The newsletter summarises recent articles, new research and commentary related to the economy, skills, employment and labour market in the West Midlands.

You can view the newsletter in your browser or in pdf.

Related links

• Subscribe to newsletters by registering with us
• RSS and email updates from the Observatory

New research on employment gap between white and BME communities in the West Midlands

There is a large gap between the employment rates of the white population and the black and minority ethnic (BME) population and this gap is bigger in the West Midlands than nationally.

74% of working age white people are in employment in the West Midlands (compared to 76% nationally), while 54% of working age BME people are in employment (compared to 60% nationally).

A new briefing paper (pdf, 761kb) from the Observatory’s economic inclusion research team explores the nature of this employment gap and other issues around minority ethnic groups and the labour market.

Download the briefing on employment and black and minority ethnic groups in the West Midlands (pdf , 761kb)

Regional Skills Assessment published

The Regional Skills Assessment for 2009 is now available. This extensive research gives an overview of the changing needs of the West Midlands’ labour market, along with a detailed exploration of key issues by sector, by sub-region and for key groups.

This year’s main report presents a few distinctive sections compared to previous years. It mainly focuses on recent trends, looking also at the impact of recession and prospects for recovery.

The main report is complemented by two reports identifying the main skills needs and issues in each of the region’s key sectors and clusters.

The Assessment also includes a series of six detailed sub-​regional skills profiles assessing recent trends and future prospects for both the demand for and supply of skills. The profiles highlight key issues to support, in particular, development of Local Economic Assessments by local authorities, the commissioning of 16-​19 learning provision and the work of sub-​regional Employment and Skills Boards. The sub-regional assessments cover:

• Birmingham and Solihull
• Black Country
• Coventry and Warwickshire
• Herefordshire and Worcestershire
• Shropshire
• Staffordshire

In addition, there’s an entire chapter dedicated to future prospects in the region’s labour market with forecasts covering both short-​medium term (2009 to 2014) and long term (to 2024), using the Observatory’s economic forecasting model.

View the Regional Skills Assessment 2009 pages on wmro.org

Key contact: Andy Phillips, Head of Skills Research

2009 Skills Assessment and regional skills policy

The productivity gap in the West Midlands regional economy appears to be widening, despite a narrowing skills gap.

This was one of the key issues arising at a dissemination event for the Observatory’s Regional Skills Assessment held last Friday at the Observatory.

A range of attendees, including higher education representatives and policy officers from organisations including Advantage West Midlands, Sector Skills Councils, the City Region Partnership and Jobcentre Plus, discussed the implications of the Regional Skills Assessment on policy in the West Midlands.

Electronic marketplaces: a way to tackle worklessness?

The Joseph Rowntree Foundation have just published a think-piece on electronic markets (pdf, 1.09mb) by Wingham Rowan, project director of Slivers-of-Time.

The underlying premise is simple: there are plenty of people who would like to work, but can’t commit to regular hours because of family commitments or recurring medical conditions.

There are also lots of businesses which could benefit from hiring people for an hour or two at a time at short notice, without all of the overheads associated with traditional recruitment agencies.

Slivers-of-Time working is designed to connect the two using online electronic marketplaces—a sort of ‘eBay for jobs’—in a way that could help ease workless people back into the workforce and supply businesses with a flexible pool of vouchsafed, accredited labour.

Environmental technologies skills in the West Midlands seminar roundup

The Observatory held an event on 20th January 2010 to present findings from their environmental technologies skills review, which determined:

• The relative importance of these industries to the regional economy and the profile of the workforce by gender, ethnicity, age and qualification attainment
• Key developments in the sector, potential market opportunities and drivers of skills change
• Current and potential labour and skill needs and any gaps and shortages
• Investment in training and up-skilling by employers
• The use of publicly funded, private sector and internally run training and any gaps or weaknesses in provision
• Recommendations and actions to address any issues identified