State of the Region, in a wider perspective…

Professor David Bailey Aston Business School

2

Unemployment

14% Greater Birmingham JSA Rate 12% Birmingham JSA Rate 10% 8% 6% West Midlands JSA Rate UK JSA Rate 4% 2% 0% янв.11 июл.11 янв.12 июл.12 янв.13 июл.13 янв.14 июл.14

Birmingham and Region: Bouncing Back

• • • • • • Output drop and unemployment rise in West Midlands worse than many other regions during 2008-9 recession (not a surprise given region’s sectoral make up) BUT bounce back more rapid – rebalancing effect? certain parts of manufacturing, exports, modest ‘reshoring’ More rapid jobs growth – WM out performed other regions.

Last 2 years: WM exports +30%, UK: +2%. HMRC data on number of firms exporting positive E&Y: West Midland set for more rapid export growth than even Germany next year Output PMI for region positive but manufacturing PMI in 2014 slowing down (concern over exports?)

Export Growth

Regional Export Growth, 2010-2013

% change 2010-2013, source: HMRC 50% 46% 40% 30% 30% 20% 21% 18% 10% 14% 12% 11% 3% 0% -7% -10% United Kingdom North East North West Yorkshire and The Humber East Midlands West Midlands East -5% London South East South West

Growth to…

West Midlands Export Growth by Destination

% change 2010-2013, source: HMRC 180% 160% 155% 140% 120% 100% 80% 60% 40% 20% 0% 103% 25% 30% 63% 33% 36% 40% Asia & Oceania Eastern Europe (excl EU) European Union Latin America and Caribbean Middle East and North Africa (excl EU) North America Sub-Saharan Africa Western Europe (excl.

EU)

Overall exports…

Wider Picture…

Thoughts on Growth 1

• • • • • We are growing!  to pick up?

2.5% in 2014. Investment started This growth has been a long time coming Policy has worked in a sense. Monetary Stimulus has been huge. QE, F4L, H2B… But economic pick up would have come much more quickly if it hadn’t been for austerity But to be fair, Osborne ditched Plan A in late 2012 when recovery well off track  Plan A++

Thoughts on Growth 2

• • • • • Global uncertainty weighed on manufacturing growth through 2014, but oil price fall set to stimulate oil-using economies… Domestic headwinds abating? Real incomes fell to end of 2014, now set to grow. Consumer spending increased. Investment picking up? But financial system?

2.5% GDP growth in 2014. Forward guidance. But is this a ‘sugar rush’?

UK has some deep seated problems: investment, R&D, skills, lack of industrial policy

Overall Growth Picture 1:

 • • • • • • • Typical recovery, led by consumption but delayed somewhat Policy working: stimulating economy A more balanced recovery? Regions, sectors?

Real incomes (about to) start to rise, at last… Eurocrisis abated (for now… ECB QE to the rescue?) Global economic headwinds, but oil price drop to fuel growth?

New industrial recovery?

• • • • • • • • •

Overall Growth Picture 2:

 UK hooked on QE & low interest rates, zombie banks Not a typical recovery as savings have been run down Real incomes still being squeezed right up to end of 2014.

H2B/stamp duty changes  Here we go again?

possible housing boom? Investment lagging. OBR: 50% increase over next four years unrealistic?

Eurocrisis just resting; deflation and stagnant Emerging economies – China? Serious headwinds Industrial recovery? Delayed by poor policy and errors Long run problems…

WM: reasons to be cheerful?

• • • • • • Greater Birmingham: well placed today if we can build on successes?

Manufacturing renaissance. Some re-shoring, good export performance, productivity pick up.

Auto sector booming BUT need to do more to support supply chain and huge skills challenge LEPs need genuine powers and the ability to raise more funding Right scale? Intermediate ‘join up’ of LEPs’ work critical – as a minimum: intelligence and info gathering base, pursuing effective cluster and innovation strategies and accessing EU funding.

Combined authority model – with matching ‘super LEP’ critical

*Things we could do differently

• • • • • • • • Prevent credit bubbles Reform banking system Channel investment to build productive capacity. National Investment Bank?

Boost capital spending Back growth sectors: industrial policy Tackle skills deficit Recognise and tackle income inequality (IMF, OECD)

Decentralise

West Midlands Economic Review

• Lunar Society and Aston University • Advisory Board to provide input and challenge • Aim: to identify policy changes and actions that will accelerate economic growth, enhance appeal of the region to its own talented workforce and outside workers and enterprises, and raise personal welfare.

West Midlands Economic Review

• • develop a fact-based set of policy prescriptions and recommended organisation structures and processes to achieve these aims. Panel of academic experts drawing on the public, private and voluntary sectors for evidence and ideas.

West Midlands Economic Review

• commission research on: • Enterprise; Clustering and Agglomeration Economies; Innovation, Trade and Connectivity; Inward and Indigenous Investment; Labour Markets, Skills and Talent; and Sustainable Communities…

Thanks for listening.

Comments, Questions welcome.

Have a good day!

[email protected]