6. Overview of the Midlands (via Midlands Engine Economic Observatory)
In 100 days since lockdown, the Bank of England has suggested the UK economy is heading for a V-shaped recovery.
This is based on a return of consumer spending, a trade deal and return of trade activity, no second waves of lockdowns, a vaccine by mid next year, and a return to ‘normal’ late 2021.
June’s Markit Purchasing Managers Indices (PMIs) show a marked improvement in national outlook, returning to near pre-lookdown levels, below February levels but near-February.
Registering at below 50 (47.6) indicates the economy has contracted and comparing on a month-on-month basis suggests the UK economy contracted in June, but not by as much as it did in the previous months.
Applying the national proportions of workers furloughed per sector to the Midlands Engine furlough numbers (1.19m people) suggests a number of sectors at risk including the Visitor Economy sector which potentially has the highest number of workers furloughed – 242,041 workers (65.4% of jobs in this sector).
The local lockdown in Leicester is likely to bear heavily on businesses that incurred significant costs in preparation for the anticipated opening of additional sectors on the 4th of July.
The flexibility to return workers affected by the lockdown to furlough is welcome, but additional financial support is likely to be required if this circumstance is not to result in additional business failures.
There is the risk that Leicester-based businesses unable to trade will lose business to competitors based outside the lockdown.
Regional analysis from the Business Impact of Coronavirus shows that 69% of trading businesses in the West Midlands and 64% in the East Midlands reported their turnover had decreased by at least 20% compared to 65% of businesses in the UK.
However, 16% of trading businesses in the West Midlands and 19% in the East Midlands reported that their turnover was unaffected (22% for the UK) and just over 10% reported their turnover had increased by at least 20% in the West Midlands and nearly 12% for the East Midlands, above the UK average (nearly 9%).
The Small Area Vulnerability Index (SAVI) investigates the association between each predictor (proportion of the population from Black, Asian and Minority Ethnic (BAME) backgrounds, income deprived, over 80 years old, living in care homes, living in overcrowded housing and having been admitted in the past 5 years for a chronic health condition) and COVID19 mortality using a multivariable Poisson regression, whilst accounting for the regional spread and duration of the epidemic.
There are high levels of vulnerability concentrated around the Midlands Engine particularly in the West Midlands with high scoring clusters in Wolverhampton, Shropshire, Birmingham, Bromsgrove, Rugby, Herefordshire, and Stratford-on-Avon whilst in the East Midlands there were smaller clusters around Derby, Chesterfield and Nottingham.
According to Make UK, manufacturing is expected to decline by 11% nationally, creating a decline of between £19bn (baseline forecast) and £35bn (downside forecast) losses.
They predict manufacturing investment to also be down between 1% and 9.7%.
It is a major concern that manufacturing sectors identified as amongst the Region’s strongest performers in advance of the Pandemic– such as automotive and aerospace – are now amongst the most threatened.
FULL PRESENTATION: MIDLANDS ENGINE ECONOMIC IMPACT OF COVID-19 (3 JULY 2020)