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Birmingham Economic Update

Published: February 2010

The key findings from this report are:

Overview of Conditions in the Birmingham Economy

• Business conditions in local manufacturing and service companies in December 2009 indicated a local economy that was on the cusp of recovery. Both the Birmingham and national Chamber of Commerce economic surveys showed optimistic business sentiment, which bodes well for further improvement.
• Despite the depth of the recession Birmingham’s unemployment was already showing signs that it was beginning to stabilise at the end of 2009. From the low point in unemployment in December 2007 the number of unemployed local residents had increased by 17,640 by December 2009. At the same point in the 1990s recession the number of claimant unemployed in Birmingham had risen by 26,044.
• The number of local Jobcentre vacancies also unexpectedly started to trend upwards in the last part of the year. The ratio of unemployed to each notified vacancy in Birmingham has risen from 4.5 in the year to August 2008 to 8.4 by December 2009. Although this U/V ratio is a lagging indicator of events, it now seems to be peaking in line with stabilising unemployment and increasing vacancies.

Recent Developments & Immediate Prospects for the UK Economy

• According to preliminary estimates, in the last three months of 2009 the economy grew for the first time since March 2008 – but only by a meagre 0.1%. It is too early to conclude that economic recovery has been firmly established./li>
• The increase in output in the last quarter of 2009 was greatest in two of the sectors worst hit in the recession. Output in manufacturing and in the retailing, wholesaling & catering sectors both increased by 0.4%. There was no growth in construction, transport & communications or in financial & business services. Output in the public sector increased by the average 0.1%, and energy & water output was down by 3.3%.
• Nationally the number of people working part-time or temporary contracts because they say they can’t find full-time or permanent jobs has been increasing. The number of full-time jobs is still falling..
• The Bank of England’s Quantitative Easing (QE) programme has drawn to a close after an injection of £200 billion aimed at increasing bank deposits. However QE and the Bank of England’s 0.5% interest rate had only partially reversed the effects of the credit crunch on lending by the end of 2009.
• In this edition of the Economic Update we examine how investment market fears about the growing debts of many governments may cause market interest rates to rise too early for the weak UK economy.
• We also look at the prospects for longer term consumer spending in the light of increasing savings rates – and at progress in moving the economy away from dependence on consumer and public spending towards an economy driven by increased business competitiveness.