You are in: Home > Business and Economy > Economic Trends > Birmingham Economic Update

Birmingham Economic Update

Published: October 2007

The key findings from this report are:

Overview of Conditions in the Birmingham Economy

• Although the economic growth rate in Birmingham appears to be at a satisfactory level, this growth is not translating into as favourable a fall in local unemployment as is occurring in the UK. For the five quarters to June 2007 both the UK and Birmingham economies have been growing at about 3% per year.
• Business conditions for local manufacturers are currently the best they’ve been since 1994. Manufacturing respondents to the Birmingham Chamber of Commerce quarterly economic survey report buoyant sales in both the UK and in export markets. Buoyant global markets for exporters meant that local manufacturing made a positive contribution towards Birmingham’s recent satisfactory economic performance.
• Both manufacturing and service companies in Birmingham are following the national trend of heavy investment in equipment and training.

Recent Developments & Immediate Prospects for the UK Economy

• The UK consumer boom is nearing exhaustion and several years of slow consumer spending growth are on the near horizon. Earnings have been growing more slowly than the cost of living and consumers are more reluctant to borrow in the new environment of higher interest rates. Consumer spending growth in 2006/7 has been financed by a sudden fall in the saving ratio for all households to 2%. Obviously there is a limit to how long savings can be “raided”.
• Consumers are unlikely to quickly get help from much lower interest rates because increasing global energy, commodity and food prices mean that the UK is importing inflation.
• To compensate for less buoyant consumer spending and maintain economic growth the UK will have to improve export performance and increase business investment to boost competitiveness in terms of productivity and bringing innovative products/services to market.
• We conclude from past experience that a spontaneous collapse of the housing market, causing a recession, is unlikely. In the last house price “crash” cause and effect were the other way around. The end of the consumer boom will likely end the house price boom because of falling consumer confidence. It would probably take a recession to cause a major house price collapse, rather than a levelling off in prices.