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Birmingham Economic Review 2001

Economic Trends

After two decades of major job loses, there was a positive 'sea change' in the employment performance of the Birmingham economy in the 1990s. However, due to the Sterling exchange rate being overvalued the number of Birmingham residents in employee jobs fell by 3% between November 1998 and August 2000. Most of the job losses have been in manufacturing with an important local factor being the Rover crisis.

Although the service sector employment of Birmingham residents also fell during 2000 the long term trend relative to the UK has been fairly good

The local economic problems that have led to the fall in Birmingham residents' employment are also reflected in relative unemployment trends. Whereas, the number of claimant unemployed in Birmingham fell by 9.3% between January 1998 and September 2000, there was a 16.2% fall in the Region, and a 26% fall nationally.

Crucial Success Factors for the Birmingham Economy

The setback experienced by the Birmingham economy in 2000 will prove to be temporary and local employment growth will resume over the next few years. Much will depend however, on how quickly the City's economy can transform itself into one of hi-tech manufacturing and high value added services. The critical success factors are:

• Investment for Growth - Under-investment, particularly in manufacturing, is the major factor behind the historic under-performance of the Birmingham economy. However, 'Development Investment' has been impressive enough to suggest that investment levels in the wider economy will achieve the task of improving its relative economic performance.
• Attracting Relocating Companies & New Business Projects - Birmingham has a very successful record in attracting a positive net inflow of companies from the South East of England. However, the City had an overall net loss of 283 companies and 3,724 jobs.
• Increasing Visitor Spend - If Birmingham were to support as many jobs per capita as the national average then there would be 10,000 extra jobs in the city's 'visitor' economy.
• An Enterprising Economy - The number of VAT registered businesses in Birmingham was only 4.6% higher in 1999 than in 1979 compared to a 34% increase nationally. We estimated that this under performance may have deprived Birmingham of 40,000 extra jobs.
• Embracing New Technology - The increasing spread of e-commerce means that sectors of the economy that have never faced international competition (such as retailing) are about to be pitched into a global market place for the first time.
• Capitalising on Birmingham's Cluster of Higher Education Institutions - An expanding university/R&D cluster would in itself be modernising and diversifying the Birmingham economy, but it could also act as a locational attraction for hi-tech companies.
• A High representation of Fast Growth Sectors - We estimate that in 2001, 74% of Birmingham's employment is in sectors where job numbers are forecast to increase over the period to 2010. (This compares with 68% in 2000). However, Birmingham's economy is still too mired in slow growing sectors.
• A Skilled & Qualified Workforce - Not only is the proportion of employed residents with degree level (NVQ 4+) qualifications rising quickly but it has surpassed the UK average. On this evidence Birmingham's employed workforce is becoming increasingly well qualified to meet modern labour market needs.However, over 37% of residents with jobs have either only NVQ 1 qualifications or none at all.
• Improving the Vocational and Academic Standards of Young People Entering the Labour Market - The proportion of sixteen year olds in Birmingham gaining five or more higher grade GCSE passes (equivalent to NVQ 2) has been rising rapidly in recent years. However, the level of success is far below the national average and the gap is only narrowing very slowly.
• Bringing 'Discouraged Workers' Back into the Labour Market - The economic activity rate of working aged people in Birmingham is 72% compared to 79% nationally. However, the most important aspect of the discouraged worker effect isn't at the general level of the economy, but in the uneven distribution of Birmingham's economic gains between different groups of people.
• The Labour Market's Ability to Meet the Demand for Skilled Workers in Growth Occupations - In a survey of employers we found the list of difficult to recruit occupations is dominated by the types of higher level occupations that our LEFM forecasts will make the biggest contribution to jobs growth.
• Encouraging a Culture of Continuous Improvement in Individual Skills & Education - There has been an increase since 1992 in the proportion of the local workforce that is receiving work related training at any moment in time.
• Improving Labour Market Information - we conclude that improvements in labour market information can considerably improve job search and career choice.

Economic Forecasts: 2001 to 2010

• The LEFM's base forecast predicts that between 2001 and 2010 economic growth in Birmingham will accelerate to 2.5% per annum with the Region and the UK growing a little faster at 2.7% a year.
• The average rate of jobs growth in the Birmingham economy in the 2000 to 2005 period will be zero. The model predicts that employment growth will then accelerate to 0.5% a year in Birmingham, and 0.7% per year in the UK and Region, between 2005 and 2010.
• It is the service sector that is making the positive contribution to Birmingham's overall employment growth. Total manufacturing employment is forecast to fall by 17% between 2001 and 2010 with the loss of nearly 16,000 jobs.
• Finally there are some sectors in Birmingham that the LEFM forecasts will perform better than the UK, one example being Financial and Professional Services.