A challenging global economic context
The West Midlands economy has shown resilience in the face of challenging national economic conditions, in which the economy dipped into recession in the second half of 2023 (reflected by GDP contracting by 0.1% in Q3 and 0.3% in Q4) before returning to growth in Q1 2024 (GDP growing by 0.7%), with many economic forecasters projecting UK economic growth in 2024 and 2025 to be higher than previous projections. While inflation has fallen over the course of the past year, from a high of 10.1% in April 2023 down to 3.4% in March 2024, interest rates have remained high, rising to 5.25% in August 2023, where they have stayed. These factors, coupled with ongoing international conflicts in Ukraine and Israel, have kept energy prices high and compromised trade routes, adding to shipping costs.
However, against this economic backdrop, business activity in the West Midlands has continued to grow, albeit modestly. The regional Purchasing Managers’ Index (PMI) showed that business activity in the region only dipped into negative territory for one month (September 2023) and has otherwise remained in the positive, peaking at 54.2 in May 2023, representing slow but steady growth (any score over 50 represents an expansion of activity). In terms of business optimism, the West Midlands has remained one of the most positive regions, maintaining a future activity index of above 70 throughout the year.
As well as challenges around high costs and elevated interest rates, businesses have also faced labour market difficulties this year. Economic inactivity remains high, with long waits for NHS treatment exacerbating the legacy effects of the pandemic. While the rate of unemployment has remained steady, the number of vacancies has remained high, which has contributed to skills shortages and wage growth.
International trade continues to be restricted by the new trading rules introduced after the UK formally left the EU. These have been made only tougher with the recent introduction of the checks on imports from the EU, which have added cost, additional administration, and further border delays. While it represents just a small fraction of the lost trade with the EU, the UK has signed up to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which will cut red tape for exports and reduce tariffs with countries, such as Brunei, Peru, and Malaysia.
International competition from countries including the USA and the EU, supported by government subsidies and America’s Inflation Reduction Act, had made the UK a less attractive location for investment. However, there was positive news, particularly for Advanced Manufacturing, as the West Midlands was given the green light for an Investment Zone centred around the Coventry Airport site, now known as Greenpower Park which has outline planning permission for the UK’s largest gigafactory. It is hoped that the benefits offered by the arrangement, which includes generous tax reliefs, will encourage significant investment in the site, and neighbouring sites which are also part of the Investment Zone.
Regeneration work continues around the city, with the first stage of archaeological preparatory works now complete as part of the first phase of the City Centre South scheme. The £400m+ scheme will transform the south side of the city, with new homes, retail and restaurants, along with new public spaces. Detailed Planning Consent is now in place for the first phase of the scheme and preparatory works and demolition are due to begin during 2024/25, with the project due for completion in 2034.
Government figures for Foreign Direct Investment in 2023/24 show that the West Midlands was the strongest region outside of London for FDI, with 133 projects in the region. More than a third of these projects (53) took place in Coventry and Warwickshire and created 2,161 new jobs. This represents a 5% reduction on last year’s figure but is marginally better than the national picture where the number of projects dropped by 6%.
Coventry & Warwickshire placed second for FDI Strategy and with top 10 placings for Economic potential and business friendliness in the FDI Intelligence Magazine’s annual FDI European Cities and Regions of the Future Awards 2024.
Coventry and Warwickshire attended UKREiiF (the UK’s Real Estate Investment & Infrastructure Forum) in May 2024, as part of a West Midlands regional presence. The West Midlands had the largest pavilion at the show, allowing Coventry & Warwickshire to have its own exhibition stand and providing space for a packed meetings and events programme. Coventry’s strengths in the low carbon sector were profiled alongside E.ON and our key projects such as the Investment Zone, Greenpower Park, Friargate, City Centre South, Cultural Gateway and the Strategic Energy Partnership were promoted through a number of speaking opportunities. The new Coventry Investment Prospectus was launched at the show to a key audience of investors, developers and other property professionals, showcasing investment opportunities in new regeneration projects in addition to our strategic sites and investment opportunities in transport and digital innovation and green futures projects. Work continues to follow-up on the productive introductions and conversations started at UKREiiF.