West Midlands confirmed as least productive region in the country

Oct 29 2009 by Paul Dale, Birmingham Post

Any faint hope that the West Midlands might somehow miraculously avoid the worst of the recession has been dashed by authoritative research showing that this region continues to bear the brunt of the country’s economic misery. Public Affairs Correspondent Paul Dale reports

Even before the credit crunch and downturn hit home just over a year ago our reputation as one of the least productive regions in the country was getting worse rather than better.

Poor workforce skills levels, a large immigrant population without English as a first language, below-average qualifications among school-leavers and a continuing failure to convince university graduates to live here when they complete their studies has contributed to a damaging wealth output gap.

In 2005, the difference between the economic output of the West Midlands and the average for England amounted to £10 billion.

By 2007, that figure had grown to reach £15 billion.

Put simply, if the economic output of every adult in the region simply matched the English average the West Midlands would be £15 billion a year better off.

Even Birmingham’s supposedly booming financial services sector, thought by some to be the saviour of the regional economy, is under-performing, according to the 2009 State of the Region report by the West Midlands Regional Observatory.

The report notes: “The region has too few businesses and they are not as productive as those in some other regions. In particular, we have a low share of some of the most productive sectors.

“Most notable in this respect are financial and business services, which between them account for around 70 per cent of the output gap.”

Sadly, the true picture is likely to be even gloomier. The wealth gap may have measured £15 billion in 2007, before recession set in, but is likely to have “grown still further” by now, according to the Regional Observatory report. Just how much further, no one is prepared to speculate.

Gloomy statistics leap off every page:

• Almost one-third of the working age population in the West Midlands is unemployed.

• A quarter of young people aged under 25 are out of work.

• Graduates make up only 23 per cent of the workforce, compared to an average 28 per cent for England.

• Some 14 per cent of adults have no academic qualifications – the highest figure anywhere in the country.

There is a worrying section on the economic contribution of minority ethnic groups, who will form a growing share of the population over the next decade.

Asian and African-Caribbean communities are more likely to live in deprived areas than their white-British counterparts and if these patterns persist this could “inhibit the region’s economic performance” even further, according to the Observatory.

The report notes: “Nearly 75,000 more people from minority ethnic groups would need to enter employment to match the rate amongst white people.”

Alarmingly, these figures pre-date the economic slowdown. The position is likely to have worsened considerably in the past year.

Some economic sectors have fared worse than others, with automotive manufacturing, ceramics, construction, property services, financial services, pubs, bars and restaurants taking the biggest hit. Even the public sector, traditionally seen as a bulwark against unemployment, is beginning to feel the strain as councils prepare to shed thousands of jobs.

Unemployment among people without qualifications has increased by almost six per cent in the past year – twice the increase for people with qualifications.

Across the region as a whole, there are 276,000 people out of work and claiming Jobseekers’ allowance – an increase of 110,000 in a year.

There is a damaging divide among the region’s wealthy and poorer areas, with economic output in Solihull some £10,000 higher per person than in Stoke. More than 40 per cent of Birmingham’s working-age population is not employed, roughly double the rate in Warwickshire.

The West Midlands Regional Observatory, which conducts research for the regional development agency and local councils, expects the impact of the recession to be felt for years. It is recommending that the region’s entrepreneurs concentrate on the West Midlands’ reputation for innovation in an attempt to add value to the economy.

There are calls for more investment in transportation, to make access to markets easier and to meet the needs of a rapidly-increasing older population.

The study also demands greater efforts to improve the region’s image: “The region’s cultural offer is one of the key elements influencing how people see the West Midlands. Whatever the true state of the region is, the decisions that people take will be influenced by their perceived image of it. These decisions will determine the future of the region, be they about whether to live here or locate a company here, to invest in a property or a business, to come here to study or to visit for leisure or business.”