Birmingham's Potential Economic Catastrophe, And How Business Rates Reform Can Soften The Blow
Birmingham’s leisure and hospitality sector faces meltdown, whilst thousands of jobs in all sectors are at risk amidst mounting business debt.
That is the warning in the newly published Birmingham Economic Review authored by Greater Birmingham Chambers of Commerce and Birmingham University's City Region Economic and Development Institute.
As Greater Manchester reels from a messy, and potentially economically damaging, descent into Tier 3 coronavirus lockdown, and the West Midlands ponders its own future with confirmed infections rising, Birmingham is being warned of the huge costs of the way the pandemic has been managed.
The report warns that Birmingham’s important conference, tourism, food and beverage, and hospitality sectors "cannot survive intact under current Government restrictions without further support".
The warning comes after Greater Manchester’s political leaders attempted to secure better support for low paid workers in those sectors, eventually failing after a day of high drama.
The end of the furlough scheme, which provided 80% of workers wages, and its replacement with a system providing 66%, prompted Greater Manchester’s fight-back, and doubts appear to be shared in the West Midlands. “Many of us are deeply concerned about what this will mean for the city,” Chamber of Commerce chief executive Peter Faulkner said.
The report suggests lockdowns and social distancing will cause a 9.1% contraction of the West Midlands economy in 2020, higher than the 7.2% expected across the UK, and nearly double the 5% loss to GVA experienced by Birmingham after the 2007-2009 recession.
If neither a vaccine nor an end to social distancing is in sight by July 2021, the report said “there will be a sustained and prolonged contraction, a further loss of confidence and subdued demand, meaning the region will face a robust and residual structural change to the region’s economy.”
The region has already lost 74,000 jobs, one of the worst tallies in the UK, with 35% of the regional workforce furloughed, the report said.
The city is already in a poor position, with GVA per head of £25,477, significantly underperforming the UK national average (£28,729) and English average (£29,356) and far behind Manchester (£41,178). The region’s reliance on the auto sector could magnify its problems.
However, Colliers International Head of Business Rates John Webber said urgent reform of business rates could help cushion the blow.
Webber used the report to call for a reduction in the multiplier to £0.30p with effect from April 2021 for all properties; reduced rateable values of all premises affected by COVID-19 by December 2020 and all properties affected by tram works in the City Centre; and an online/delivery levy to pay for the shortfall in any tax take.
“It is well known that the burden of business rates has been steadily growing over the last 30 years to the point where Birmingham businesses now shoulder an annual burden close to £500M. While this had become unsustainable in a buoyant trading environment; in a post-COVID-19 world something has to change,” he said.
