Forget The JLR Wobble, The Midlands Engine Is Roaring And Property Will Benefit

Jaguar Land Rover has announced that production of the Discovery will move from Solihull to Slovkia. Surely that is a bad sign for the Midlands Engine's claim to be the heart of U.K. manufacturing?

Maybe not. Exports are soaring, new infrastructure projects beginning to ripen, and whilst the Northern Powerhouse feels very year-before-last, the Midlands Engine is beginning to steam ahead and taking with it prospects for wider regional property markets.

JLR is at the heart of a thousand West Midlands supply chains, and crucial to the region's property sector. The manufacturer's growth has made the 8.4M SF plans for Solihull's U.K. Central project feel like a modest step toward meeting continuing substantial demand for auto sector floorspace and spinoffs. According to one local MP the move is "deeply disturbing."

So what is going on?

The West Midlands economy has always been about exports, and today it is exporting more than ever. Data from HM Revenue and Customs, released on Monday 11 June, showed that the volume of exports (measured by value) increased by 7.6% in 2017. This is ahead of the national average of 6.5% growth.

In the first quarter, the West Midlands not only exported more, but exported more valuable goods from a larger pool of exporters. There are 2.5% more exporters in the region than in the first quarter of 2016, and the average value of exports is now a shade under £1M for each, Midlands Insider reports.

HMRC data comes just days after accountancy giant EY reported that in 2017 the Midlands Engine had recorded its highest ever number of Foreign Direct Investment projects, up from 130 to 140. Although Birmingham itself did not perform particularly well, the wider West Midlands did: FDI in Solihull was up 40% whilst it jumped 60% in Coventry, Business Desk reports.

Midlands Engine Roaring, Northern Powerhouse Spluttering?

The JLR decision is not all it seems. As The Guardian pointed out, the Discovery is the slowest selling of the five models made in Solihull, shifting just 45,000 (out of about 650,000) a year. The move clears space for the development of electric vehicles in Solihull, replacing diesel technology which will be outlawed for new vehicles in the U.K. by 2040.

Moreover, the move to the 1,800-acre site in Slovakia comes as no surprise to locals: It was widely discussed as far back as 2015.

Instead of seeing a Midlands Engine under threat from moves by JLR, property market observers in other regions see something new and powerful in the Midlands. They notice that whilst the Northern Powerhouse has not always delivered on its promises, the more recent Midlands Engine initiative is making headway. The recent rail chaos around Manchester has dramatised the difference, and senior figures in Manchester increasingly recognise the Midlands Engine as a threat.

"We shouldn’t give up on the Northern Powerhouse. You only need to look at the infrastructure projects now being promoted for overseas funding — some multibillion-pound projects — to see that the Northern Powerhouse brings economic additionality," said CBRE's Manchester-based senior director for planning and development, Iain Jenkinson.

“That said, the Midlands Engine is doing this, too. They are getting their act together and projecting their vision far and wide. Whilst I’ve worked on three true northshoring operations recently, it's true that all three depended on rail infrastructure and if the Northern Powerhouse fails to deliver on that, then that will be to the detriment of the North. Combined with the Midlands getting their act together, and the importance of rail infrastructure, and the message back to Powerhouse is maybe that we need to develop some sharper elbows.”

A Big Infrastructure Win?

But there are complexities, and as with the Northern Powerhouse — where plans for a Transpennine high speed rail line have stalled — they revolve around infrastructure. This is not just about HS2 — which Mancunians have noticed is moving fast — but on road infrastructure.

Midlands Connect has published a 25-year strategy which includes the Midlands Motorway Hub study and work on the A46, A5, A50 and A500 trunk roads. This week plans for one element of that strategy surfaced: the revived 40-mile M5 link road, west of Birmingham. The Western Strategic Route would connect the M5 Junction 4a at Bromsgrove with Junction 2 of the M54, near the i54 business park. The difficulty is that almost exactly the same idea was rejected twice before — in the 1990s and 2000s — on the basis of financial and environmental problems.

Perhaps more seriously, the move to electric vehicle production for which JLR are preparing could spell the end of the petrol-age of mass personal car ownership. Some have speculated that by the time the Western Strategic Route was completed in the middle of the century, car use patterns will have changed so dramatically that it will be a white elephant from day one, the Birmingham Post reports.

The road might be the answer to a wider problem, which is spreading the Midlands Engine's success evenly around the region, something dramatised by the property market.

According to Lambert Smith Hampton's Midlands Engine analysis there is a widening gap between Birmingham and the eight other main Midlands office markets.

Birmingham's supply of Grade A floorspace is roughly 10 times more than other key markets in the Midlands Engine region, which are lagging behind. Those smaller markets are underperforming, with take-up down by up to 20% because of the lack of new floorspace, LSH said.

This week's news about JLR was — superficially — a jolt to the Midlands Engine's confidence, and the property market's prospects. But a cooler view suggests the Engine is purring along very nicely indeed.