5 Key Takeaways For Property From The Birmingham Economic Review
The Birmingham Economic Review 2018 has just been published. This weighty document, produced by the University of Birmingham’s City-REDI and the Greater Birmingham Chambers of Commerce, sets out the strengths and weaknesses that will determine how the city survives the turbulence of Brexit, late cycle and HS2.
The full report is available here and a brief executive summary can be found here. Here are the five big takeaways for property.
1. Science, Digital And Tech Is The Future
According to the national U.K. Innovation Survey (2017) the West Midlands are well above average on science, tech and digital, coming fourth out of nine English regions and ahead of all three of the devolved nations, with over half of the region's firms seen as ‘innovation active’. The region also has a healthy share of jobs in ‘science and technology’ sectors, compared to the others. The sector amounts to around 360,000 employees, or about 20% of all jobs.
In Birmingham, advanced technologies and artificial intelligence are already creating significant employment, growth and investment opportunities. In 2017 the city’s digital sector is estimated to have totalled 36,802 digital jobs, contributing £1.4B to the city's gross value add.
2. Financial And Professional Sector Has Grown Fast...
The city has seen a significant expansion in professional, scientific and technical services since 2010. This sector has experienced the fastest growth in comparison to the other top-10 sectors at 51.6% since 2010.
The business startup rate is good, and whilst the business survival rate is a little below the national trend, the business death rate is low, suggesting that if a Birmingham business makes it through the early stages it has an unusually good chance of survival, a tribute to the city's business environment.
The raw data shows 17,473 new businesses were registered in Birmingham, the largest number of startups outside London in 2016, when the figures were released. The business birth rate for Birmingham has almost doubled since 2014 and is now 8.16 enterprise births per 1,000 of the population, making it the U.K.'s No. 3 and well above the national average (6.31). A total of 39% of new businesses started in Birmingham in 2011 were still trading in 2016, compared to 44.1% nationally.
3. ...And There Is More To Come
The business, professional and financial services sector is twice the size of the manufacturing and engineering sector in the West Midlands conurbation and accounts for 28.2% of GVA and 20.3% of jobs. The report says that employment in the sector is set to grow by 31%, and the sector’s contribution to GVA is expected to double by 2030.
4. Overseas Investment Is Big News
Foreign direct investment is making a real impact on the city's economy, largely by reinforcing the trend toward business, professional, financial and scientific sectors. Roughly one in four of the jobs created from FDI go to this sector (26%) followed by automotive (20%).
In 2017-18, there were 52 FDI investments into Birmingham creating 2,439 new jobs. This was a record year with a rise of 10.6% in projects and 30% in the number of jobs since 2016/17, and a rise of 92% in projects and 76% in jobs since 2011-12. Not bad going given the uncertainties of Brexit, U.S. trade wars, China's economic problems and late cycle risks.
5. But Skills Are Still A Massive Drag-Anchor
Birmingham’s employment rate is estimated at 63.6% for 2017, well below the national rate of 74.9%. Unemployment remains high at 8.4% of those aged 16-64 in Birmingham compared to 4.5% nationally. Birmingham’s unemployment rate is the highest among all the core cities, however, it has reduced from 9% in 2016.
Economic inactivity (people who are not seeking work) is a particular problem. At 30.6%, Birmingham had a much higher proportion of economically inactive residents in 2017 compared to the national figure of 21.6%. The figures are not quite as bad as they seem because over a third (39.6%) of the economically inactive are students. Even so this is not good news.
Birmingham residents are less likely to have high-level qualifications and more likely to have low or no qualifications than residents of other major cities and the national average. The proportion qualified to NVQ3 and above is 50.4% (the U.K. average is 56.9%). Around 12.6% of the working-age population have no formal qualifications (U.K. average 7.7%). Progress is being made in reskilling but there is some way still to go.
