City remains compelling investment destination despite challenges – report

Birmingham continues to be a compelling investment destination despite a string of pressures facing businesses, according to a major economic report released today.

The annual Birmingham Economic Review paints a largely optimistic picture for the city, thanks to an improving economy, a resilient export market and the promise of further devolved powers.

But the review – produced by the City-Region Economic and Development Institute (City-REDI) at the University of Birmingham and the Greater Birmingham Chambers of Commerce – also warns that ongoing skills shortages, alarming child poverty rates and cost pressures arising from the Autumn Budget also present significant hurdles.

The 2024 report reveals that the Birmingham city-region has increased its gross value added (GVA) contribution by 9.7 per cent to £60.78 billion.

The value of goods exported from the West Midlands in Q2 2024 was £8.8bn - 1.4 per cent higher than a year ago and 16 per cent above pre-pandemic levels.

And, prior to the Budget, businesses were buzzing with optimism – 65 per cent said they expected their turnover to rise next year and 57 per cent predicted a profitability boost.

The report says the arrival of HS2, more devolved powers through the West Midlands Combined Authority’s Trailblazing Devolution Deal and a Budget windfall of £1.5bn to drive economic growth should put the city-region on an upward trajectory.

However, skills shortages persist, with a higher percentage (6.5 per cent) of working-age individuals lacking formal qualifications compared to the national average (6.2 per cent).

Meanwhile, Greater Birmingham’s rising child poverty remains a barrier – over a third of children in the region are said to be in “relative poverty” and a quarter are in “absolute poverty”.

Henrietta Brealey (pictured), chief executive of Greater Birmingham Chambers of Commerce, said: “Prior to the Autumn Budget, the Greater Birmingham business community seemed to have been feeling a cautious optimism that the economy might be starting to recover from the disruptions of Brexit and the Covid-19 pandemic, and the subsequent energy and cost of living crises.

“Inflation has softened, interest rates are gradually declining, and UK business investment has returned to pre-pandemic levels.

“Post-Budget, and at the time of writing, we have yet to see whether that is still the case.

“The significant increases in the tax burdens of many businesses may well put a damper on business confidence. Whether that can be offset by meaningful action on pledges on the importance of boosting infrastructure spend, tackling skills gaps, driving innovation and continuing to turn the dial on regional devolution, remains to be seen.

“Greater Birmingham is a place of many strengths, that also has plenty more scope to grow to reach its full potential. Driving inclusive growth, addressing barriers to economic activity and working together to tackle health disparities and high levels of deprivation, will continue to be at the heart of this.

“However, the fundamentals that make the city-region a great place to invest and do business remain compelling.

“HS2 is once again poised to connect our city-region with central London, FDI projects are topping regional rankings, and the region is on the cusp of receiving further devolution of funding for local leaders - and is anticipating new powers coming down the tracks to grow key sector clusters.”

Professor Rebecca Riley, deputy pro vice chancellor (Regional Engagement)/co-director for City-REDI at the University of Birmingham, said: “The UK economy is in the process of adjustment and recovery from successive shocks in recent years.

“The pandemic, Brexit, the invasion of Ukraine, the cost-of-living crisis, higher interest rates and the depreciation of the pound, have all caused significant structural changes to the UK economy, in the short, medium and long term.

“The UK economy is currently trying to adapt to and navigate these changes in its recovery.

“The West Midlands was acutely impacted by a number of these shocks, particularly Brexit and the energy crisis, due to the sectoral mix within the region.

“In this report, we look in depth at how the region is recovering from a turbulent few years, presenting data and expertise on the performance of the region around key indicators and how people and businesses are impacted.

“Moving forward, sustainable and inclusive growth will depend on the region’s ability to seize opportunities through collaboration, investment and innovation.”