Birmingham
Summary of Key Economic Issues
AWM Strategy Team
[email protected]
[email protected]
September 2010
The Birmingham Economy
Introduction
Competitiveness Factors
This report provides a brief overview of the
Birmingham economy and the key challenges
ahead. Below the context for this discussion
is set within a review of regional economic
performance and the principle ‘drivers’ of
economic competitiveness.
A range of factors influence competitiveness
including traditional factors of production
(land, labour and capital) as well as
technology, human and social capital.
Regional economic context
Analysis of long run economic trends indicates
that there has been some deterioration in
regional performance, relative to other
English regions, over the past decade.
The last time regional GVA per head exceeded
the national average was in 1975. The
combination of recession and tight fiscal and
monetary policies saw a very dramatic decline
in GVA per head relative to the national
position over the period 1979-81.
Thereafter the regional position has stabilised,
until the late 1990s when relative regional
GVA growth started to deteriorate again.
From 2000-08, the region saw the slowest
average annual growth in workplace-based
GVA per head (3.8%) of any UK region.
Hence, the region has fallen from 5th in its
GVA per head ranking in 1998 to 8th in 2008.
Analysis of long-term movements in claimant
rates, shows a similar picture. Whilst the
region tends to experience much higher
increases in claimant rates at the peak of
recession, rates tend then to return to
national levels. Since the late 1990s regional
claimant rates – like output – have started to
diverge; the regional claimant rate remaining
stubbornly above the national rate.
Over the period 1998 – 2008 the region
uniquely saw a contraction in private sector
employment. It also has fewer ‘high-growth’
firms than any other English region.
In seeking to explain variations in local
economic performance, Parkinson et al1
researched the competitiveness of 50
European cities, focused more specifically on
six critical success factors, namely:
1. Economic diversity. Cities and regions
that have become dependent on a sector
are more vulnerable to market changes.
2. Skilled workforce. Knowledge economies
critically depend on skilled workers.
3. Connectivity. Good physical and
electronic infrastructure, including
efficient external communications.
4. Strategic-decision taking capacity.
Including strong networks between key
players, political leadership and ability to
sustain commitment and motivation.
5. Innovation, including the efficiency of the
‘local innovation system’.
6. Quality of life. Skilled workers are highly
mobile, hence QoL factors are key.
In highlighting these factors, it is widely
recognised that there are powerful processes
of persistence, ‘path dependence’ and selfreinforcing advantage at work.
In the case of the West Midlands, it appears
that the region has ‘structural vulnerabilities’
relating to its historic dependence on
manufacturing. This vulnerability was
especially evident in the recent recession
where the region was significantly impacted.
1
European Institute for Urban Affairs, Liverpool
JMU. Competitive European Cities: Where do the
Core Cities Stand? January 2004.
AWM Strategy Team 1
The Birmingham Economy
Drivers of Change
Looking forward there are a number of drivers
that will significantly influence future
economic structures and performance, at
local, sub-regional and national levels.
Macroeconomic policy – macro-economic
policy will have a major bearing on economic
prospects in the short to medium term, in
particular the need to tackle the budget
deficit. In its June 2010 Budget the new
Government announced plans to reduce
public spending by £32 billion a year by
2014/15 and to increase tax revenues by £8
billion per year. The Autumn’s Comprehensive
Spending Review will provide more detail on
how spending reductions will be
implemented, but they will clearly have both a
direct impact on the economy in terms of
Government’s spending and public sector job
losses (potentially around 610,000 by 2016) as
well as indirect impacts on the wider supplychain and consumer and business confidence
and spending.
Sectoral change – long-term trends in the
sectoral composition of employment in
developed countries are likely to continue
with the decline of employment in primary
and productive activities and the continuing
shift to a service sector economy.
Knowledge economy - the generation and the
exploitation of knowledge play a key role in
the creation of wealth and are increasingly
important in both production and service
activities. Reflecting this there is the
increasing demand for skilled labour (and
shrinking demand for unskilled labour),
specialised research infrastructure and higher
and further education institutions in
supporting economic growth.
Demographic change – overall lower birth
rates and higher life expectancy mean
population growth in industrial nations will be
limited. Amongst others this will have
implications for future labour supply and
demand for health and care services, with a
smaller working age population and a growing
ageing population. This may also be
accompanied by more economic migrants. In
contrast some communities have higher birth
rates, resulting in a need to generate more
new jobs for a rapidly growing labour supply.
Globalisation - since the mid-1980s, the pace
of globalisation in the economy has quickened
considerably and is reflected in global supplychains, international labour migration and the
‘off-shoring’ of economic activities. This trend
has been accompanied by the emergence of
new economic centres of gravity, including
the so-called BRIC economies (Brazil, Russia
India and China), with a major shift in
productive capacity to Asia especially.
Climate change – the growing understanding
and recognition of the links between the
economy and climate change have already
had a range of economic impacts (both
challenge and opportunities) that are likely to
continue, including changes in consumer
preferences and regulatory frameworks and
growth in low carbon goods and services.
The timing, pace and impact of these drivers
will undoubtedly differ between areas,
reflecting their current and historic economic
circumstances and their ability to adapt to
changing conditions. For some businesses and
communities they will present considerable
opportunities for future growth, whilst for
others they will expose underlying
weaknesses and present and/or further
compound significant economic and social
challenges.
AWM Strategy Team 2
The Birmingham Economy
The Birmingham Economy
Introduction & overview
The future economic prospects of Birmingham
are of course intimately related to national
and regional fortunes.
Presently the Government are pre-occupied
with attempting to ‘rebalance’ the UK
economy. This reflects concern around the
size and performance of public and private
sectors, as well as the significant spatial
imbalances in prospects that have emerged
between the ‘north’ and ‘south’ of the UK.
Problems with the performance of the
regional economy have firmly placed it to the
north of this traditional UK divide. Below we
briefly touch on the structure and
characteristics of the Birmingham economy
and how it ‘plays into’ this wider context,
setting the scene for identifying the key
economic challenges ahead. 2
Although known as the City of a 1,000 trades
the significance of manufacturing has been
declining. Today Birmingham has a diverse
economic base, following substantial
industrial restructuring, facilitated by a
programme of large scale physical renewal.
Amongst the key developments that have
taken place over the past decade which have
transformed the city include:

A series of major city centre projects
completed in the 1990s including the
International Convention Centre (ICC),
Symphony Hall, Brindley Place and the
National Indoor Arena (NIA).

The redevelopment of the 40-acre Bullring
site, opened in 2003. The scheme has
helped transform Birmingham into a
world class retail capital, and has involved
the refurbishment of key city landmarks the Rotunda, the old Moor Street Station,
and St Martins Church.
The future of the regional economy is
intimately connected with the future
economic performance of Birmingham. A
strongly performing region requires a strongly
performing Birmingham at its heart, not least
because the latter accounts over one-fifth of
regional output.
Looking forward there are plans to regenerate
Eastside, refurbish New Street Station and
develop a new library. These are key projects
identified in the ‘Big City Plan’, a masterplan
that will co-ordinate the physical, economic
and cultural development of the city centre
over the next twenty years.
In so many ways Birmingham is ‘different’.
This distinctiveness stems in part from its size
- it is the UKs second city. However, it also has
the youngest population in Europe and one of
the most diverse populations of any major
European city, including the largest resident
Pakistini population outside of Pakistan itself.
A key dimension to these regeneration
activities has been to break the ‘concrete
collar’ (the inner ring road), which is seen as
having constrained the development of the
city centre, as well as impacting upon
environmental quality and city image.
2
The analysis presented draws extensively from
range of studies by AWM: Regional economic
performance; Functioning economic geographies;
Sub-regional economic profiles; Community
Resilience and Rural Disadvantage Indexes; Labour
market / skills assessment; and Recession impacts.
However, whilst the potential for private
sector leverage is unmatched in the region,
beyond the city centre there has been much
less public sector investment, which in some
communities has been accompanied by
significant private sector disinvestment.
AWM Strategy Team 3
The Birmingham Economy
Perhaps the most notable example in recent
years has been Rover although other famous
locally manufactured brands have closed (MG
Rover, HP Sauce) or been taken over
(Cadbury).
Proportion of Manufacturing Employment to All Employment
Sandwell
Walsall
Heref ordshire
Stoke-on-Trent
Dudley
Worcestershire
Telf ord & Wrekin
Wolverhampton
Shropshire
Staf f ordshire
West Midlands
The closure of Rover's Longbridge factory in
2005 was a major blow and resulted in the
loss of 6,000 jobs. 3 The multiplier effects
have also been significant, especially in the
automotive supply chain. Here the effects
have been compounded by other closures in
the region, including Peugot in Coventry
(2006) and more recently LDV formerly based
in Nechells.
Hence, Birmingham has many unique and
distinctive characteristics which influence its
economic outlook. As discussed further
below, whilst substantial progress has been
made reshaping the city, diversifying its
economy and improving its image, there
remain significant concerns around the labour
market, wider economic performance and
whether the City is ‘punching its weight’.
England
Birmingham
Warwickshire
Unlike many other economies in the region,
the industrial structure of Birmingham is not
hugely different from that of England. The
manufacturing sector is proportionately the
same size as that of England, indicating the
significant restructuring of the local economy
that has taken place.
3
For more detail on the MG Rover case study, see
Bailey, Chapain, Mahdon and Fauth (2008).
Low-Technology
Medium-High Technology
High-Technology
Coventry
Solihull
-20%
20%
-15%
15%
-10%
10%
-5%
5%
0%
5%
10%
15%
However, looking in more detail at the
specialisms with the local economy (through
the analysis of Location Quotients), several
stand out, namely :

Traditional manufacturing activities
including - fabricated metal products and
basic metals, jewellery, glass products

Manufacture of electrical machinery

Motor vehicle manufacture, although the
closure of LDV will have further reduced
the significance of this sector locally

High value financial and legal services,
insurance and pension funding, largely
located in the city centre

A significant public sector, the City Council
alone employing over 50,000 people.
Industrial Structure
Industrial structure remains an important
influence on local economic prospects,
especially in explaining differences at the
margin in performance.
Medium-Low Technology
More generally, as jobs have fallen in
manufacturing these have been replaced by
work in transport and distribution, retail and
wholesaling, hotels and restaurants. This has
been accompanied by public sector growth
(which is now at risk). However, business
services – a key growth sector in recent years
– is less well represented.
Whilst, developments in the service sector are
now the key drivers of the economy, the
prospects of many individual communities
continue to be shaped by the significant
decline of manufacturing within the City.
AWM Strategy Team 4
The Birmingham Economy
Key Companies
As a core city, Birmingham hosts a number of
nationally and internationally significant
companies reflecting both its manufacturing
heritage and the city centre’s function as a
professional and business services hub for the
wider region.
The city centre is home to a strong retail offer
centred on the Bullring, the most visited UK
shopping destination outside of the West End
in London.
The centre of financial and business services
for the wider region, the city hosts a large
number of companies focused around
Brindley Place and Colmore Row including:
Deutsche Bank; Royal Bank of Scotland; the
headquarters of the Islamic Bank of Britain
(the first standalone Islamic retail bank in the
UK); Wesleyan; KPMG;
PricewaterhouseCoopers and Deloittes.
Birmingham has a strong legal services
presence, with the Birmingham Law Society
the largest in the UK and key companies
including Wragge & Co., Pinsent Mason, DLA
Piper, Eversheds, Hammonds, Martineau and
Shoosmiths. This sector has seen fairly
significant job growth 2000-08.
The city also host the headquarters of
Europe’s largest independent IT group, SCC,
based in Sparkhill to the south east of the city
centre.
Areas directly adjacent to the city centre areas
continue to host a large number of
engineering and manufacturing firms,
alongside a range of creative industries
businesses.
The Jewellery Quarter is home to over 400
jewellery businesses that continue to produce
around 40% of the UK’s jewellery, whilst
Digbeth has seen a significant development of
media and craft businesses, including awardwinning media production companies such as
Maverick TV.
There continues to be a strong manufacturing
presence across the city. There are particular
concentrations of engineering and metalsbased companies in eastern areas such as
Heartlands, Bromford and Tyseley and Aston
to the north west of the city centre, whilst
Bournville in south Birmingham hosts food
manufacturer Cadbury (recently bought by US
firm Kraft Foods).
These concentrations reflect both the legacy
of major automotive companies no longer in
the city such as MG Rover and LDV and the
continued presence of firms such as Jaguar
Land Rover site in Castle Bromwich;
aluminium-manufacturer Alcoa in Kitts Green;
aerospace-supplier Timet in Witton; TRW
Automotive in Perry Barr; metals
manufacturer Sertec Group in Coleshill; and
Goodyear in Erdington.
The city’s ethnic diversity has also encouraged
the growth of some key Asian and AfroCaribbean businesses, including the UK’s
leading supplier of Chinese and Oriental food,
Wing Yip; East End Foods and Cleone Foods.
Reflecting its function as a core city,
Birmingham has a high public sector presence,
comprising with a number of very large public
sector employers. Key amongst these is
Birmingham City Council (which employs
around 59,000 staff), the Queen Elizabeth
Hospital (employing around 6,900) and
University of Birmingham in Selly Oak
(amongst the global top 100 universities). In
addition there are a range of smaller public
sector bodies (eg. the Gambling Commission,
OFWAT and the Criminal Cases Review
Commission).
AWM Strategy Team 5
The Birmingham Economy
Functioning Economic Geographies
Birmingham effectively constitutes a
significant ‘sub-region’ in its own right, given
its overall scale and economic significance.
Its influence extends well beyond the
boundaries of the City as illustrated by travel
to work patterns (TTWAs). At the 75% self
containment level, there are strong
relationships with neighbouring areas specifically Solihull, North Warwickshire,
Tamworth, plus parts of Lichfield and the
Black Country, Redditch and Bromsgrove in
Worcestershire.
The sheer scale of the city complicates
comparisons with other UK cities where
boundaries are often more tightly drawn.
Because of its size, it is useful to draw some
distinctions within the City which comprises a
number of ‘local economies’. Several
different types of centre can be distinguished
(although these have blurred over time):

The city centre with its mix of high value
services, retail and public services

Healthy town economies. Sutton
Coldfield is the city’s second largest local
centre with some degree of critical mass.
Other larger centres with a more
diversified economy include for example
Kings Heath, Northfield and Selly Oak
(where the University Hospital Trust is
investing £540m in Europe’s largest
hospital).

Edgbaston is one of the most affluent
parts of Birmingham. Industrial
development was restricted in the 19th
century by the Gough-Calthorpe family
who refused to allow factories or
warehouses to be built. Extending around
Edgbaston to the south is a largely
residential area with a network of ‘urban
villages’ (eg. Harborne, Moseley, Acocks
Green). These are more affluent suburbs,
several with ‘conservation areas’ and a
vibrant service and retail sector.

There are then the many older industrial
communities in the City comprising a
fairly large swathe of North Birmingham.
It includes long established industrial
communities in inner Birmingham (Aston,
Small Heath, Nechells, Soho, Washood
Heath etc), the industrial heartland and
manufacturing / engineering traditions to
the east, plus more recent suburban
municipal estates developed close to large
manufacturing plants as at Longbridge.
Birmingham TTWA (2001 Census)
The influence of Birmingham is further
illustrated when looking at for example ‘travel
to shop’ patterns, which underlines the wider
significance of the city to adjacent districts.
Travel to Shop
AWM Strategy Team 6
The Birmingham Economy
Although not formally part of the Birmingham
City area it is also worth picking out the strong
links to – and relationships with - Solihull.
These links include the overspill community in
Chelmsley Wood to the north of Solihull, the
National Exhibition Centre and Birmingham
Airport. There are additionally several
business parks – notably Birmingham and
Blythe Valley – close to the City boundary.
Levels of worklessness tend to be higher and
activity rates lower for Pakistani, Bangladeshi
and Black African Groups (particularly
females), and many of these groups are
significantly represented in the City. This
contributes to Birmingham having one of the
highest rates of worklessness in the region.
As the chart below illustrates, because of the
sheer size of the city, the rates can underplay
the scale of the problem when expressed in
terms of absolute numbers. This is illustrated
in the chart below which details worklessness
in absolute terms.
Solihull has also been one of the most rapidly
growing districts of any in the UK, begging the
question as the nature of the relationship
with Birmingham and whether this remains
more complementary than competitive. It
further suggests the need for caution in
drawing comparisons.
Working Age Worklessness Levels (Jan – Dec 08)
Birmingham
Staffordshire
Worcestershire
Warwickshire
Labour Market
Sandwell
Coventry
Wolverhampton
Economically Inactive
Dudley
Birmingham’s labour market also has very
distinctive characteristics reflecting its
demography and specifically the very
ethnically diverse nature of the population,
with a relatively high proportion of
Asian/Asian British Pakistani’s. Related to this
the City also has a young and – in contrast to
many other parts of the region – rapidly
growing working age population (expected to
grow at twice the national rate).
Unemployed
Walsall
Stoke-on-Trent
Shropshire
Solihull
Telford and Wrekin
Herefordshire
0
50,000
100,000
150,000
200,000
250,000
Number of Working Age Workless People
Birmingham also has a very high proportion of
its working age population with no
qualifications, around 20% compared with a
(high) regional average of 16% and well in
excess of the national average (12.7%).
Notably, the City has very low employment
rates. This reflects the very high numbers of
economically inactive, which in turn is partly a
reflection of demographic composition.
Despite the presence of many high value
sectors, the City also has a smaller proportion
of its workforce qualified to NVQ level 4+,
although this more or less in line with the
regional average.
Working Age Worklessness Rates (Jan – Dec 2008)
Birmingham
Sandwell
Wolverhampton
Coventry
Stoke-on-Trent
Walsall
Dudley
Solihull
Telford and Wrekin
Shropshire
UK average = 26.0%
Staffordshire
Herefordshire
Worcestershire
Warwickshire
0
5
10
15
20
25
30
Working Age Worklessness Rate (%)
35
40
45
This underlines a further feature of the
Birmingham economy which is the tendency
for significant numbers of professional jobs to
be taken by commuters. Whilst this is
perhaps the case for most large urban
economies (certainly in the UK), there is
concern around the continuing loss of higher
skilled groups from the area.
AWM Strategy Team 7
The Birmingham Economy
Nechells for example has long housed the
poorest fraction of the urban working class.
The continued prevalence of poverty in such
inner city neighbourhoods tends to result
from the net out-movement of those with
better paid jobs and in-movement of those
with fewer skills.
Research by the Barrow Cadbury Trust 4
further underlines the extent to which the
decline of manufacturing has been replaced
by jobs in sectors where low pay, low skills
and casualisation of labour are common. In a
number of communities this has thought to
have contributed to real wages falling.
Looking at tends in qualifications over the
recent period 2005 – 2008, it is evident that
there has been progress in increasing the
proportion of working age population with
qualifications. However, for those with no
qualifications, there has been very little
movement. However, as discussed further
later on in this report, it is expected that both
the number of total jobs will decline to 2020
and will drop even more sharply for those
with no qualifications.
The City is home to three major Universities –
Aston, Birmingham and Birmingham City – as
well as several Colleges. These have a key
role to play in addressing the future skills
needs of the economy with the potential to
more closely align skills supply and demand.
At present there is a significant leakage of
graduates from the region, which reinforces
the need to examine the demand and
deployment – as well as the supply – of skills.
Planning, regeneration & renewal
The linkages to planning, housing and
community are briefly considered below. The
framework for future development is set out
in the ‘Big City Plan’. The masterplan coordinates physical, economic and cultural
development of the city centre over the next
two decades.
Key objectives of the Plan include :
There is a concern that such processes are
contributing to weakness in the skills base. It
also helps to explain the combination of high
unemployment and skill shortages, allied to
the growing complexity of travel-to-work
patterns.
Unemployment is very high and claimant
rates in Birmingham (7.3%) exceed the
regional average (4.8%), as well as rates for all
other areas in the region (and other core
cities), with the exception of Wolverhampton
(7.6%). Youth unemployment also remains
relatively high, although is not quite as
significant as that in the Black Country.

Expand central area activities into
neighbouring parts of the city centre

Raise the quality of life for individuals
living within the city centre and increase
the number of families living here

Encourage new forms of workspace,
flexible learning, living space and business
support

Actively promote the development of the
high-speed rail network to the city centre.
4
Barrow Cadbury Trust. Why Do Neighbourhoods
Stay Poor? Deprivation, Place & People in
Birmingham.
AWM Strategy Team 8
The Birmingham Economy
Extending the city centre
Significant investment has been made in the
city centre. As previously noted, this was
substantially kick-started in the 1990s via
investment in several major projects. This
included: the ICC (opened 1991) and the
award winning Brindley Place (opened in
1994). This major redevelopment scheme
opened up the cities canal basin and helped
fund the National Indoor Arena (NIA).
Conferences, exhibitions and major sporting
events are major economic contributors to
the City economy. 5
This was followed in the noughties with the
redevelopment of the 40-acre Bullring site
(opened in 2003). The scheme has been cited
as the catalyst for transforming The City into a
world class retail capital, which is now second
only to London in terms of retail spend.
Existing landmarks - such as the Rotunda, the
old Moor Street Station, and St Martins
Church -have also been cleaned and restored.
As a result, there is a very buoyant demand
for B1 offices in the city centre, producing
some of the highest rents in regional cities.
This is supported by a strong consent pipeline
(7.9m sq ft.) which increased by 20% in 2006.6
The economic priority must now be to
continue to breach the ‘concrete collar’ and
expand the city centre into adjacent areas.
This will also help to redress the substantially
more limited amount of investment to date in
5
The ICC, NIA, the LG Arena along with the
National Exhibition Centre (NEC) are all owned and
operated by the NEC Group (owned by
Birmingham City Council and the Birmingham
Chamber of Commerce). A study by KPMG
conducted in 2008 estimated that The NEC Group
contributes in the order of £2 billion a year to the
economy and supports some 29,000 FTE jobs.
6
those communities and areas that lie beyond
the immediate city core.
Additionally, there is something of a question
mark around the extent to which the
emphasis on comprehensive physical renewal
schemes may have (albeit inadvertently)
contributed to the marked decline in
manufacturing employment in the City.
Major physical renewal projects
Birmingham has a number of major physical
renewal projects in the pipeline which have
the capacity to deliver significant additional
jobs and investment.
Key amongst these include: Eastside ,
Longbridge and the Icknield Port Loop site
described further below.
a) Eastside
Eastside Birmingham was a declining
industrial area, largely untouched by the
regeneration programmes of the 1980s and
1990s. In 2001 the City Council and AWM
produced a regeneration ‘roadmap’ focusing
on high-technology and creative businesses
A major physical regeneration project,
Eastside comprises some 170 ha (420 acres).
The project will help extend the city centre
through the demolition of the ring road,
helping to open up links from the city centre
and create a new ‘quarter’.
Key elements of the scheme include: housing,
offices and retail developments; a media
village with creative production and
performance facilities; a learning and leisure
quarter, including new bases for Matthew
Boulton College and South Birmingham
College; Millennium Point; and new public
spaces (Eastside City Park).
Entec, September 2008.
AWM Strategy Team 9
The Birmingham Economy
The Learning and Leisure Quarter will
comprise a new City Park (3.2 ha), creating a
link between the city centre, Eastside and
surrounding communities, plus learning
facilities based on the range of educational
establishments located here. 7
In terms of economic development potential,
these sites represent a major opportunity for
the City and region and should be key in
helping improve the attractiveness of the City
to foreign direct investors, as well as growing
creative and business service companies.
b) Longbridge Technology Park
Maximising the economic potential will
however depend on the extent to which they
can genuinely can help attract/develop
enterprise and thereby contribute to
generating net additional economic activity.
This will require minimising both deadweight
(through the movement of existing
employers/employment) and minimising
displacement (including any economic
activities already based on these sites).
The Longbridge sites (amounting to around
189 ha) - along with Eastside - represents one
of the largest regeneration opportunities in
the country. As well as meeting the needs of
Birmingham and Bromsgrove, the site is of
wider strategic and regional importance.
The former MG Rover site is a mixed
development planned to deliver some 10,000
new jobs, 1,500 new homes and a new local
centre. Phase one of the Technology Park is
completed, accommodating 28 companies.
Phase two will create ‘growth space’ for
developing technologies companies.
Subject to planning permission, Bournville
College is planning to relocate to a purpose
built educational facility at Longbridge North
in 2011. The College will form the first phase
of the new Longbridge Centre.
c) Icknield Port Loop site
The third major scheme is a joint venture
being developed between the major
landowners for the Icknield Port Loop site.
The site lies immediately west of Birmingham
city centre, close to Broad Street . A
masterplan is being developed and selective
demolition and clearance has begun. The 32
ha site has potential to provide over 2,000
new homes and other mixed use activities,
7
Includes South Birmingham College, Matthew
Boulton College, Aston University, the New
Technology Institute, Birmingham City University,
plus expanded facilities for Aston Business School
and the Academy of Life Sciences.
Local centres and industrial estates
As previously noted, there has been far less
investment beyond the immediate city centre.
This is perhaps reflected in lower levels of
demand for out-of-centre B1 offices. There is
plenty of supply and rents are static. The
development pipeline is also much lower
reflecting restrained levels of demand.
Elsewhere the demand for B2 industrial
premises has tended to decline due to offshoring and rationalisation, although demand
remains for smaller units for light industry.
Additionally, there is recent evidence of small
B8 units being acquired in and around the city
centre and this could have a major influence
on future demand in these areas.8
As well as major strategic sites, it will also be
important to continue to invest in local
centres and provide for affordable
employment land provision to support the
requirements of local firms.
8
Entec, Septemebr 2008.
AWM Strategy Team 10
The Birmingham Economy
Community, health and housing
Growth Performance
Birmingham has large pockets of multiple
deprivation. As well as the employment
difficulties facing many ethnic groups, the City
remains a major destination for migrants who
also face multiple barriers to employment.
Looking at employment performance over the
period 2000-08 it is evident that employment
growth has been concentrated in the public
sector whilst there has been a major
reduction in private sector jobs.
Over half of the residents in the City live in the
most deprived areas in England. The City has
higher rates of death from all causes than
England. Rates of homelessness and infant
deaths are amongst the worst in England.
The contrast is stark: whilst employment in
the public sector grew by 33,463 (+27%);
employment in the private sector shrank by
25,886 (-7%). This decline includes the MG
Rover closure and impact on the supply chain,
but also job losses in a range of higher value
added service activities (eg. monetary
intermediation, computer related). In
contrast, large increases were recorded in low
value activities (eg. restaurants, health,
education and regulation of public agencies).
The Community Resilience Index developed
by AWM, highlights significant issues in Hodge
Hill, Erdington (incl. Castle Vale), Sparkbrook
& Small Heath Parliamentary Constituencies.
There are strong inter-relationships between
inequality, health and employment. The
causal mechanisms are complex, but poor
health and homelessness are major factors
affecting employment rates – which are
especially low in Birmingham. As illustrated in
the diagram below, lack of employment also
leads to poor health outcomes. Equally poor
health is a major cause of inactivity.
% Poor Health
Overall the City economy grew by +7,577
(+2%). In comparison, England’s public sector
increased by 19%, private sector employment
by 1% and overall employment by 5%.
More detailed analysis of employment change
over the period 1998-2005 has been done
using shift-share analysis. 9 This points to the
very positive performance of the public
sector, but in contrast suggests that the
private sector has created 45,000 fewer jobs
than might have been (statistically) expected.
As illustrated in the chart below, the sectors
which have been especially ‘uncompetitive’
include higher value activities, notably
especially business services. The activity
which demonstrates the most positive local
performance is public administration.
Addressing multiple deprivation - especially
health inequalities - has a major role to play in
improving overall employment rates and
raising levels of gross value added per head.
Other key barriers here include childcare,
travel and English language skills.
9
Shift-share examines the combined effect of
three components: national share, industry mix
and regional shift to determine how much each
component contributes to economic growth. The
technique may be used to identify locally
competitive industries, defined as one that
outperforms its counterpart at the national level.
AWM Strategy Team 11
The Birmingham Economy
Future Growth Prospects
Birmingham Employment Change 1998-2005
Employment change 1998-2005
15000.0
10000.0
5000.0
0.0
National Growth Share
-5000.0
Industrial Growth Share
Local Share
-10000.0
Transport and
communications
Finance
Business
Services
Cultural and
sporting
Health
Education
Public Admin
Comparisons with other core cities
Further analysis on behalf of AWM by Oxford
Brookes University underlines the extent to
which the performance of the Birmingham
City Region has not only been statistically
weaker than might have been expected, but
has also been weaker than many other
comparator core city-regions.
For example:

The Birmingham City-Region in terms of
innovation performs below the UK on a
range of indicators, and especially weakly
in relation to high-tech patents

Knowledge industries/workers/
occupations are much less well
represented in Birmingham


Total job growth (1984-2007) has been
lower in the Birmingham city-region
relative to any other city-region, with the
exception of Liverpool and Sheffield
The average rate of change in full time
equivalents in the financial and business
service sectors (2.5% growth 1993-2007)
was lower than any other city-region.
As a result, both GVA per capita growth in
Birmingham has been lower than that for
other core cities (with the exception of
Nottingham) and the net reduction in
employment in the knowledge intensive
private sector has been especially poor.
Looking forward, Cambridge Econometrics
produced employment projections to 2020.
Not surprisingly these indicate a marked fall in
employment from 2006-2010, indicating the
impact of the recession. From 2010-20 there
is a further fall in employment from 506,700
full time equivalents (FTEs) to 503,500 FTEs.
Birmingham is particularly exposed to the
reductions in public sector spending, with the
public sector accounting for a relatively high
share of total employment – in the region
second only to Stafford. This will significantly
impact on the employment outlook over the
next few years.
The fall in employment is further accentuated,
in respect of the overall ‘labour market
balance’ for the City, by the significant growth
in labour supply. The working age population
is expected to increase by an additional
34,000 people, rising from 649,300 in 2010 to
683,500 in 2020.10 In absolute terms, this is by
far the largest increase in the region.
As the chart below illustrates, taking into
account labour supply and demand, overall
employment densities are expected to fall
most markedly in Birmingham 2006-20.
Change in number of jobs per 100 working age, 2006 to 2020
North Warwickshire
Tamworth
Cannock Chase
Telford and Wrekin
Staffordshire Moorlands
South Staffordshire
Wychavon
Herefordshire
Redditch
Shropshire
Malvern Hills
Lichfield
Stafford
Wyre Forest
Worcester
Dudley
Bromsgrove
Newcastle-under-Lyme
Solihull
Wolverhampton
Nuneaton and Bedworth
Stoke-on-Trent
Stratford-on-Avon
East Staffordshire
Sandwell
Rugby
Walsall
Coventry
Warwick
Birmingham
-10
-10
-13
-14
-12
-10
-8
-8
-7
-8
-6
-6
-6
-6
-4
-4
-4
-3
-3
-3
-2
-1
-1
-1
-1
-1
-1
-2
-2
2
0
0
0
2
4
4
4
4
4
5
6
Change in number of jobs per 100 working age people
10
ONS 2008 based sub national population
projections. For every 100 people in Birmingham
there will be 76 jobs in 2015. This is eight fewer
than in 2008 (84 jobs).
AWM Strategy Team 12
8
The Birmingham Economy
Summary of Key Challenges
1. Rebalancing the economy
Birmingham is facing some major - and very
distinctive - economic challenges, namely:
As previous analysis indicates, there has been
a major significant and sustained job loss in
the private sector across Birmingham.

A private sector that has performed
poorly in recent years and is now
vulnerable to public sector cuts

Particularly weak performance in
professional and business services

The performance of creative industries in
the City has been characterised as ‘solid
rather than spectacular11

Low levels of entrepreneurship and low
business survival rates

GVA per head in 2007 declined further
with an index value of 97, continuing the
decline from a peak of 104.6 in 2001. 12

Very significant increases projected in
terms of labour supply, in contrast to the
overall decline in labour demand

Very low employment rates, high
unemployment and worklessness rates

High levels of deprivation and
disadvantage, including significantly
worse health outcomes

Continuing deterioration in job density
with a projected increase in worklessness.
This underlines the concerns around the local
economy which has been performing poorly
for some time. Yet Birmingham remains
central to the fortunes of the regional
economy, accounting for 21.3% of total
regional GVA in 2007.
11
BDP Consulting. Why the Creative Industries
matter to Birmingham. January 2010.
Looking over a longer period it is evident that
the proportion of employment in the private
sector for the wider City Region has not really
changed, employment growth being confined
to the public sector – this is a well established
trend dating back to the 1970s.
These are clearly long term employment
trends, reflecting continuing decline in
manufacturing with limited growth in private
sector tradable services. This leaves the LEP
confronting some very challenging structural
problems. Challenging the overall trajectories
detailed here is a long term project.
This suggests that a fundamental ‘debate’ is
required to assess the adequacy of present
approaches to economic / enterprise
development. There are two strands to be
examined here: first, the immediate
framework for enterprise support; and
second, the wider ‘environment’ for business.
In the first instance it will be important for the
City to build on its strengths including:

High growth firms (many of which are to
be found across sectors)

Export based clusters
12
It is estimated that Birmingham contributes in
the order of £600 million to the overall regional
output gap of £16.5 billion in 2008.
AWM Strategy Team 13
The Birmingham Economy

Sectors where employment is projected
to increase and which are well
represented locally including for example:
-
Banking, finance and business services
-
Shared service centres
-
Creative industries & digital media
-
Transport technologies - low carbon /
green automotive assembly
-
Advanced manufacturing.
Recent analysis by the City Council13 has
identified potential competitive advantages in
these sectors. The diverse ethnic make-up
provides further opportunities, especially
where levels of entrepreneurialism are high.
In terms of the wider business environment a
High Speed rail link is a major opportunity.
There are also some fundamental questions
to be further examined in terms of:

The emphasis placed on physical renewal,
‘major projects’ & worklessness – via-à-vis
promoting a more entrepreneurial city

The levels of deadweight and
displacement associated with major
renewal projects

The balance of investment in the city
versus suburban/outer urban areas

The emphasis placed on worklessness visa-vis retaining and developing a broad
range of skills in the City (with wider
implications for neighbourhood policies).
Here it may be worth engaging in a much
wider debate with leading academics and
practitioners to revisit economic strategies,
including lessons from other comparative
international cities .
13
Marketing Birmingham. Inward Investment
Research Project. May 2010.
2. The growing skills gap
While projections indicate overall
employment will contract slightly over the
decade to 2020, at the same time the net
changes hide a significant degree of ‘churn’
within the labour market.
As well as reducing labour demand, there will
also be a significant change in the skills
required, as the demand for skilled workers
increases and the demand for less skilled
workers decreases.
The economy is therefore both contracting
and ‘upskilling’ resulting in a significant
reduction in the need for elementary
occupations (-11%) combined with a
significant increase (+12%) in the demand for
senior managers.
The issue of skills is a major one, not least
because opportunities will arise as older
workers retire from the workforce creating
‘replacement’ demands. Qualifications will be
key to accessing these opportunities.
The extent of the skills gap is difficult to
predict, but based on recent trends there are
particular concerns in Birmingham where the
most marked increases have been in the
numbers of people of working age with no
qualifications (based on recent trends 20052008). More positively, this has been
accompanied by an increase in those qualified
to NVQ level 4+.
AWM Strategy Team 14
The Birmingham Economy
4. Addressing worklessness
Birmingham has significant economic and
labour market weaknesses. Employment
rates are especially low, worklessness is the
highest in the region and claimant rates
remain second highest in the region.
Claimant Proportion (April 2010)
3. Bringing forward major strategic sites
Considerable investment has been made in
the city centre and this has yielded significant
benefits in terms of the positioning of the city
and offer in terms of retail, leisure and
cultural activities. The demand for B1 office
uses also remains healthy.
Despite the City’s assets in terms of its central
location, heart of the UK motorway network,
huge market catchment, international
presence in the conference market and
proximity to London – the performance of its
private sector has been poor.
Investing in the physical fabric of the area –
and especially the major strategic sites – will
continue to be a priority. Longbridge,
Eastside and Icknield have a much wider
strategic significance. Eastside particularly
will facilitate the extension of the city centre.
Continuing investment in the built
environment will continue to be important in
creating an environment attractive to
potential investors and a broad mix of
social/skill groups.
It is important that the investment in major
strategic sites contributes to significant net
additional economic development - as
opposed to displacement – and help to
transform what appears to be a relatively lack
luster performance in terms of attracting
inward investment.
% of resident working age population
claiming Jobseekers Allowance
9
8
7
6
5
4
3
2
1
0
As previously noted, part of the reason for the
very high levels of worklessness in the City is
its diverse demographic composition. Rates
of worklessness are especially high for specific
ethnic groups and especially females. Here
there are likely to be strong cultural factors at
play which may also influence the number of
those who are workless that are actively
wanting to return to work.
However, claimant rates remain very high –
and of course in absolute terms the number
will be considerable. An emphasis on
creating jobs will continue to be of critical
importance in order to tackle these problems.
Labour demand projections indicate a fall in
employment 2010-2020. Combined with the
projected growth in labour supply, this results
in job density deteriorating over the period.
By comparing projections of the working age
population with levels of residence based
employment for the City, it is possible to
estimate the implications for worklessness.
This analysis suggests that worklessness in the
City will increase by roughly 33 thousand
people 2010-2020, rising 2% to 44% of the
working age population by 2020.
AWM Strategy Team 15
The Birmingham Economy
In Birmingham, people with no risk factors are
no more likely to be workless than if they
lived elsewhere in England.
The position is further complicated by the
large proportion of the workforce with no
qualifications. It has not proved possible to
improve the employment rates of these
groups even during recent years of significant
economic growth. Youth unemployment has
also risen during the recession, although rates
in Birmingham remain below those elsewhere
in the conurbation.
Research14 underlines the significantly
enhanced ‘probabilities’ of unemployment
where several risk factors combine.
Many of the key risk factors associated with
high unemployment ‘probabilities’ – ie. no
qualifications, younger people, ethnic
minorities and disadvantaged communities –
are of course all too readily present in many
Birmingham communities. The effect, in
combination, is to produce disproportionately
high probabilities of being unemployed.
80%
Probability of Worklessness
70%
Probabilities of Worklessness in the West Midlands
Male
Female
60%
Individuals with a single risk factor (eg. young,
BME, lone parent, no qualifications, long-term
health problem/disability) are however, more
likely to be workless if they live in Birmingham
than those living elsewhere in England with
the same risk factor, or for that matter
elsewhere in the West Midlands metropolitan
area.
The position is particularly stark for people
with no qualifications. Here the probability of
being workless is nine percentage points
higher for males with no qualifications if they
live in Birmingham than if they lived
elsewhere in England and 12 percentage
points higher for females with no
qualifications.
Likewise the probability for a young male is 12
percentage points higher if they live in
Birmingham compared to those elsewhere in
England (eight percentage points higher for
females).
These differences are even greater for those
people who have more than risk factor. For
example, there is a 75% probability that a
black female with no qualifications in
Birmingham will be workless. This compares
to a figure of 48% if they lived elsewhere in
England.
50%
40%
30%
20%
10%
0%
A person with no risk
factors
A person with no
qualifications
A young person
A young person with no
qualifications
The significant numbers of workless in
Birmingham is a significant inhibitor to its
economic performance, projections further
indicate that without some significant
turnaround this position will deteriorate.
14
Worklessness in the West Midlands: the impact
of demographics and multiple risk factors, WMRO,
2010.
AWM Strategy Team 16
The Birmingham Economy
5. Tackling social inequalities
Conclusions
Many of the indicators noted here reflect
deeper social inequalities, especially in terms
of education and skills – the single most
important determinant of an individuals life
chances. These inequalities marked in the UK
in contrast to many other leading economies.
Here, government has a major role to play in
establishing a wider context which is
supportive to local and regional initiatives.
In economic terms Birmingham has not
‘punched its weight’, particularly in light of
some of its evident advantages in terms of
location and market catchments.
Local authorities are key given the localised
nature of the issues involved. Cuts in public
expenditure - and specifically regeneration
and community development - will make this
a challenging agenda in the years to come.
The third sector has an increasing role and
consideration will need to be given as to how
best to assist the sector to step up to this
challenge and ensure cuts do not undermine
the capacity of the sector.
Intermediate labour market initiatives are
especially key to tackling longer term
disadvantage. Encouraging enterprise in
disadvantaged communities will also continue
to be important, and again the government
has indicated an important role for the third
sector, community and voluntary initiatives.
More generally, analysis highlights the
relationships between, education,
employment and the welfare state (health,
housing and the benefits system). Further
efforts to ensure these agendas are joined up
across government will remain important.
As the role of government reduces and that of
the private sector increases there are some
concerns around the impact on inequality and
community cohesion, particularly given the
experience of parts of Birmingham in the last
deep recession of the late 1970s/early 1980s.
This is reflected in significant job loss in the
private sector in recent years, limited
attractiveness to inward investors and poor
performance in key sectors – such as business
services which have driven employment
growth in recent years.
The particularly poor performance in business
services in part reflects an underperforming
regional economy, possibly to some degree
the proximity to London and may still reflect
issues around the ‘image’ of Birmingham.
Here significant swathes of the city suffer
from a poor quality environment and high
levels of worklessness .
The City Council specifically – and public
sector more generally – is such a significant
presence that the prospect of some degree of
‘crowding out’ of private sector activity
cannot be ruled out. In this respect it is
interesting to note that measures of the early
stage entrepreneurial activity (TEA) for
Birmingham (6.8%) is higher than the regional
average (4.6%) and is similar to that observed
in London. 15
Rebalancing the economy will be a major
challenge in light of trends in recent years and
will require liberating some of this nascient
entrepreneurialism. Birmingham also has
some significant advantages on which to build
although inevitably its skills profile and
inactivity rates will continue to be issues that
will persist and influence future performance.
15
GEM UK. West Midlands Summary, 2009. Note
differences are not statistically significant.
AWM Strategy Team 17