Jan 17th, 2022
The Midlands’ Productivity Challenge: Exploring the issues
The Productivity Institute’s eight Regional Productivity Forums have written an extensive agenda-setting analysis for each of the five English regions and the devolved nations of Wales, Scotland and Northern Ireland. This includes historic regional context, key issues and future research priorities. Alongside this is an executive summary: a high-level overview highlighting the productivity picture in their area, including a scattergraph showing the disparities within on a NUTS3 level in comparison with the UK average, the primary drivers and bottlenecks, a SWOT analysis and a look to the future. Both can be downloaded on the right of this page. These were written with the support of the Midlands Productivity Forum.
Geographically, the Midlands lies at the heart of the UK, and has a population of 10.7m people, 435,000 active businesses, 5.1m jobs and an annual economic output of more than £258bn (2019), it forms a significant part of the national economy. Aggregate productivity for West Midlands and East Midlands has been consistently 0 to 15% below the UK average, though the productivity growth performance of the West Midlands has slightly improved relative to that the East Midlands.
Historically the Midlands has been known for manufacturing, and still boasts a number of global brands including Toyota and Jaguar Land Rover in automotive, Alliance Medical in medtech, Mondelez in confectionery, Experian in business services, Bombardier and its predecessors in rail engineering, QinetiQ in defence, Rolls-Royce in aerospace, and HSBC in fintech with its new UK HQ in central Birmingham. The challenge now is to translate the Midlands’ manufacturing heritage into leading positions building on opportunities presented by industrial digitisation, and electric and autonomous vehicles and electrification.
The main cities being Birmingham, Coventry and Wolverhampton in the West, and Nottingham, Derby and Leicester in the East. Birmingham and Leicester in particular have relatively young and diverse populations compared with the UK average, and all are very diverse. Higher level qualifications are increasing faster amongst the workforce than the national rate. The West Midlands is the fastest growing UK region for goods exports. FDI projects have almost tripled since 2011/12.
If one considers the essential drivers of productivity, such as agglomeration, innovation, connectivity, firm start-ups, and experience effects, these point to the fact that the region’s productivity should be better than it is. In order to fully close the productivity gap (i.e. match the UK productivity levels by 2030), the Midlands’ productivity performance would need to increase at a rate of more than 2% per year, meaning the region would need to return to (and exceed) productivity growth rates previously seen in the 1980s and 1990s.
Author Nigel Driffield