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West Midlands, UK
The West Midlands is one of our inclusive productivity case studies for Our Economy 2023. Historically, the West Midlands shares many similarities with the North East of England, but the region has seen much greater productivity growth since 2008.
The West Midlands is comprised of the local authority areas of Herefordshire, Shropshire, Staffordshire, Stoke-on-Trent, Telford and Wrekin, Warwickshire and Worcestershire, together with the West Midlands Mayoral Combined Authority area. It has a total regional population of nearly 6 million, and is a region of distinct nature and diversity, ranging from major urban areas to sparsely populated zones. The diversity is also reflected in its population, with a wide range of communities, businesses, workers, and skills.
Birmingham is the powerhouse of the West Midlands and the largest UK city outside of the capital with a population of 1,144,919. The scale of Birmingham means the city plays a key role in the regional economy.[1].
The West Midlands economy historically mainly specialised in manufacturing, creative design, production sectors and supply services such as transportation and education. It shares similarities to the North East in its industrial strategy, given the importance of the automotive sector in both regions.
The 2008 to 2018 period saw the transition from one Regional Development Agency to multiple LEP areas in the West Midlands (covering the region’s county, unitary, and local authorities) and later the establishment of the West Midlands Mayoral Combined Authority. This had an impact on the ownership, remit and available resource for policy development in different parts of the region.
^Resolution Foundation (2023) A tale of two cities: A plausible strategy for productivity growth in Birmingham and beyond. Available here
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Performance on key indicators
In 2008 the GDP per head of North East England lower than that of the West Midlands. Between 2008 and 2018, the West Midlands rate grew faster so that, by 2018, the gap had widened.
The economic activity rate was a little lower in North East England in 2008 than in the West Midlands. The West Midlands saw a slightly larger increase in the rate between 2008 and 2018, widening the gap.
Disposable household income per head in North East England in 2008 was lower than in the West Midlands. Between 2008 and 2018, both regions saw similar rates of growth, so that the North East England rate remained lower in 2018.
Further detail about the comparison across these three indicators can be seen in the charts below.
11%
Between 2008 and 2018, GDP per head rose by 11% in the West Midlands, compared with an increase of 4% in North East England
Gross Domestic Product per head, 2008 to 2018 ($s)
North East England was less productive than the West Midlands in 2008: GDP per head was at 93% of the level in the West Midlands. Between 2008 and 2018, the West Midlands saw considerable productivity growth, with an 11% rise in GDP per head compared with growth of 4% in North East England.
This means that by 2018, North East England had fallen further behind. GDP per head in North East England was 87% of the level in the West Midlands in 2018.
The economic activity rate was slightly lower in North East England (74%) in 2008 than in the West Midlands (75%). The West Midlands saw a greater increase in labour market participation than the North East between 2008 and 2018 (an increase of 2 percentage points in the West Midlands, compared with a rise of 1 percentage point in North East England).
The economic activity rate in the West Midlands (77%) therefore remained above that in North East England (75%) in 2018.
Disposable household income per head in North East England in 2008 was 94% of the level in the West Midlands.
Between 2008 and 2018, both regions saw similar rates of improvement, with the disposable household income per head in North East England at 93% of the level in the West Midlands in 2018.
Prior to our chosen period of 2008 to 2018, the West Midlands was underperforming economically in comparison to UK averages, with lower productivity and slower growth rates. Since then, the region has seen growth in performance through a focus on investment in research and development, expanding links between R&D, academic and business, growing key markets through inward investment, strengthening business support and access to finance and enhancing connectivity and mobility to develop thriving local and town centres.
Policy interventions and aims
Regional Competitiveness and Employment Objective details the vision of West Midlands European Regional Development Fund Operational Programme for 2007 to 2013, which was to achieve a significant increase in the productivity of the business base; to reduce unemployment and inequalities; and ensure that the region’s economic growth is achieved in a sustainable manner, which aids its transformation towards both a low-carbon and high value-added economy.
The programme aimed to assist 22,441 businesses to improve their performance, create 10,519 jobs and 2,495 new businesses and support the reduction of regional carbon emissions with the region. To do so, the Programme had the following priorities:
Priority 1 (Promoting Innovation and Research and Development) – Increase the regional levels of R&D expenditure and activity and knowledge transfer between research and business to generate more innovative businesses.
Priority 2 (Stimulating enterprise development) – Increase enterprise in the West Midlands to improve regional economic performance through the provision of tailored business support together with a limited range of integrated access to finance measures.
Priority 3 (Achieving Sustainable urban development) – Stimulate renaissance within key urban areas in the West Midlands by encouraging job creation and targeting communities in need to help them join the economic mainstream.
Priority 4 (Developing Inter-Regional Activity) – Support the three main priorities through the introduction of an inter-regional element to their work to learn how to tackle regional problems and how to maximise learning from inter-regional activity.
The Regional Spatial Strategy 2008 outlines key policy areas to inform the development of strategies and programmes of other public agencies and provides the spatial framework for the Regional Economic Strategy. The areas include:
Urban Renaissance: The creation of high quality, healthy, affordable and sustainable living and working environments, with a sufficient number and variety of employment and training opportunities, modern urban transport networks, and rejuvenating city, town and local centres to serve communities with high quality services.
Rural Renaissance: Increased choice in housing; the diversification of the rural economy; better transport links between both rural areas and rural and urban areas; improving health, education, skills training, social and community facilities.
Communities for the Future: The development of housing within and beyond MUAs and reuse of land and buildings for housing, affordable homes, and mixed communities.
Prosperity for all: Linked closely with the Regional Economic Strategy, there was a focus on three high-technology corridors (HTCs) to diversify the regional economy, linked to critical research, development capabilities, and advanced technologies. There is also a large focus on innovation and cluster development related to Research and Higher/Further Education to growth and expansion.
Transport & Accessibility: The West Midlands is at the centre of the national road and rail network, and this gives rise to competing demands between local, regional, national, and international movements. The region has developed a focus on infrastructure development and reducing the need to travel through the promotion of active travel.
Greater Birmingham and Solihull LEP has policy closely linked to regional level and includes a focus on sector strengths and opportunities around high growth – high added value, high volume – high job creation and high FDI potential.
What has changed since 2008
The focus of West Midlands regional policy has been on investment in R&D, increasing FDI and exports, creating better paid and more secure jobs, and addressing pockets of high deprivation. Between 2008 and 2018, the proportion of people in employment who worked in knowledge intensive services in the West Midlands rose by 4 percentage points, from 42% to 46%. Over the same period, the proportion of people in employment who worked in knowledge intensive services in North East England rose by 1 percentage point (from 46% to 47%).
0.7% of people in employment in the West Midlands worked in high technology manufacturing in 2018, slightly down from 0.8% in 2008. Between 2008 and 2018, the proportion of people in employment who worked in high technology manufacturing in North East England fell from 0.9% to 0.6%.
24% of people in employment in the West Midlands in 2018 were in part time jobs, the same proportion as in 2008. In North East England, the share of employment in part time jobs rose from 24% to 25% between 2008 and 2018.
The ERDF Operational Programme for West Midlands achieved its target output of assisting 22,441 businesses to improve their performance. The programme successfully created 11,500 new jobs, exceeding the target of 10,519. As well as creating 2,590 new businesses in the region, again exceeding the target of 2,495.
A mid-term evaluation of the West Midlands ERDF programme[1] identified that business and innovation had received more focus than employment support and social programmes.
Involving the region’s universities in delivering large scale business and industrial innovation support was a key success factor of the 2007 to 2013 ERDF programme in the West Midlands. This included leveraging University investments in demonstrators and other research-intensive activities.
The partnership working with universities and businesses helped secure larger scale collaborative projects with a focus on commercialisation of innovation. Efforts were made to ensure commercialisation throughout the regional supply chain, including through specialist projects delivered by cluster organisations in the region.
The West Midlands experienced a successful decade for growth, forging a position as the fastest-growing region outside London to 2019, and breaking through the £100 billion economic output mark[2]. The policies in place between 2008 and 2018 contributed to this increasing economic performance of West Midlands.
^Regeneris (2011) West Midlands ERDF Operational Programme 2007-13: Mid-Term Performance Evaluation. Available here
^West Midlands Combined Authority (2022) West Midlands Plan for Growth. Available here
Proportion of employment in knowledge intensive services, 2008 to 2018
Of our five case studies the West Midlands is clearly the most similar to the North East of England, but there are still some caveats which may limit comparisons between the two.
Local devolution in the region has been more firmly established in the West Midlands. The West Midlands Combined Authority was established in 2016, providing increased powers over economic functions, including transport, adult skills, infrastructure, housing and business support.
The West Midlands’s proximity to London and the South East will also positively benefit its levels of productivity, as to a greater extent than the North East it can benefit from spillovers from the concentration of economic and human capital in the south of the country.
Finally, it must also be recognised that the greater Birmingham conurbation is significantly larger than the Tyne and Wear conurbation, around twice the population depending on the measure. It will therefore likely benefit more from agglomeration than the North East.
Overall, the West Midlands is a region which shares many of the same inclusive productivity challenges as the North East but has seen greater productivity growth since 2008. This growth has been supported through investments in R&D, working with universities and strong global trading relationships.
Explore other case studies
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Its highly skilled workforce allowed the Basque region to remain resilient post 2008 and increase its share of employment in knowledge intensive business services.
