New businesses and skills development drive decade of growth for West Midlands cities – PwC’s Good Growth for Cities index

Matthew Hammond
  • Decade of improvement for region driven by new businesses, increasing skills, jobs and income
  • Birmingham amongst top five fastest improving cities in UK
  • Coventry amongst top ten highest performing cities in UK
  • New businesses, health, environment and income distribution driving cities improvement
  • But the price of success is reduced housing affordability for all Midlands cities

Improvement in skills, new businesses, jobs and income have seen a decade of growth for West Midlands cities, according to the latest Demos-PwC Good Growth for Cities 2018 index, that ranks cities on a combination of economic performance and quality of life.

The index places Birmingham as the fifth fastest improving city in the UK with the city performing above the national average across a range of measures, including work-life balance, new businesses and income distribution. However, a price of success for the city is below average for house price to earnings.

Coventry was named as the eighth highest performing city in the UK scoring at or above the national average on all measures. Wolverhampton and Walsall has only one measure (skills) below average, but scores lowest overall as compared to all Midlands cities.

Published today [1 November 2018], the seventh annual Good Growth for Cities 2018 index sets out to show that there’s more to life, work and general well-being than just measuring GDP. The index measures the performance of 42 of the UK’s largest cities, England’s Local Enterprise Partnerships (LEPs) and the nine Combined Authorities, against a basket of ten indicators based on the views of the public as to what is key to economic success and wellbeing.

These include employment, health, income and skills – the most important factors, as judged by the public – while housing affordability, commuting times, environmental factors and income inequality are also included, as is the number of new business starts.

The latest Index analyses a decade of economic and social data to determine what long-term factors drive Good Growth. Birmingham has increased its index score by 0.33 since the 2005-7 index, compared to an average increase of 0.29 for all cities. This has primarily been driven by an improvement in skills of 25-64 year olds and a strong improvement in new businesses helping to drive increases in jobs and income.

Improving average skills levels for the UK’s youngest workers and driving new business formation have been the strongest drivers of good growth over the past decade, while unemployment levels have fallen back to around pre-crisis levels. However, this long-term retrospective analysis also highlights areas where there have been structural deteriorations for cities across the UK, particularly around reduced housing affordability and owner occupation rates and steep increases in average commuting times.

These longer term trends contrast with shorter term movements in the index, which have been driven primarily by falling unemployment rates and, in part due to this, higher overall household income levels.

The latest Index analyses a decade of economic and social data to determine what long-term factors drive Good Growth. PwC analysis shows that the average city in our index has improved its good growth score significantly over 10 years from 2005-7 to 2015-17, and has now more than recovered from the recession and downturn triggered by the global financial crisis.

Matthew Hammond, Midlands region Chairman and PwC’s Birmingham office Senior Partner, commented:

“The growth story for the West Midlands is compelling given the attractiveness of the region nationally and globally. I’m delighted to see Birmingham and Coventry recognised amongst the fastest improving and highest performing UK cities across a range of measures, including jobs, income, skills and health scores driven by a growth in new businesses.

“We have seen a decade of continued improvement, above the national average, at a time of significant investment in the region. The collaborative approach across the private, public and education sectors has been key, and remains so, to ensuring that the potential of the young population of this region is given opportunity to work in attractive businesses across the Midlands.

“Continuing to attract UK business investment, foreign capital and investment is vital if the Midlands is to make a difference to the next generation and those to come, from the unprecedented opportunities provided by HS2, Metro, Coventry City of Culture, Commonwealth Games 2022, the 5G ‘test bed’ and the related infrastructure investment.

“As compared with other regions of the UK it is particularly pleasing to see the results of the work of all agencies in attracting businesses to the region. Each of the LEP areas across the West Midlands, Black Country, Greater Birmingham & Solihull and Coventry & Warwickshire have materially improved the new businesses growth data in their areas.

“Performance of the Combined Authorities shows that the West Midlands Combined Authority’s strengths were indicators for work-life balance and new businesses, and its areas for development were income and skills amongst 25-64 year-olds.

“Having largely recovered from the financial crisis, addressing the housing and infrastructure supply constraints that drive these negative trends will be key challenges for the next decade for both central and local government, looking beyond the immediate issues around Brexit.”

PwC analysis shows that the average city in our index has improved its good growth score significantly over 10 years from 2005-7 to 2015-17, and has now more than recovered from the recession and downturn triggered by the global financial crisis.

The Index also compared how cities within Metro Mayor areas have performed since 2005-7. Birmingham has experienced improvements following the financial crisis with a slight lag relative to the index average, although this occured at a faster rate from 2012-14 onwards as unemployment rates declined significantly.

Analysis of Local Enterprise Partnership (LEP) areas in England shows the majority of ‘above average’ scores are concentrated in the Midlands and South of England. Coventry and Warwickshire LEP is the best performing in the Midlands region with scores at, or above, the UK average for all indicators. All Midlands LEPs are at or above average for jobs, new business, transport and income distribution.

Performance of the Combined Authorities shows that the West Midlands Combined Authority’s strengths were indicators for work-life balance and new businesses, and its areas for development were income and skills amongst 25-64 year-olds.

Ali Breadon, Midlands government and health industries leader, added:

“In the next 12 months we are going to see some major challenges and opportunities, including the UK leaving the EU, the 2019 Spending Review and the Government’s aims to have Local Industrial Strategies in place by 2020. This is a critical window of opportunity for  place leaders to define and deliver a growth strategy through collaboration to develop a shared vision and plan.

“Here in the West Midlands engagement and collaboration across the public and private sectors is creating an ‘investor ready’ region. For example, bodies like Midlands Connect have clearly set out the transport investments the region needs to drive future growth. Growth must be at the heart of Local Industrial Strategies and initiatives to improve the economic wellbeing of places and people across the country.”  

The top 10 highest ranked cities in our latest index, which relates to the period 2015-17, and the most improved since last year’s index were:

Highest ranking cities Top 10 improvers
Oxford Preston
Reading Middlesbrough & Stockton
Southampton Hull
Milton Keynes Milton Keynes
Bristol Birmingham
Edinburgh Wakefield & Castleford
Swindon Aberdeen
Coventry Liverpool
Aberdeen Swindon
Leicester Manchester

Source: PwC analysis

The index shows that almost all major UK cities improved their score relative to our 2017 index, driven primarily by rising employment. In general, those cities that have seen the biggest improvements in their overall score have also experienced particularly large falls in unemployment in recent years.

But the ‘Price of success’ is growing

However, the “price of success” has also become increasingly evident recently as we see declining scores since last year’s index for transport, owner occupation rates and particularly housing affordability, which highlights some of the ongoing challenges faced by UK cities.

Read PwC’s Good Growth for Cities report.

 

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