Power Up skills and infrastructure to unlock region’s productivity

Harnessing productivity through skills holds the key for regional growth, according to Deloitte’s latest Power Up report – ‘Unlocking Productivity across UK Regions and Nations’.

Consulting more than 50 business leaders, educators, local government officials and influencers from across the UK, the report takes a unique look at over 20 years of ONS (Office of National Statistics) data along with insight from regional leaders to help better understand and assess how potential productivity and growth areas across the UK and the West Midlands could be unlocked.

Although there were clear themes emerging from each region, private and public figures consulted from across the West Midlands cited skills, investing in transport and digital infrastructure and increased collaboration as key to improving the region’s productivity.

Although the region was hit hard during the recession, it has gained momentum with a number of positive developments. Since 2010, output has grown faster in the West Midlands than for the UK as a whole and the current employment rate of 74.4% is close to a record high.

For five of 13 sectors analysed by Deloitte, the West Midlands has seen productivity growth outperform national averages since 1997 providing optimism. The region has led the way in information and communications with other sectors seeing strong growth including construction, professional, scientific and technical services; administrative/support service and other services.

The strongest employment growth since 1997 has been in transport and storage; professional, scientific and technical services; and administrative and support services.

Manufacturing still accounts for 16% of output compared to the UK’s 10% with the region notable for innovation in areas such as electric and autonomous cars. The election of Andy Street as metro mayor in 2017 has also created a positive buzz around the region as well as the promise of HS2, which is already attracting talent and global businesses.

However, whilst the headlines indicate that productivity and growth in the West Midlands is heading in the right direction it still falls behind the UK average. Both private and public sector figures interviewed argued more needs to be done, particularly on skills and investing in transport and digital infrastructure, if the region is to continue to grow and prosper.

Jane Whitlock, practice senior partner at Deloitte in the Midlands, says:

“This analysis provides a unique perspective on how the West Midlands has fared both pre and post financial crisis, and whilst we are still not at pre-crisis productivity levels, the outlook is positive.

“The region’s economy, which is still strong in manufacturing, has diversified and key sector strengths now include automotive and mobility, life sciences, creative and gaming as well as business and professional services.

“However, the message from both private and public sector figures we interviewed was clear. We need to invest in skills, both new skills and the upskilling of the current workforce, take full economic advantage of HS2, invest in infrastructure and above all collaborate.

“The good news is we are already seeing signs of this. The successful bids of the 2022 Commonwealth Games and Coventry as the 2021 UK City of Culture, alongside the choice of the West Midlands for trialling 5G high-speed mobile technology is already having a positive impact on the region and we need to capitalise on this to help drive growth and increase productivity.

“Data alone cannot solve the productivity puzzle, but by analysing the past and speaking to key influencers in the present who are responsible for driving productivity and growth, we can assess our strengths and weaknesses, and pinpoint how we can potentially unlock the region’s potential.”

The report suggests weak productivity is a particularly acute problem for the UK, when compared to other developed economies as Pauline Biddle, managing partner for UK regions Deloitte, explains:

“The slowdown in productivity growth has had a tangible effect. Analysing data by industry, we looked at the best regional performer for each sector. If this performance was replicated across the UK as a whole, this would be worth an additional £263bn to the economy, or nearly £10,000 for every UK household.”

“However, our UK regions have huge opportunity for growth and there is an overwhelming sense of regional pride and commitment that comes from the interviewees.

“Regional businesses need a devolution framework and for deals to work effectively. We need to plan and execute place-based strategies and work with recently appointed metro mayors in our city regions, but making sure that other areas do not lose out unfairly in spending and investment allocations.”

Angus Knowles-Cutler, UK Vice Chairman Deloitte, added:

“There is often a trade-off between productivity and employment growth. For example, productivity in manufacturing has risen strongly since 1997 while witnessing a sharp decline in employment. But experience in sectors such as IT and the professional, scientific and technical sector show that it is possible to increase employment and productivity in tandem. Whilst there is not a single definitive answer to productivity, we certainly have a new perspective.”

The West Midlands Combined Authority, Birmingham City Council, Greater Birmingham and Solihull Local Enterprise Partnership and leading business figures all contributed to the West Midlands report.

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