The Chamberlain News

Booming West Midlands set to outpace Germany in export growth drive

Exports from the West Midlands are on course to grow at a faster pace next year than Germany – an unlikely statistic underpinning a rapid recovery from recession by the region’s manufacturers, writes Paul Dale.

Over the past three years the volume of goods the West Midlands sells abroad has risen by 46 per cent against an average of 14 per cent for the UK, easily the best performance anywhere in the UK outside of London and the South-east.

More than 12,000 firms are sending goods abroad in a boom driven largely by the success of luxury car manufacturer JLR, and the automotive sector more generally, which accounts for almost half of all exports.

These figures are the perfect antidote to cynics who a decade ago claimed manufacturing in the West Midlands was dead and buried, according to Professor David Bailey of the Aston Business School. Download Professor Bailey’s slides from the launch of the West Midlands Economic Review here.

Prof Bailey told a Think Birmingham debate on devolution that high-tech and advanced manufacturing in the West Midlands could now compete with anywhere in Europe on the basis of “high productivity, high quality and low labour costs”.

Although Birmingham and the West Midlands were hit badly by the 2008-09 recession, the bounce back to profitability has been more rapid than expected with jobs growth outstripping other regions.

The performance has been helped by a focus on new markets with a 155 per cent increase in exports from the West Midlands to Eastern Europe and a 103 per cent jump in exports to Asia and Oceania.

The Government may be fond of referring to the Northern Powerhouse,  but the West and East Midlands together have a GVA on a par with Austria and the Netherlands and account for 14 per cent of total UK exports.

However, there are sharp differences in wealth generation between richer Solihull and Warwickshire and poorer areas like Stoke, Dudley and Walsall, Prof Bailey said.

Prof Bailey warned that the boom might turn out to be an unsustainable “sugar rush” and that the West Midlands and the UK still faced “deep seated problems”, in particular a lack of investment and skills shortages. There were also concerns that a post-recession increased in consumption was being driven by “people running down their savings” and might peter out.

Prof Bailey is helping to put together the West Midlands Economic Review as part of an Aston Business School team commissioned by the Lunar Society.  The aim is to identify policy changes and actions that will accelerate economic growth, enhance appeal of the region to its workforce and enterprises and raise personal welfare.

He argued that the West Midlands will only reach its full potential if Whitehall is prepared to devolve budgets and powers to councils and local enterprise partnerships. This would produce “a better set of local policy levers so that it can do more to push things along and actively support our exporters, including greater attention to skills, access to long-term finance and support for innovation”.

The formation of a combined authority bringing together areas covered by the Greater Birmingham and Solihull LEP, the Black Country LEP and the Coventry and Warwickshire LEP would be a critical factor in boosting the local availability of skills, fostering the region’s innovation capacity, supporting the supply chain base and providing effective support services.

Prof Bailey added:

JLR has just posted record output figures and should top 500,000 units this year, with big increases in sales beyond Europe being stacked up. But while JLR has led the automotive export charge into new markets beyond Europe, UK exports overall have failed to take off anywhere near as much as policy makers had hoped for.

The West Midlands is an exception to this, with export growth far beyond anything seen in any other UK region. The heavy lifting of rebalancing and exporting our way of trouble is only really happening here in this region.

Advanced manufacturing and engineering in the West Midlands can now compete with anywhere in Europe on the basis of high productivity, high quality and low labour costs. The region is also well placed to develop this further through investment in skills and technology.

In designing support for skills in the region’s low carbon vehicle cluster or its gaming industry, local LEPs are far better placed to do this than a remote quango in London which is far removed from where the action is really happening.

So far we have seen a strong effort by local actors – whether LEPs, suppliers, unions, assemblers or support agencies such as the Manufacturing Advisory Service – to work together to support the renaissance of local manufacturing.

The co-operation between some of the local LEPs over inward investment and supply chain support, for example, has been genuinely first rate. But that needs to be built on. Local authorities need to come together in a ‘Combined Authority’ to seize the devolution opportunity.

And central government needs to listen and let go of such powers. Devolution isn’t necessarily going to boost economic growth in the UK overall as some regions won’t necessarily deliver. But this is the one region delivering the rebalancing and export growth so wanted by the government.

Giving the region more power to push that along really does make economic sense.