Deep roots will enable our region to branch out and prosper

The current economic forecast makes for sombre reading. The Bank of England’s decision to raise interest rates by 0.5 percentage points to four per cent, will have a huge impact on business and individuals as higher interest rates mean less disposable income and larger overheads.

However, with every challenge there is opportunity and with every opportunity there is a chance to push boundaries, try something new and change.

We recently took part in the Midlands Engine’s ‘Quarterly Economic Briefing’ and it’s refreshing to see businesses in the Midlands remain bullish despite turbulent economic headwinds for the foreseeable future.

Well-timed to follow the Bank of England’s latest ‘Monetary Policy Report’, it was a chance to explore the potential impact of the interest rate rise, Deloitte’s recent ‘State of the State’ report and the host’s ‘State of the Region 2022’.

It was a lively debate, with far too much to assimilate into one, short blog, but there were three key takeaways from the briefing that fuels my optimism for the Midlands region.

1 - The Midlands is a key exporter and innovator

Export is a key investment, however, there has been significant under investment in the Midlands, which is preventing that true economic growth. The ‘State of the Region 2022’ reports that despite being approx. £7bn below on exports from 2019, the Midlands is the second highest exporting region for food and is on a positive, upward trajectory as it continues to recover from the pandemic shock and Brexit.

There is lots of analysis to show that Brexit has been damaging and not a lot of analysis to show that opportunities are being seized. There is a need to focus on what opportunities can be drawn from the situation and learn from businesses that have seen Brexit as a means to adapt for long-term prosperity.

International trade remains really important, and investment will help to ensure that the region is internationally competitive.

The region also has a variety of emerging growth opportunities. Decarbonisation and digitalisation are two great examples of next generation growth, and businesses are at the forefront of many of the technologies around net zero, green transport, green buildings, the use of hydrogen, offshore wind and nuclear fusion.

Understanding how everyone can harness these opportunities and support related businesses is fundamental to future growth. Regional businesses and entrepreneurs have the innovation, they just need the right investment and skills.

And, location is key. Centrally located with an extensive travel network, easily accessible by rail, road or air, exporting goods and attracting inward investment is essential for the Midlands’ future economic health.

2 - Skills investment aligned to manufacturing for the future

To continue that upward trajectory, maintaining and driving sustainable manufacturing with the right skills is a necessity and the current labour structure is a real barrier. The Midlands was the heart of the industrial revolution and continues to lead in advanced manufacturing, but there is a huge skills shortage.

There is a need to align investment in skills with specific sectors, manufacturing being one. An ageing workforce combined with an unstable economy because firms do not have the right skills or talent coming through, will have a long-term impact on productivity.

3 - Devolution, decentralisation of government and dynamic leadership is key to levelling up

Dynamic, local leadership is key to levelling up the region and was talked about a lot in the interviews we conducted with various public sector leaders as part of the research for the ‘State of the State’ report.

The conclusion was that levelling up is not going away and place-making was really at its heart. However, greater devolution is needed and there needs to be the ability to get things done locally for the benefit of the local community and economy.

Innovation can thrive, but those in locally elective positions must be given the authority to act quickly.

The Bank of England’s latest ‘Monetary Policy Report’ indicates the UK is hit harder than other global economies as it absorbs higher energy prices, food shock price and a tight labour market, but the good news is that the domestic economy could be turning a corner.

Expectation is that inflation should come down in the latter part of 2023, and whilst there are other risks that could impact productivity, the time has come to take the bull by the horns and follow through with fully devolving funding into all regions to solve the productivity puzzle.

We have deep roots in the Midlands, we just need to be given the investment to nourish new, emerging sectors to strengthen the branches that have upheld the regional economy for so long.

If you missed the Midlands Engine’s Quarterly Economic Briefing you can listen to the recording here.