Shocking Data And The West Midlands Coronavirus Recovery Plan To Help Heal The Regional Property Market
The coronavirus lockdown will damage the West Midlands economy more seriously than the national average, new research has concluded.
Problems in the property sector, including too much office floorspace and inflexible landlords, will be part of a constellation of serious hurdles, a report from the West Midlands Economic Institute suggested.
Damage to the auto sector, threats to the 2022 Commonwealth Games and 11,000 local firms running out of cash will exacerbate the region’s problems.
Bringing together data from a number of local and national sources the must-read report paints a disturbing picture.
In Q2 2020, most of the West Midlands region will see GDP fall by more than the 35% UK trend predicted by the Office for Budget Responsibility, the report said.
According to research shared by the Centre for Progressive Policy, Birmingham will hit the national average, but GDP falls will be as high as 45% in the logistics-dominated areas of Rugby and Tamworth, 43% in the office-property dominated Solihull area, and above the trend in Dudley (39%), Wolverhampton (38%) and Coventry (37%).
The relative size of the health sector is one of the factors keeping GDP up in some areas, the report said.
The property sector does not go unnoticed.
“[There is] still evidence of landlords not relaxing or negotiating terms and significant issues in the letting sector," the report warned. "[There are] significant risks to flexible workspace and office space in the region. This could result in an over supply in office accommodation in the future and a lack of management capacity.”
The document “raised for intervention” the need for local and central government to act on the “instability of landlords and their lack of flexibility on rent reduction and the stability of property companies for the future [and] how will that affect the availability of commercial property of the companies fail”.
Work to rebuild local economies will need to be radical, according to background material prepared by the Centre for Local Economic Studies collaboration with the U.S.-based research and development lab The Democracy Collaborative.
The analysis “makes the case for community wealth building as the vehicle to drive systemic change through the initial rescue and recovery phases". In so doing, CLES argued, local authorities can lay the groundwork for a wholesale, much needed, reform of their local economies — making them fairer, more inclusive and more secure than those that existed before.
A regional Economic Impact Group, chaired by West Midlands Metro Mayor Andy Street and involving business and local authorities, is coordinating a rescue plan.
“This lockdown is having a profound impact on our regional economy and the research suggests we could be hit harder than anywhere else," Street said.
“It is clear that this unprecedented lockdown will soon start to be lifted, and it is crucial we are ready for that and have a clear roadmap to navigate our way through this difficult time.
“By preparing now, I’m confident we can secure a successful reboot of our economy and accelerate growth in key sectors.
The report comes as the West Midlands Combined Authority approved a further suite of multimillion-pound investments to unlock and transform former industrial sites across the region including a former foundry at Fountain Lane in Sandwell and a former National Grid depot at Abbotts Lane, Coventry. Details of plans for the sites will be published later this spring.
Among the report's worrying conclusions are:
• The postponement of the Olympic Games and social distancing could threaten the 2022 Birmingham Commonwealth Games.
• Up to 11,000 businesses are running short of cash and that number is growing. Birmingham and Wolverhampton both saw significant year-on-year increases of 8% and 10%, respectively.
• Just 20% of local businesses think their cash reserves will last more than three months.
• Mothballing of factories, particularly in the auto sector, will slash 10% off the regional economy, according to KPMG. The closure of the Jaguar Land Rover plants will, on its own, cut regional output by 0.53%.