Buoyant Birmingham is the perfect demonstration of that oft-seen gulf between the real economy, one that employs people and creates opportunity and prosperity, and the rarefied and sometimes jittery world of international markets. While geopolitical concerns, tumbling oil prices and reduced Asian and US growth prospects are causing some nervous traders to reach for their blood pressure pills, our city region is at its most confident since the dark days of 2008.
It’s a confidence which is well-placed too, because it’s one based on significant structural opportunities and developments which will properly fuel the engine of the regional economy. And the truth is that the economy generally is in good shape and that those tumbling oil prices – while impacting on some stock market valuations – will be a major boost to the UK economy, reducing costs for business and consumers alike.
Households in particular will benefit from lower fuel prices. Many developed countries have failed to see any significant wage increases over recent years so the reduced cost of oil will provide a welcome boost to household finances. That macro-economic picture only goes to support the confidence being felt regionally, where it’s worth reminding ourselves of some of the facts. The Birmingham economy grew by 4.2% between 2012 and 2013, outperforming the UK growth rate of 1.6% and making it the strongest performing of all the UK’s core cities in that period, according to official Government figures.
Data from Marketing Birmingham for 2012/13 shows there were 41 inward investment projects in the city, creating a total of 2,271 new jobs and safeguarding a further 1,732 jobs. This represents a 52% increase in investment projects compared to the previous year. Associated job numbers were also considerably up on 2011/12, with 64% more jobs created than the previous year.
In 2013/14 the Greater Birmingham area saw more foreign direct investment projects than any other area. The region has also seen strong export growth since emerging from recession, with the West Midlands exporting more than any other region apart from the South East in Q2 2014. Perhaps the key indicator of health is that total employment has recovered to pre-recession levels and the latest official employment figures for the West Midlands show that total employment rose by 4,000 during the period July to September last year.
Last year also saw some notable milestones, all of them signals of a strengthening economy. HydraForce Hydraulics, for instance, started work on its new factory at the Advanced Manufacturing Hub in Aston. The 120,000sq ft manufacturing facility will become home to around 500 staff this summer. Work also started on the first speculative office building to be built in Birmingham since the recession. The 55,000sq ft Goodman office at Eastside Locks tell us that property investors are coming out of hibernation. The latest chapter in the renaissance of car manufacturing was the opening of the £500m Ingenium engine factory in Wolverhampton.
Birmingham Airport’s runway extension also opened last summer, bringing new long-haul destinations, including China, within range. The Chinese tourism market has tripled over the past 10 years and is estimated to be worth about £15m to the West Midlands economy. That investment is part of a £1bn chunk of infrastructure investment for the region which will provide improved access for business, residents and visitors and which it’s estimated by Birmingham City Council will ultimately deliver some 24,000 new jobs and £4bn-plus of GVA for the city region.
The next stage of the New Street Station development, for instance, will see some 3,000 workers on site this summer as work on a 21st century transport hub and the Grand Central Birmingham project is completed. When John Lewis opens its £35m store above New Street station, Birmingham will be the only city outside London with a Harvey Nichols, a Selfridges and a John Lewis. Selfridges is itself investing £20m in its Bullring store centre and Harvey Nichols is doubling its space in the Mailbox, which is itself undergoing a £50m revamp by new owner Brockton Capital. Add to this already heady mix the £130m extension of the Metro network and the huge potential impact of the HS2 project (50,000 jobs and a £4bn GVA boost according to Birmingham City Council) then it’s easy to see where city confidence is coming from.
The new employment opportunities all these developments will bring, combined with the boost to consumer spending from low oil prices and low inflation, is good news for the city. For the West Midlands and the Birmingham city region, we believe 2015 will be a year of sustained positivity.
Quilter Cheviot Investment Management focuses primarily on structuring and managing bespoke discretionary portfolios for private clients, charities, trusts, pension funds and intermediaries. www.quiltercheviot.com. This article is not intended to constitute financial advice: securities referred to may not be suitable for all recipients, and the value of investments can go down as well as up.