Socio-economic research improved the economic prosperity of the West Midlands through underpinning a £1.5 billion cash injection into the region.
Summary
This social science research produced more accurate projections of the effects of Brexit and Covid-19 on the UK economy than could be gained from trade statistics alone. It contributed directly to shaping the West Midlands region’s socio-economic policy, enabling the region to withstand economic threats.
Building economic resilience: UK regional and national responses to Brexit and Covid-19
“(This research) improved our understanding of the region’s distinctive exposure to different kinds of risks and therefore enabled a more effective response to the disruptive effects of Brexit and Covid-19.”
Andy Street Mayor of the West Midlands, 2017-2024
The challenge
Brexit and Covid-19 both caused concern regarding the vulnerability of the devolved nations and regions of the UK to socio-economic shocks. While Brexit risked increasing interregional inequalities, the impact of the pandemic was also quite clearly going to be spatially uneven, with increased challenges in certain regions.
Both Brexit and Covid-19 highlighted a need for high quality data and analysis to understand specific regional vulnerabilities and challenges. Regional and national policymakers need access to good sub-national data to design mitigating strategies that address specific and localised challenges.
The difficulty is that good quality data at the regional level is traditionally quite scarce. So, the challenge taken up by City-REDI, on behalf of the University of Birmingham and the West Midlands Combined Authority (WMCA), was to design and implement a model for generating a detailed understanding of the West Midlands region’s resilience to economic shocks so that policy could then be developed accordingly to strengthen where necessary and increase the region’s ability to withstand future threats to its economic stability. But this is not a project that just benefits the West Midlands. The analytical model the project created can be adopted by other regions too.
The research
Research conducted at the City-Region Economic Development Institute (City-REDI) led to the establishment of the West Midlands Regional Economic Development Institute (WM REDI). WM REDI analysed the engagement of UK firms and regions in cross-border global value chains. The mixed-methods approach included quantitative (datasets, input-output, econometric and Computable General Equilibrium (CGE) analyses) and qualitative case study analyses on specific regions, industries and workers.
Among its key findings the research revealed the following:
- The West Midlands was one of the three UK regions most at risk of being adversely impacted by Brexit because of its relative reliance on manufacturing value chains and EU trade.
- The West Midlands automotive industry was particularly vulnerable with 21 firms at high risk due to poor current liquidity ratios, with Coventry and Birmingham emerging as locations most susceptible to firm closures.
- Covid-19 would widen inequalities and exacerbate the interregional effects of Brexit, including in the West Midlands. Sectors such as travel, tourism, hospitality, creative and cultural industries, and high street retail would be most adversely impacted.
- National policies would not sufficiently account for the different vulnerabilities and challenges of specific regions.
- The differential impact of Covid-19 and Brexit across different sectors and occupations and therefore regions meant that enhancing the resilience of the skills system was important in fulfilling regional labour and reskilling requirements.
“This (a 50% uplift to funding in the West Midlands region) is a result of the robust, evidence-based case which the WMCA put forward, with City-REDI analysis at its heart.”
Jonathan Skinner Head of Economy and Local Industrial Strategy, West Midlands Combined Authority
The impact
This social science research shaped the response of the West Midlands Combined Authority (WMCA) to the threats of Brexit and Covid-19 and informed policy which increased the region’s economic resilience.
The project developed a successful model, which can also be used in other regions, for analysing sub-national data to identify the key specific impacts on the region and thereby enabled local policymakers to develop regional resilience plans in response. The model produced data and analysis that enabled the case to be made to central government for strategically targeted funding to improve the West Midlands region’s economic resilience. Central support received into the region based on this social science research included:
- £1.5bn to accelerate planned infrastructure projects, such as new tram and rail lines that inject extra money into the economy and create new jobs
- £644m fund for businesses with cash flow issues or struggling to secure loans for investment
- £36m workforce support package for workers made redundant, the retention and retraining of staff, and for an apprenticeship protection scheme
- £8.3m business support package with help for exporters to access foreign markets including bespoke trade missions
- The West Midlands region was awarded approximately 50% additional funding from Central Government compared to a straightforward per-capita basis
The research also helped shape Whitehall’s thinking regarding local and regional implications of all trade deals and informed discussions leading up to the Spending Review at the time. Specifically, it shaped views on how funds should be used to help local areas to prepare and recover after Brexit and then Covid-19.