An expert panel of leading West Midlands business figures joined TheBusinessDesk.com and leading professional services firm EY to explore regional challenges and opportunities.
From government policy and economic stability to planning, infrastructure, and public sector constraints, the conversations focused on the steps needed to secure the region’s long-term prosperity in a rapidly changing economic landscape.
Government Policy and Stability
The UK economy, after a period of uncertainty, shows promising signs of recovery and resilience.
Following a brief recession in the latter half of 2023, Peter Arnold, chief economist at EY said the economy bounced back in early 2024, with growth figures of 0.7% in the first quarter and a similar rate in the second. When annualised, this equates to a growth rate of approximately 2.5%, signalling a strong rebound.
Despite expectations of slower growth towards the end of the year, the economic outlook remains reasonably robust.
Arnold says the firm is more optimistic about the consensus around the long-term growth trajectory for the UK. Whilst the Bank of England thinks 1.5% is the capacity, EY believes “there’s still a little bit of slack in the economy”.
Perhaps the most striking development is the newfound political stability in the UK, which contrasts sharply with the uncertainty seen in other major Western economies.
Now with a stable government holding a clear majority, both domestic and international investors are taking notice says Arnold. This stability is a contrast to the political volatility in the US, where the upcoming presidential election has created uncertainty, and in Europe, where political shifts, such as the rise of the far-right in France and Germany, have created instability.
Arnold says this development has seen several major US banks and forecasters upgrade their growth projections for the UK, highlighting the positive performance of the FTSE and the relatively strong position of the pound against other currencies.
He said: “The UK now looks like that bastion of stability in a Western world that is ever, ever uncertain. As a result, we have started seeing some forecasters, some of the big US banks, looking again at the UK and really kind of repricing UK assets, the UK economy, upgrading growth forecasts and encouraging return to investment in the UK”.
With this Labour majority, there has been a more “negative mood” coming from the new government about how they will be “forced” to make “tough decisions” with the economy they have inherited.
Many believe Labour has “overdone the negativity”, Arnold understands that “in the next couple of weeks we are going to see a bit of a pivot in political messaging towards more optimistic times”.
A significant area of discussion in the UK’s economic policy landscape revolves around fiscal rules and infrastructure investment.
Chancellor Rachel Reeves has revised fiscal rules, allowing for borrowing to fund capital projects, with the stipulation that debt as a percentage of GDP must still fall over a five-year period.
Arnold believes the challenge lies in convincing financial markets of the value of these investments.
He said: “The financial markets really heavily punished Liz Truss when she tried to borrow the extra money in tax cuts, it will be interesting to see whether they’ll give them the benefit of the doubt and see the value of that extra capital”.
Stability is key for entrepreneurs Andy Wilkinson, CEO of OWB, part of global agency DRPG.
“We employ more than 400 people across the globe so stability is critical. We have to be able to plan and we haven’t been able to.
“The government needs to move on from this negativity and actually crack on and deliver some policy now”.
Planning and Infrastructure Challenges
For Paul Costiff, development director at national housebuilder Vistry, too often, political decision-making overrides planning officers’ expert recommendations, leading to delays or even cancellation of crucial projects.
Around 50-70% of Vistry homes are classed as affordable, because of the huge demand. Developers require not just a more effective planning process, but land availability. Without this, they’re reluctant to invest in long-term projects that can help alleviate the UK’s housing shortage.
Costiff believes: “There are lots of weak economically performing parcels of land, where someone could assemble these parcels into decent size pieces of land that can be developed. If they’re large enough, you have a much, much better opportunity to create these fantastic places that we need. It’s not about 50 plots here – that doesn’t create places, that creates houses. There’s a difference”.
Vistry is spearheading several major regeneration schemes across the UK and West Midlands. It’s currently working on the former MG Rover site in Longbridge and is kickstarting the £196.5m regeneration of the Birmingham City Hospital site with outline planning permission secured for 750 homes.
“These sites are of scale, where you can really make a difference and create something fantastic, not just for the people living here but the wider area,” says Costiff.
He added: “Challenges moving forward will be the resources of local government to be able to issue highway approvals when we get the planning and the young talent that we need to attract into the industry that can deliver these new homes”.
With Vistry’s commitment to delivering affordable housing, Costiff warned that the arrival of HS2 will send house prices soaring.
He said: “There’s evidence that whenever significant infrastructure is delivered to an area, it radiates house prices significantly. I can see in 10-15 years, when HS2 is up and live, the house prices in this area will significantly increase, meaning more people will be priced out of the market.
“We’ve got the opportunity over the next two or three years, to plan how we prepare for that economic demand”.
Craig Wakeman, head of HS2 and strategic partnerships at the West Midlands Combined Authority (WMCA) echoed Costiff’s thoughts, as house prices near Transport for London’s Elizabeth Line skyrocketed.
He said: “We are right to be wary of that, but I believe that the worst decision is indecision.
“Infrastructure project delivery is so fragmented. If we’re looking to build something, there needs to be a strategy for skills and for housing around it, to create a regional plan that everyone is bought into”.
Public Sector Constraints and Collaboration
Public sector funding constraints are a major issue due to cash-strapped councils spending increasingly more money on adult and social care.
After effectively becoming bankrupt, Birmingham City Council passed what are thought to be the largest budget cuts in local authority history in March.
Residents of the largest local authority in Europe have been hit with a council tax increase over the current referendum limit from 4.99% to 9.99% for the next two years.
The council has received £1.255bn in Exceptional Financial Support (EFS) from the government, which must be paid back through £750m of asset sales.
It will help to tackle an equal pay liability above £867m, an overspend on IT system Oracle of £136m and support a £100m redundancy scheme when it cuts 600 jobs.
Philip Nell, strategic director of place, prosperity and sustainability at Birmingham City Council said: “The potential of Birmingham is amazing thanks to the dynamism and diversity of our population. But we have some of the most deprived communities in the UK, we have up to 50% of our school children growing up in poverty, we have three times the national average of unemployment, 23,000 households – that’s not people, that’s families and couples, on our social housing waiting list”.
To tackle this, Nell believes that a much more strategic use of limited public resources is required.
“I don’t want to sound negative because the opportunity is amazing, but how do you unlock it in that collaborative way with the private sector? Because we will need public money to do it.
“The devolution deal is really important in finding ways to deploy the smaller resources that we have. It’s been getting smaller for the last 12 to 15 years so we need to be much more effective and interventionist. We need to understand the way in which different interventions work in collaboration with each other”.
There’s also a concern over the lack of decisive action in the public sector, which fears risk and looks to avoid blame, ultimately leading to inaction.
Nell said: “People do not understand the impact of not doing something. It’s much easier not to make a decision. You can’t sit in the private sector and not do anything, everybody will go bust. You’ve got to make decisions and decisions – they’re never black and white, they’re always grey. You never have 20/20 vision.
“The trouble is, in the public sector, there isn’t that recognition, and because nobody’s getting actually rewarded – in fact, they get punished for making the wrong decisions, so they just won’t. It’s just easier not to make a decision”.
The UK’s economic recovery, despite recent challenges, is showing positive signs of growth, bolstered by improved political stability.
Challenges for the UK and the West Midlands remain, particularly in terms of infrastructure development, housing affordability, and public sector constraints.
It’s clear that the need for decisive action, effective collaboration between public and private sectors, and strategic use of limited resources is critical to unlocking the full potential of the UK.