Midlands hit hardest in economic ‘perfect storm’

Midlands hit hardest in economic ‘perfect storm’

19 Jun    Finance News, In Business

New research by Aston University’s Centre for Business Prosperity has shed light on the realities faced by the Midlands region concerning international trade.

The report, Midlands International Trade: State and Challenges, looked at the region’s trade performance from Q3 2019 to Q2 2022 and offers recommendations for recovery and growth.

It highlighted several factors disrupting exports across the UK, including Brexit uncertainty, the COVID-19 pandemic, supply chain disruptions, the UK’s EU exit, reduced demand and higher costs.

In 2019, the Midlands accounted for £56 billion in exported UK goods, representing 16% of the UK’s total goods exports. However, the value of goods exports experienced a significant decline in 2020, dropping by over 10% to £45.6 billion – five times higher than the national average decline of around 2%.

Additionally, the Midlands’ services exports were severely disrupted, with a near 25% reduction in export value, making it the worst-hit region. Between 2021 and 2022, the Midlands’ rate of recovery lagged behind the UK average, resulting in a two-percentage-point reduction in the region’s share of UK exports.

Machinery and transport account for over 60% of the region’s exports, but the decline and slow recovery in this sector, particularly in the West Midlands, have negatively impacted the region.

Jun Du, a professor of economics at Aston Business School who worked on the report, said:

“We found the Midlands’ exports rely equally on EU and non-EU markets, but the decline in exports since 2020 has been more pronounced in non-EU markets.

“The East Midlands and West Midlands exhibited varying rates of recovery, with the East Midlands showing signs of bouncing back in 2022 while the West Midlands’ recovery has been weaker.

“To revive and develop exporting in the Midlands, we recommend developing Midlands export markets and trading relationships by promoting regional firm strengths, exploring growth markets, and influencing UK trade policy.

“We encourage policymakers to help SMEs explore overseas markets, develop export strategies and enhance overseas marketing capabilities by providing training, education and inspiration to Midlands entrepreneurs and business leaders regarding exports.

“There is also a need to pursue a regional industrial strategy that leverages the region’s strengths and competitiveness in emerging global markets, emphasising sustained exporting and firm productivity.”

Professor Delma Dwight, director of Midlands Engine Observatory, said:

“It’s clear that there is no one single issue that’s causing trade challenges in the Midlands, and it follows therefore that there is no one single solution.

“Neither is the exporting journey a linear one, whether that’s for large companies or SMEs.

“Supporting businesses of all sizes, wherever they are in terms of export growth, will help them predict and adapt to changing conditions.

“If we can bolster confidence across the board, over time that becomes the bedrock of a more stable recovery.”

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