But potential Brexit no-deal strikes a blow to confidence
Construction and services see region outperform most of UK
This month’s dramatic fall in confidence is a very worrying event.
Richard Rose, partner and head of BDO in the Midlands
THE West Midlands economy grew faster than anywhere outside London between 2012 and 2018, according to new figures.
The West Midlands saw its Gross Domestic Product (GDP) grow by 16.5 per cent between 2012 and 2018.
And between quarter four of 2017 and 2018 it grew 3.2 per cent – more than doubling the average UK growth of 1.5 per cent.
The figures were buoyed by the construction and services industry in the region.
But the news was tempered by a seperate report this week revealing a dramatic slump in confidence across the wider services industry just in the last month as a no-deal Brexit loomed.
Optimism in the economy across the country fell sharply in August to levels not seen since 2013, according to the report from business advisers BDO.
Its Services Optimism Index collapsed 3.89 points in August to 95.49, only just above the 95 level that indicates a recessionary mindset has taken hold.
The index provides information on future economic developments based on opinion surveys of over 4,000 respondents to constituent surveys and is a good indicator of economic growth in the sector six months ahead.
However, the West Midlands remains top of the national league for exports, job creation and foreign business investment. It even has a trade surplus with China and the United States.
The region is now a global player in autonomous vehicle research, with a premier tech and digital sector excelling in automotive and advanced engineering.
The new ONS statistics are based on GDP calculations taken from 1.9 million Value Added Tax returns across the country.
The figures were released a day after Creditsafe’s start-up index showed the West Midlands has registered 21 per cent new start-up
businesses since June 2016, eight per cent more start-ups than London, with figures rising from 54,521 between May 2016 and April 2017, to 65,762 the following year.
Cllr Ian Brookfield, portfolio holder for economy and innovation at the West Midlands Combined Authority (WMCA) and leader of the City of Wolverhampton Council, said: “This is great news for the West Midlands, and shows just how fast the region is growing compared to our neighbours across the UK.
“Of course, the key now is to maintain this economic strength in the face of the challenges ahead – but we are very well positioned to continue to lead the way for UK regions and will be doing all we can to ensure residents in our region have every opportunity to share the spoils of our economic resurgence.”
Mayor of the West Midlands Andy Street said the positive figures underlined the economic renaissance the region had gone through. He said: “These stats underline that the West Midlands economy has been performing better than any area outside London, something I am immensely proud of.
“Our construction sector is visibly growing – the sheer number of cranes in our skyline shows just how much work is going on here – and with so much investment going into the likes of housing and transport, it is no wonder we saw three per cent growth in the last part of 2018 alone – more than double the UK average.
“However, we know there will be difficult times ahead, particularly for the automotive sector as we head towards our exit from the European Union.
“We must also make sure HS2, which has been underpinning our construction boom, goes ahead. Our challenge is to navigate this tricky period and to continue the renewal of the region by both growing our economy and improving the lives of every person living and working in the West Midlands.”
But the wider fall in confidence due to Brexit could drive businesses to invest less and hire fewer people, creating the conditions for a recession, says BDO.
Richard Rose, partner and head of BDO in the Midlands, said: “This month’s dramatic fall in confidence is a very worrying event.
“Pessimistic companies don’t invest or hire, which is how recessions start.
“The reason for this has to be that UK businesses have suddenly woken up to the fact that a no deal Brexit is a real possibility.”
Mr Rose added: “This reminds me very much of the aftermath of the 2010 election, when there was a sudden realisation that austerity wasn’t going to be pretty.
“Sentiment collapsed as a result, and this was the precursor to a long period of very low growth that followed.
“Let’s hope that we can avoid a no deal Brexit, otherwise the next couple of years could be very uncomfortable.”