Change brings innovation forward
Looking overseas and developing hi-tech, niche sectors offers the best chance of recovery
The East Midlands is going through a massive upheaval at all levels. In Derby, work is ongoing to ensure the city punches above its weight; Leicester has seen the UK’s first multi-area agreement economic development company set up; while Nottingham strives to bring its inward investment and regeneration companies under one roof before 1 April 2010.
The East Midlands has, like other regions, been affected by the recession. The construction sector has contracted as the commercial and residential property markets have slowed. Falls in consumer expenditure have had an impact on retail. Within the manufacturing sector, the automotive industry and its supply chain in the region has been affected by a fall in demand for cars. However, following a sharp downturn at the end of 2008, there are signs that the rate of contraction may be easing across the region.
Levels of output per head remain below the UK average (at 89 per cent in 2007) but, despite an increase in unemployment, labour market performance in the East Midlands compares well with the UK. In February 2009 the employment rate in the region was 75.8 per cent, which is above the UK average of 73.8 per cent. The East Midlands continues to be the only one of the five northern and Midlands regions where this is the case. But the unemployment rate has increased during the last year, and now stands at 6.9 per cent, the same as the national average.
Recovery, say the experts, is likely to be stronger in the East Midlands because of the mixed economy with a blend of high technology manufacturing, broadly based services, retail and tourism, which are benefiting East Midlands from the low value of the pound and the decision of more UK residents to holiday at home this year.
Derbyshire and Nottinghamshire Chamber’s latest Quarterly Economic Survey, an important barometer of business health, showed warmer prospects for the two counties across a number of indicators.
Domestic sales and orders were significantly stronger than those for the previous quarter and businesses are reporting slightly higher employment levels compared with past surveys. Cash flow balances are starting to look healthier and businesses are much more confident about turnover and profitability for the immediate future.
Export markets were slightly better than the previous quarter for both sales and orders but this is mainly being driven by the service sector rather than manufacturers. And it is the manufacturing sector where confidence is weakest – companies are reducing investment in plant and machinery and investment in training is being scaled back.
We hear much of the mixed economy in the East Midlands, but to which sector must we look to drive the East Midlands forwards? Manufacturing, in general, benefits from being driven by innovative global companies producing products demanded internationally – Rolls-Royce has recently announced a £300m investment in the UK some of which will benefit the aerospace supply chain in Derbyshire and Nottinghamshire. But in general, it is companies who have embraced change, innovated and pursued new markets overseas that are faring best and will continue to lead the way.
Sam Metcalf
A journalist on Midlands Business Insider