Economic growth in Birmingham has been weaker than in comparable markets in the recent past. The city saw GVA growth of 10.4% in the five years to 2019, significantly lower than the 29.5% seen in Manchester, and lower than Leeds and Cardiff at 14.2% and 19.2%, respectively. Future economic growth in Birmingham is also predicted to lag behind these comparable markets.

A skilled workforce is vital for attracting businesses to a city and enabling those businesses to grow. Although the West Midlands has a young population and large employment base, it is relatively less well-educated than comparable markets. 25% have no formal qualifications, compared to 22% in Greater Manchester and 15% in London. This is hampering the city’s ability to generate economic growth.

The West Midlands has a prime opportunity to improve the skills of its labour force because it has a large population of university students. Every year, 49,000 students graduate from universities in the Combined Authority. Just 30% of those graduates stay in the area after university. And this rate is even lower at the area’s two highest-ranking universities – the University of Birmingham (24%) and the University of Warwick (12%). This means that Birmingham and Coventry lose more graduates to other cities than any other cities in the country, aside from London.

The graduates that the cities lose are more likely to embark on high-earning careers in their new homes. Graduates who remain in the West Midlands after university are more likely to work in Education (31%) and in Human health and social work (25%), earning a median starting salary of £24,000. Those who move to London after graduating are most likely to work in Professional, scientific and tech, Information and Communication and Financial and insurance activities. These graduates earn a median salary of £29,500.

Birmingham should seek to amplify its pre-existing strengths. The city is unlikely to compete with London in the Financial Services sector, despite the high-profile corporate relocations of Deutsche Bank, HSBC and others in recent years. The number of jobs in this sector in the West Midlands is forecast to decline over the next three years, whereas there are growing opportunities for Professional, scientific and tech roles, particularly with a burgeoning tech hub in Digbeth and the area serving as a testbed for 5G technologies. Employment in this sector in Birmingham grew by 55% in the ten years to 2020, and is forecast to grow by another 11% in the five years to 2025.

Retaining more graduates in scientific and tech sectors should help drive productivity, and capitalise on the strengths emerging in R&D from the region’s world-leading universities. An element of this will involve creating the eco-system that can allow start-ups and research spinouts to thrive, increasing the opportunities that encourage a highly educated workforce to remain in the region.

Birmingham Health Innovation Campus is a prime example of the type of space that helps drive innovation and economic growth. The campus is being delivered in conjunction with the University of Birmingham, and will become the only science park in the region dedicated to health and life sciences. It is anticipated to attract significant inward investment, which in turn will drive the wider economy. A 2021 study by the University of Glasgow demonstrated that every £1 million of investment in university-led R&D was repaid sevenfold in productivity gains in the wider economy, suggesting that BHIC, with £14 million funding already committed from the LEP, can be a catalyst for growth.

There are other sectors in Birmingham, such as the automotive, space and AI industries that could benefit from the establishment of similar innovation centres. Of equal importance is the provision of flexible and affordable “follow-on” space, such as the Tramshed scheme in Cardiff, that enables the SMEs that emerge from these innovation hubs to become established private sector businesses.

Boosting existing strengths

Logistics is also an increasingly productive industry which the Midlands has a key advantage in relative to the rest of the economy. Productivity in the industrial and logistics sector is forecast to increase by 29% between 2025 and 2039, compared to 18% across the UK economy as a whole. A third of all occupier demand is in the Midlands, demonstrating the potential to boost economic growth in the region, if sufficient land can be allocated for development.

The logistics sector is driving a growing well-paid and increasingly technical employment base. Over the last decade, almost 350,000 of the logistics jobs created nationally have been for professional and technical occupations, or skilled trades. 30% of respondents to Savills Occupier survey stated that one of their top priorities was to invest in automation, increasing the need for highly skilled employees, and presenting opportunities to grow the region’s R&D capabilities.

But to retain skilled graduates and attract productive firms, the city and the region must offer high-quality places for workers to live at an affordable rate. The average transaction value in London was 23.6 times the average graduate salary in 2021. That figure for Birmingham was just 10.2. Graduates in Birmingham can therefore afford larger homes earlier in their career than those in London. But there must also be a sufficient supply of housing both for graduates to move into and for families to settle down in. That requires strong delivery of homes both in the urban centre and on the outskirts of the city.

Key points

• Graduate retention in the science and tech sectors must improve if Birmingham is to become a more productive city.

• Birmingham should look to attract productive firms in industries where the city already has strength.

• Skilled labour will demand a high quality of life, which can be offered through new development both in the urban core and on the city fringe.

_{Read the articles within Birmingham: growth and productivity below.}