BER 23 - Chapter 1 Economy by greaterbirminghamchamberofcommerce

BIRMINGHAM E CO N O M I C REVIEW 2023 Chapter 1: Economy Crisis and Resilience

Introduction The annual Birmingham Economic Review is produced by the University of Birmingham’s City-REDI and the Greater Birmingham Chambers of Commerce. It is an in-depth exploration of the economy of England’s second city and a high-quality resource for informing research, policy, and investment decisions. This year’s report provides comprehensive analysis and expert commentary on the state of the city’s economy as it emerges from disruption caused by the pandemic into a continuing period of high inflation and uncertainty. This Birmingham Economic Review highlights the global, national, and regional challenges that the city region is facing. Alongside studying the growing opportunities available to the region and how the regions current strengths and assets can help develop these opportunities. The most recently available datasets as of 30th September 2023 have been used. In many circumstances there is a significant lag between available data and the current period. Contributions from experts in academia, business and policy have been included to provide timely insight into the status of the Greater Birmingham economy.

Report Geography The report focuses on the ‘Greater Birmingham city-region’ defined by the boundaries of the following local authorities: Birmingham, Solihull, Bromsgrove, Cannock Chase, East Staffordshire, Lichfield, Redditch, Tamworth, Wyre Forest. References to the ‘West Midlands region’, or ‘West Midlands (ITL1)’, are to the large-scale region at International Territorial Level 1 (ITL1). There are nine ITL1 regions in England: North East, North West, Yorkshire & The Humber, East Midlands, West Midlands, East of England, London, South East and South West in addition to Scotland, Northern Ireland and Wales. Note that ITL recently replaced the EU’s Nomenclature of Units for Territorial Statistics (NUTS). Geographies of ITL and NUTS territories generally correspond except for minor differences at local authority level outside the Midlands. References to the ‘West Midlands metropolitan area’ are to the West Midlands county comprising seven metropolitan districts (WM 7M): Birmingham, Solihull, Coventry and Dudley, Sandwell, Walsall, Wolverhampton. References to the ‘West Midlands Combined Authority (WMCA) area’ are to that administered by the Combined Authority. Note that figures may not always total exactly due to rounding differences. Figures in some tables may be undisclosed due to statistical or confidentiality reasons.

BIRMING HAM EC ON OMIC RE VIEW 2023

Index Foreword and Welcome

Chapter 1 Economy: Crises and Resilience

Chapter 2 Business: Disrupted Markets

Chapter 3 People: Challenging Times

Chapter 4 Place: Sustainable Communities and Pride in Place

Chapter 5 Challenges and Opportunities

BIRMING HAM EC ON OMIC RE VIEW 2023

Economy: Crises & Resilience The national economy has been dealing with a series of shocks and crisis for a prolonged period. In 2008 the global financial crisis led to a long-term reduction in private sector investment, alongside an extended period of austerity, which significantly reduced the capacity of public services. This was followed by Brexit referendum in 2016 which led to one of the largest depreciations of sterling in history and increased barriers to trade with the UK’s largest trading partner. The Covid-19 pandemic then saw the largest decrease in output since the second world war, amplifying inequality across the country. The demand-pull inflationary pressures following the pandemic were then pushed up by cost-push inflationary pressures, as Russia invaded Ukraine in February of 2022, and global energy markets . Sterling subsequently depreciated further, and interest rates rose in October last year following the ‘mini budget’ of the previous government. The city region has been heavily impacted by these shocks and they have continued throughout the year; this is because the wider regional (West Midlands ITL) economy is more exposed to some of these shocks that other regions. The West Midlands has a large export and import dependency due to its large manufacturing base, increased barriers to trade (Brexit and Covid) have led to changes in business operations, which have driven up input costs in manufacturing and production. The city region and wider region also has higher levels of inequality, including poverty, health and educational inequalities, which have all been widened by varies economic shocks and policies, comparative to other regions. There is currently still a great deal of economic risk at the global, national, and regional level, with economies still having to contend with turbulent and uncertain times. Building resilience in the region remains critical to developing its ability to not only weather economic shocks, but to emerge stronger from them. This chapter of the Birmingham Economic Review for 2023 outlines the city region’s economy within the context of recovery from a series of global and national crises, analysing and evaluating headline indicators, including productivity, trade, investment, and business activity.

Macroeconomic Context During the pandemic, in 2020, the UK economy (Gross Domestic Product) shrank by 11%, comparative to the previous year. In 2021 the economy then did bounce back growing year on year by 7.6% in 2021, which was followed by further growth of 4.1% in 2022. Growth largely slowed in 2022 as a result of inflationary pressures and worsening national and global outlooks, which have dampened growth internationally. Compared to the UK, other countries or trading blocs saw their economies shrink between 4% and 6% in 2020, then grow by 4% or 6% in 2021, as seen in the following figure.

BIRMING HAM EC ON OMIC RE VIEW 2023

Annual Growth in GDP (%)

Source: OECD.stat- GDP, volume – annual growth rates in percentage

Compared to the European Union, G7 and Organisation for Economic Co-operation and Development (OECD), the UK saw a much greater contraction of its economy in 2020, followed by much higher economic growth in 2021. However, UK GDP did not grow at the rate it fell the year before, whereas comparative economies did. As a result, comparable countries have seen their economies returned much quicker to their 2019 pre-pandemic levels. The International Monetary Fund (IMF) is forecasting that the UK economy will shrink by -0.3% 1 in 2023, signalling a recession. This is down on October 2022 projections by the IMF, which forecast the economy would grow by 0.3% this year 2. The UK will be one of only 2 G7 countries to see their economies contract this year, with Germany expected to contract -0.1%, therefore, the UK will see the largest contraction of any G7 economy. On average across the advanced economies GDP is expected to grow 1.3%, with the US seeing the largest growth at 1.6%, closely followed by Canada at 1.5%. In 2024, the UK economy is expected to grow 1%, though this is down on last year’s forecast by the IMF which was 1.5%1. The forecast is much closer to the average expected growth for advanced economies comparative to 2023, with advanced economies expected to grow 1.4%. This will also just be behind the forecast for the US at 1.1% for 2024. These growth forecasts, however, should be taken with caution, as they have been regularly revised over the past year, due to both the domestic and global uncertainty.

1 International Monetary Fund. (2023) World Economic Outlook 2 International Monetary Fund. (2022) World Economic Outlook

BIRMING HAM EC ON OMIC RE VIEW 2023

Consumer Price Inflation Consumer Price Inflation (CPI) is the rate at which the price of goods and services bought by households rise or fall 3. The best way to understand CPI is to imagine a shopping basket with the most popular goods and services that month. Economists will look at the contents of the basket and compare the price of each good or service this month, with the price same time last year, allowing them to understand whether prices have fallen or risen. A growing economy likely always has some level of inflation, and the Bank of England aims to maintain a rate of 2%. As seen in the graph below however, prices have been rapidly rising since 2021. In August 2019 the annual CPI rate of inflation was 1.7%, which means on average prices were 1.7% higher than they had been in August 2018. In August 2020 prices were 0.2% higher than in August 2019. In August 2021 prices had begun to increase and prices were 3.2% higher than they had been the same month the year before. By August 2022 prices were 9.9% higher than August 2021 and in the latest update prices are 6.7% higher in August 2023, than they had been in August 2022. Whilst it is positive that the rate of inflation has decreased, prices remain higher than they were last year. For example, in 2021 the price of a white sliced loaf of bread was £1.06, the price of this bread had risen by 18.9% in August 2022 to £1.26, in August 2023 the same bread was £1.36, with the price having risen 7.9% in August 2022 4.

CPI annual inflation rates for the last 10 years

Source: ONS- Consumer price inflation, UK: August 2023 Until March this year housing and household services had been the largest contributor to CPI inflation. As we left winter behind the price increases for this contributor to inflation decrease, as seen in the graph below. This is likely because we were likely using less energy or gas from this point on in the year. Since then, food & nonalcoholic beverage prices have contributed the most towards price rises this year. Only transport has seen prices reduce in the last couple of months, comparative to the same time last year, likely as a result of reductions in fuel prices.

3 ONS, 2023. Consumer price inflation, UK: August 2023

4 ONS, 2023. RPI: Ave price - Bread: white loaf, sliced, 800g

BIRMING HAM EC ON OMIC RE VIEW 2023

Contributions to the annual CPI inflation rate UK

Source: ONS- Consumer price inflation, UK: August 2023

CMB Economics, HSBC

CMB Economics •

HSBC recently cut its UK GDP growth forecasts to 0.4% in 2023 but does not expect a recession or housing market crash

•

It also expects no further rate rises, after inflation fell and the BoE held rates steady for the first time since November 2021

UK data review (Jul/Aug 2023) •

GDP fell by 0.5% m-o-m in July, reversing the 0.5% increase seen in June, and continuing the pattern of ‘one step forward, one step back’ that has characterised UK monthly GDP growth for the last couple of years. All three main sectors fell in mo-m terms: services output was down 0.5% m-o-m (on the back of strikes in health services), industrial production by 0.7%, and construction by 0.5%.

•

Wage growth surprised to the upside once again, with total pay rising by 8.5% 3m/yr (consensus: 8.2%) in July and being revised up from 8.2% to 8.4% for the previous month. The July rate was the fastest on record (in this series dating back to 2001). Within this, pay growth slowed a touch in the private sector (from 7.8% to 7.6% 3m/yr), but rose in the public sector from 10.7% to 12.2% 3m/yr, on the back of a sizeable NHS pay settlement. At the same time though, the unemployment rate rose further, from 4.2% to 4.3%, and vacancies fell for the 15th consecutive month.

•

August inflation threw up a big downside surprise with headline CPI inflation dropping from 6.8% to 6.7% y-o-y (consensus 7.0%), despite a jump in petrol prices. The downside news was driven by a much sharper-than-expected drop in core inflation, falling from 6.9% to 6.2% y-o-y (consensus 6.8%), on lower

BIRMING HAM EC ON OMIC RE VIEW 2023

food, restaurants and hotels, furniture, and recreation and culture prices. This meant that there were declines in both core goods and services inflation. Against this backdrop, the Bank of England (BoE) opted to keep the bank rate unchanged at 5.25% on 21 September, versus earlier expectations for a further 15bp increase. •

Retail sales made only a very meagre recovery in August, with volumes rising 0.4% m-o-m (consensus: 0.5%). Excluding fuel, volumes were up 0.6% (consensus: 0.7%). That increase came from food and nonfood stores, which saw a partial recovery after wet weather kept shoppers away in July. But nonstore retail and fuel sales fell, with the latter perhaps reflecting higher prices.

•

PMIs (Sep) remained below 50 in September, with the manufacturing print rising a touch, from 43.0 to 44.2 (consensus: 43.2) and the services survey falling from 49.5 to a 32-month low of 47.2 (consensus: points to its lowest level since January 2021. And new orders and business expectations were at their weakest since November 2022.

Watching the labour market The UK economy has shown considerable resilience to the numerous challenges it has been through, but the cracks are now starting to show. The services PMI has been below 50 in the last two readings, the housing market numbers are weakening, and unemployment is starting to rise. We may be witnessing a summer shakeout, but it is also possible that the economy is now faltering in the face of higher inflation and interest rates. Lower forecasts In slightly better news for the UK, the Office for National Statistics (ONS) has announced that, following methodological revisions, it now thinks the economy was around 2% bigger at the end of 2021 than previously estimated. This chimes with the strong jobs market and tax revenue picture of the last couple of years. However, HSBC economists recently revised down their Q3 2023 GDP growth forecasts from 0.3% q-o-q to 0.0%, partly because of near-term data news – with GDP having fallen 0.5% m-o-m in July. That takes 0.2ppt off 2023 growth and 0.1ppt off 2024 growth. They also made further downward tweaks, for two reasons: first, the weakness in the surveys of late, and second, because the post-pandemic catch-up potential, which had underpinned previous forecasts, has now been revised away. So, HSBC is now forecasting GDP growth of 0.4% in 2023 (previously: 0.6%), 0.5% in 2024 (previously: 0.8%), and 0.9% in 2025 (no previous forecast). While this is below the trend rate of growth, it does not incorporate a recession, reflecting a recovery in real incomes as inflation falls back. The team forecasts CPI inflation dropping to 4.1% at end-2023, 3.3% at end-2024, and 2.2% at end-2025, and thinks companies are more insulated from higher interest rates than in previous cycles. Peak rates These forecasts assume no further rate rises from the Bank of England (BoE), which held rates unchanged at 5.25% on 21 September. But it should also mean no recession, no housing market crash, and no rate cuts in 2024, as resilient (if not strong) demand keeps core inflation and wage growth higher than the BoE would like. However, as inflation falls back, real interest rates will become more restrictive and the BoE will start to think about cutting. We might see the first move towards the end of 2024, but election uncertainty might keep the BoE on hold until the start of 2025. So, HSBC has pencilled in 25bp of easing per quarter in 2025, taking the bank rate to 4.25% by end-2025.

BIRMING HAM EC ON OMIC RE VIEW 2023

The labour market is unwinding more quickly than we had expected.

We now expect cuts from Q1 2025

Key upcoming UK economic data Date 29 Sep 2 Oct 5 Oct 12 Oct 18 Oct 20 Oct 24 Oct

Indicator GDP y-o-y Nationwide house price y-o-y All sector PMI GDP Estimate y-o-y CPI y-o-y Retail sales y-o-y Flash composite PMI

Period Q2 Sep Sep Aug Sep Sep Oct

Prior 0.4% -5.3% 48.8 0.0% 6.7% -1.4% 46.8

* This publication is dated as at 28 September 2023. All market data included in this publication is dated as at close 27 September 2023, unless a different date and/or a specific time of day is indicated in the publication. Please see page 42 at the end of this chapter for the full disclosure appendix and disclaimer.

BIRMING HAM EC ON OMIC RE VIEW 2023

Watching the Labour Market The UK economy has shown considerable resilience to the numerous challenges it has been through, but the cracks are now starting to show. The services PMI has been below 50 in the last two readings, the housing market numbers are weakening, and unemployment is starting to rise. We may be witnessing a summer shakeout, but it is also possible that the economy is now faltering in the face of higher inflation and interest rates.

Lower Forecasts In slightly better news for the UK, the Office for National Statistics (ONS) has announced that, following methodological revisions, it now thinks the economy was around 2% bigger at the end of 2021 than previously estimated. This chimes with the strong jobs market and tax revenue picture of the last couple of years. However, HSBC economists recently revised down their Q3 2023 GDP growth forecasts from 0.3% q-o-q to 0.0%, partly because of near-term data news – with GDP having fallen 0.5% m-o-m in July. That takes 0.2ppt off 2023 growth and 0.1ppt off 2024 growth. They also made further downward tweaks, for two reasons: first, the weakness in the surveys of late, and second, because the post-pandemic catch-up potential, which had underpinned previous forecasts, has now been revised away. So, HSBC is now forecasting GDP growth of 0.4% in 2023 (previously: 0.6%), 0.5% in 2024 (previously: 0.8%), and 0.9% in 2025 (no previous forecast). While this is below the trend rate of growth, it does not incorporate a recession, reflecting a recovery in real incomes as inflation falls back. The team forecasts CPI inflation dropping to 4.1% at end-2023, 3.3% at end-2024, and 2.2% at end-2025, and thinks companies are more insulated from higher interest rates than in previous cycles.

Peak Rates These forecasts assume no further rate rises from the Bank of England (BoE), which held rates unchanged at 5.25% on 21 September. But it should also mean no recession, no housing market crash, and no rate cuts in 2024, as resilient (if not strong) demand keeps core inflation and wage growth higher than the BoE would like. However, as inflation falls back, real interest rates will become more restrictive and the BoE will start to think about cutting. We might see the first move towards the end of 2024, but election uncertainty might keep the BoE on hold until the start of 2025. So, HSBC has pencilled in 25bp of easing per quarter in 2025, taking the bank rate to 4.25% by end-2025.

BIRMING HAM EC ON OMIC RE VIEW 2023

Producer Price Inflation Producer Price Inflation (PPI) is the change in the price of goods bought and sold by UK manufacturers, including price indices of materials and fuels purchased (input prices) and factory gate prices (output prices) 5. The graph below shows both the annual input PPI and output PPI. If either PPI rate is positive, then this indicates that prices have increased, if negative then they have decreased. The rate is measured by comparing the prices that producers paid for input goods and services for the latest month with the same time a year ago. This is the same for output PPI, comparing the price that producers charged for their products in the latest month with the same time a year ago. As seen in the graph, input prices began to increase in January 2021 comparative to January 2020, largely as businesses were starting to reopen following the easing of pandemic restrictions. This is no surprise as demand at the time will have outpaced available supply. As input prices began to increase this is then starting to filter through to output prices, which began increasing the following month. The PPI rate continued on an upwards trajectory until around June 2022. From July 2022 onwards the PPI rate started to decrease (meaning prices were still increasing just at a slower rate than they had in the previous months). Not until May 2023 did input PPI become negative, meaning prices were lower in this month than they had been the same time the year before. Output PPI did not turn negative until July 2023, as there is often a delay in reductions in cost filtering through to the consumer price.

5 ONS. (2023) Producer price inflation, UK: August 2023

BIRMING HAM EC ON OMIC RE VIEW 2023

Producer Price Inflation annual rate

Source: ONS- Producer price inflation, UK: August 2023 Between August 2019 to August 2023, the largest contributing factor to increased input PPI has been price rises in metals and non-metallic minerals. This is unsurprising given Russia is a significant producer of metals; since the invasion of Ukraine the supply of these input materials has fallen, increasing the price. The second largest contributor is crude oil and the reasons for price increases in this input are the same; Russian supply has fallen therefore, prices have increased. This is also the case for chemicals. However, each of these contributing factors may have also been impacted by the change in our relationship with the EU and pandemic-related supply chain disruption, making it difficult for many businesses to find new suppliers.

BIRMING HAM EC ON OMIC RE VIEW 2023

Producer Price Inflation annual rate contributors

Source: ONS- Producer price inflation, UK: August 2023

Drivers of Inflation Pent Up

Initially inflation was driven by pent-up demand in 2021. As restrictions began to be lowered in

Demand

many economies, demand for products boomed. Businesses were reopening and increasing output and consumers had built up savings they were enthusiastic to spend. This caused demand-pull inflation, when demand grows at a faster rate than supply, increasing the cost of products 6.

Increased

Demand-pull inflation was then compounded by increases in costs of production. The cost of

Costs

production rose due to a number of factors, including businesses competing for staff and transportation of goods, changes in trade routes and delays in input goods and services, amongst other cost pressures. This led to cost-push inflation, as the cost of production increased.

Invasion of

Every country has unique specialisms in the production of certain goods or services, which

the Ukraine

contribute to the production input of other goods or services. Prior to Russia’s invasion of Ukraine, these two countries together produced a third of the world’s wheat, a quarter of the world’s barley and three quarters of the world’s sunflower oil 7. Russia was also one of the world’s largest exporters of fertiliser 8. The ongoing war in Ukraine has caused a loss of

6 Kekarainen, H. (2022) The return of inflation. Deloitte.

7 Ramcharan, M. (2022) International Trade and Supply Chain Disruptions in the Light of the Russian-Ukraine

war. City REDI 8 Broom, D. (2023) This is how war in Europe is disrupting fertilizer supplies and threatening global food security. World Economic Forum BIRMING HAM EC ON OMIC RE VIEW 2023

production in both countries and the cost of these goods has risen internationally as supply has fallen, making production input for food and drink more expensive. Sanctions on Russian oil and gas (Russia being the second largest producer of oil and gas in the world 9) have also resulted in higher prices, as supply has reduced. This has more than doubled energy costs across Europe 10. Being a net importer of energy has made the UK particularly vulnerable to global energy market shocks 11.

Brexit

Brexit has also made trade difficult for many UK businesses. When surveying business on the Trade Cooperation Agreement (TCA) the British Chambers of Commerce (survey December 2022) found that 52% of businesses were experiencing shortages of goods and services, rising to 70% for manufacturers. 8 in 10 had (80%) had of firms had experienced increased costs since the TCA was brought into place and 53% had experienced an overall decrease in their sales margins 12. In 2022 the Greater Birmingham, Coventry and Warwickshire and Black Country Chambers of Commerce surveyed businesses in the West Midlands Combined Authority area about the ongoing impact of Brexit. Just over 30% of businesses said they found it more difficult to export goods to the EU as a result of Brexit. The most common issue encountered by businesses was increased costs, followed by supply chain issues and border delays. Micro, small and medium businesses were more acutely impacted by such issues than larger businesses. An increase in trade barriers as a result of Brexit has increased costs for UK exporters, leading to many having to raise prices, and thereby experiencing reduced sales in Europe. Additionally, the TCA has led to increased costs for European businesses exporting to the UK and UK importers, as they too have to navigate new trade barriers. As a result of Brexit, the Centre for Economic Performance and the London School of Economics estimate leaving the EU had added at least £210 to household foods bills by the end of 2021 13.

Tight Labour

The UK has had long-term shortages in specific sectors in the labour market, particularly the

market

public sector in the NHS and teaching, in part due to pro-longed austerity leading to wage reductions, which has contributed to low staff retention. This has been compounded by a reduction in the labour pool following Brexit and Covid-19, and EU migrants subsequently leaving the UK workforce. Other labour market changes following the pandemic, including an increase in long-term health issues, and high retirement rates during the pandemic, have led to a reduction in economic activity and therefore, the size of the labour market 14. The tightening of the labour market has thus, led to many businesses having to increase the wages of open positions to attract employees, in turn increasing the cost of goods and services, and forcing many businesses to increase their prices.

9 Ritchie, H., Rosado, P., and Roser, M. (2022) Fossil Fuels. Our World in Data

10 Gazzani, A., and Ferriani, F. (2022) The impact of the war in Ukraine on energy prices: Consequences for firms’

financial performance. Centre for Economic Policy Research 11 ONS. (2023) Measuring price changes of the UK national accounts: February 2023 12 British Chambers of Commerce. (2022) The Trade and Cooperation Agreement: Two Years on Proposals for Reform by UK Business 13 London School of Economics. (2022) By the end of 2021, Brexit had already cost UK households a total of £5.8 billion in higher food bills – new LSE research 14 City REDI. (2023) REDI-Updates: Cost-of-living crisis - The impact of the crisis and the supply-side failures driving it BIRMING HAM EC ON OMIC RE VIEW 2023

Depreciation

The depreciation of the pound has also led to higher inflation. As sterling depreciates it makes

of the pound

imports more expensive. The 2022 mini budget saw a significant depreciation of sterling last year, particularly in relation to the dollar and since this the pound has on average remained relatively low 15. As input costs rise for those with international supply chains, UK businesses must rise prices to maintain profitability.

Inﬂationary Impact on Households

Energy Prices Impact In October 2019 the energy price cap for the average household energy usage was around £1,179. By October 2022 this had risen to £2,500, when the government enacted the Energy Price Guarantee 16. This represented a 112% increase in the energy price cap for the average household. However, without the Energy Price Guarantee households could have seen their energy bills rise to £3,549 last October, which would have been more than a 200% rise in energy bills from 2019. Between 1 October to 31 December 2023 the energy price cap is set at £1,834, reflecting recent falls in wholesale energy prices 17. Whilst this is a decrease of 26.6% on the energy price guarantee cap from October 2022, it is still 55.6% higher than the 2019 price cap. Though future caps will largely depend on whether there are additional shocks to the global energy market, positively, the EU has already reached its target of filling 90% of its energy storage facilities 18, which should offer greater energy protection as we move towards winter. Nevertheless, the Resolution Foundation has found that more than 1 in 3 households (35% or 7.2 million households) will see higher bills this winter than last year, with almost half of those (47%) being the poorest tenth of households 19. This is largely because the £400 Energy Support Payments issued last winter will not be offered this year and daily standing charges will rise. This will place an even greater strain on some of the poorest households in the GBSLEP area, which already has some of the highest levels of fuel poverty in the UK (as discussed in Chapter 4 of this Review). The increased financial burden will likely also reduce households’ disposable income during the busiest retail and hospitality period of the year, which many businesses depend on to remain afloat the quietest period of the financial year between January and March.

Fuel Prices Since early 2021 fuel prices have rapidly risen as can be seen in the graphs below. On 4th January 2021 unleaded petrol cost 116.67p per litre. As of 15th September 2023 petrol now costs 154.34p per litre. This is a 32.3% rise in the cost of petrol, though it is 19.4% lower than the cost of petrol at its height last year on 1st July 2022. Unleaded petrol - average UK pump and wholesale prices over time

15 BBC. (2023) Pound Sterling

16 Forbes, 2023. Energy Price Cap – Latest State of Play

OFGEM, 2023 Energy Price Cap

18 European Commission, 2023. EU reaches 90% gas storage target ahead of winter

Resolution Foundation, 2023. Over one-in-three households across England will pay higher energy bills this winter than last winter – including almost half of poor families BIRMING HAM EC ON OMIC RE VIEW 2023

Source: RAC- Petrol and Diesel Prices On 4th January 2021, diesel cost 120.12p per litre whereas, as of 15th September 2023 diesel now costs 157.20p per litre. This is a 30.9% increase in the price of diesel, though this is a 21.0% fall in the price of diesel from its height on 1st July 2022. Diesel - average UK pump and wholesale prices over time

Source: RAC- Petrol and Diesel Prices The table below shows how the price of petrol and diesel has changed over time from 2019 to 2023. On average in the West Midlands (ITL) per person per year the average number of miles driven is around 3,000 20. If someone driving a diesel vehicle drove 3,000 miles in a year it would have cost them £3,941 in 2019, in 2023 this same journey would cost them £4,725. This is a 19.9% increase in cost, based on the average 2023 price to date. For someone driving a petrol vehicle, this number of miles in a year would have cost them £3,773 in 2019, comparative to £4,400 in 2023, based on year-to-date average prices, a cost increase of 16.6%.

20 Department for transport, 2023. Mode of transport- NTS9904: Average distance travelled by mode, region

and rural-urban classification (miles per person per year) BIRMING HAM EC ON OMIC RE VIEW 2023

Average increase in spend on petrol or diesel per year West Midlands (ITL) 2019 2020 2021 Car or van driver 3000 3000 3000 Diesel price 1.3137 1.1946 1.3605 Cost of Diesel per year £3,941 £3,584 £4,082 Cost of Diesel Year on Year % change -9.1% 13.9% Cost of Diesel % change since 2019 -9.1% 3.6% Petrol Price 1.2578 1.1553 1.3336 Cost of Petrol per year £3,773 £3,466 £4,001 Cost of Petrol Year on Year % change -8.1% 15.4% Cost of Petrol % change since 2019 -8.1% 6.0%

2022 3000 1.7813 £5,344 30.9% 35.6% 1.6506 £4,952 23.8% 31.2%

2023 3000 1.5750 £4,725 -11.6% 19.9% 1.4666 £4,400 -11.1% 16.6%

Source: RAC- Petrol and Diesel Prices It should be noted that (as of the time of writing) 2023 fuel prices are much lower than they were last year, though they remain higher than their pre-pandemic levels. The cost is lower than last year because many countries have found new suppliers outside of Russia however, given many countries have banned the consumption of Russianproduced fuel, the price remains higher than before 2022. Whilst Russia’s invasion of Ukraine continues, prices are likely to remain higher than their historical levels, due to the reduction in supply.

Food Prices Impact Whilst there has been great focus on energy prices the cost of food has also risen rapidly. The table below shows the changing price of a weekly shopping list between August 2019 and August 2023. For the shopping list below the average household would have paid in total £50.80 in August 2019. By August 2023 the same shopping basket would now cost the average household £64.24. This a 26.5% increase in the cost of this shopping basket. If the below is taken to represent a weekly shop, in total over a year this diﬀerence would be an increase of £698.88, from £2,641.60 in August 2019 to £3,340.48 in August 2023.

BIRMING HAM EC ON OMIC RE VIEW 2023

Food shopping by year UK Shopping Items

Aug-19

Aug-20

Aug-21

Aug-22

Aug-23

White loaf, 800g

£1.08

£1.07

£1.06

£1.26

£1.36

Margarine, per 500g

£1.79

£1.39

£1.60

£2.03

£2.19

Large Eggs, per dozen

£2.25

£2.27

£2.12

£2.76

£3.26

Cheese, per kg

£7.12

£6.94

£6.20

£7.53

£9.32

Milk, per pint

£0.44

£0.43

£0.62

£0.65

Tea bags, per 250g

£1.95

£1.90

£1.95

£2.21

£2.54

Instant Coffee, per 100g

£3.02

£2.77

£2.94

£3.18

£3.35

Sugar, per kg

£0.75

£0.73

£0.71

£0.79

£1.13

Apples, per kg

£2.05

£2.06

£2.35

£2.21

£2.14

Bananas, per kg

£0.95

£0.84

£0.80

£0.91

£1.15

Grapes, per kg

£3.74

£3.78

£3.93

£3.96

£4.16

Potatoes, per kg

£1.29

£1.34

£1.42

Tomatoes, per kg

£2.12

£2.13

£2.29

£2.71

£3.11

Broccoli, per kg

£1.83

£1.66

£1.88

£2.30

Onions, per kg

£0.93

£0.84

£0.85

£1.07

Mushrooms, per kg

£3.02

£2.92

£3.14

£3.34

£3.47

Chicken, per kg

£2.74

£2.58

£2.73

£3.27

£3.87

Sausages, per kg

£5.02

£4.96

£5.06

£5.90

£6.92

Ham 100 – 125g

£1.96

£2.03

£1.97

£2.40

£2.50

Beef mince, per kg

£6.75

£6.57

£6.10

£7.18

£8.33

£50.80

£49.38

£49.22

£56.33

£64.24

-2.8%

-0.3%

14.4%

14.0%

Total Y on Y % change

% change between August 2019 and August 2023

26.5%

Source: ONS, Consumer Price Inflation Tables This is a significant price rise, at a time when many households are also struggling with inflation in other areas. Additionally, the above list does not include goods such as cooking oil, rice or cereals, which have all seen notable price increases as a result of the fall in grain and cooking oil supply, due to the invasion of Ukraine and extreme weather events destroying crops. Therefore, it is likely that the food inflation households have seen between 2019 and 2023 is even higher than calculated above. With many consumers looking to save money, there has been a

BIRMING HAM EC ON OMIC RE VIEW 2023

signiﬁcant shift in shopping habits, with many switching to cheaper products, such as own-label brands or to cheaper market competitors, like Aldi and Lidl. In September 2022, Aldi overtook Morrisons to be the 4th largest supermarket by grocery market share in the UK 21.

Inflationary Impact on Business Operations Businesses are facing similar pressures with the prices of input goods rising exponentially, including raw materials, wages, energy and fuel. During the height of the energy crisis, many businesses were not offered caps on their energy costs, unlike households, leading to thousands of businesses seeing energy bills quadruple or worse over the last 18 months. These pressures have forced many firms to change their business operations. The changes that SME business have most likely to have made in the last 18 months have been:

Changing

Many SMEs are having to change how they utilise their ﬁnances, to deal with the cost pressures.

use of

A survey by Santander found that 41% of SMEs are having to dip into company savings; 29% are

ﬁnances

having to borrow money; 28% are dipping into personal savings; and 23% of SMEs are running out of funds at the end of each month 22. As the year progressed however, UK Finance 23 found that falling demand and rising interest rates are dampening borrowing by SMEs, as it becomes more expensive to invest, with low returns due to falling demand. Whilst gross lending was reducing, UK Finance also found that in 2022 there was a 22% increase in overdraft applications than in the previous year.

SME

Santander found that the most common adaptations made by business owners in response to

Business

the cost-of-living crisis have been, 31% taking home less pay; 28% reducing marketing budget;

Owners

27% working unpaid hours; 27% switching to cheaper energy suppliers; 25% delaying new IT equipment purchases22. Alongside this Santander also found owners have had to make decisions which they would usually be uncomfortable with including, 23% trialling different opening hours; 22% paying to promote their business on local social media groups; 21% using ‘buy now, pay later’ to purchase business supplies22. SME business owners are being forced to make difficult decisions, including sacrificing their own incomes, to keep their businesses afloat. Many of these measures will not be sustainable long-term.

Business

A weaker outlook for proﬁts and a marked fall in business conﬁdence underpins a planned

Investment

slowdown in capital investment growth. Surveying by The Institute of Chartered Accountants in England and Wales shows a 3.2% annual rise in spending on capital assets over the past 12 months, but only a 1.5% increase planned in the 12 months ahead. Except for the sharp contractions during the pandemic, this would be the slowest rise in capital investment in over a decade 24. The Oﬃce

21 BBC, 2022. Aldi becomes Britain’s fourth-largest supermarket

22 Santander. (2023) Rising cost of living makes for 'toughest winter in memory' for many high street retailers,

according to Santander UK research 23 UK Finance. (2023) LOSS OF CONFIDENCE RESULTED IN LOWER SME BORROWING IN Q4 2022 24 ICAEW. (2023) UK Business Confidence Monitor: National BIRMING HAM EC ON OMIC RE VIEW 2023

for Budget Responsibility (OBR) noted in November 2022 that business investment in the second quarter of 2022 was still 8% below its pre-pandemic peak, and it forecast “much weaker” business investment in the coming years than it had forecast in March 2022. The OBR also anticipated that by the end of 2024, business investment would be 12% lower than it had forecast in March 2022 25. The same can also be said of Research and Development (R&D) budgets. After rising by 2.2% in the latest survey period, growth is set to slow to just 1.4%, which would mark the weakest rise in over 10 years. These plans for both capital spending and R&D budgets are concerning, particularly given their importance to future productivity gains and, thus, competitiveness in global markets. This has become more crucial for businesses as they deal with record-high input price inﬂation and challenges in the post-Brexit trading environment24.

Interest Rates The Bank Of England base rate is the single most important interest rate in the UK 26. The base rate determines the interest rate that commercial banks offer on savings, as well as the cost they charge for borrowing money26. The Monetary Policy Committee (MPC) at the Bank of England sets the base rate and the MPC will adjust this rate dependent on movements in inflation or growth. If inflation rises above the 2% inflationary target, the MPC will increase interest rates to cool the economy and slow down price rises. If growth drops in the economy, they will reduce interest rates to try and incentivise investment and spending, to grow the economy. Since the start of 2022, as inflation began gaining pace in the UK the MPC began increasing interest rates to prevent the economy overheating. Since, there have been 13 consecutive interest rate rises, from 0.25% in early January 2022 to 5.25% in September 2023, as can be seen in the graph below. This is the highest rate of interest in 15 years. Interest rates were last this high before the 2008 crash. Following the crash they were maintained at a low rate to try and incentivise growth in the UK. However, last year interest rates began to climb, mainly as a result of rising inflation. The 2022 mini budget also contributed to the rapid rise in interest rates, as the government implemented expansionary policy during a time when the Bank of England was trying to cool price rises, increasing interests faster than would have been the case otherwise 27.

25 House of Commons Business, Energy and Industrial Strategy Committee. (2023) UK plc 26 Bank of England. (2023) Interest Rates and Bank Rate 27 IFS. (2022) Mini-Budget response

BIRMING HAM EC ON OMIC RE VIEW 2023

Official Bank of England base rate (%)

Source: Bank of England, Interest Rates and Bank Rate, 2023 As inflation in the UK has remained sticky, the MPC has had to continue to rise interest rates to try and cool down the economy. Though there has been some debate as to whether this is the correct response to tackling inflation. Inflation is usually either demand-pull or cost-push (demand-pull is when demand exceeds supply increasing prices, cost-push is when production costs increase, and businesses pass on this cost through higher prices). As economies re-opened from pandemic restrictions, demand-pull inflation led to higher prices, as demand exceeded supply. However, since 2022 it is rising costs (cost-push) which have been driving inflation 28. Historically, academic evidence has found there is little linkage between increasing interest rates and a reduction in cost-push inflation 29. The Bank of England hopes that increasing interest rates will lead to reductions in spending, driving competitive prices amongst retailers28. However, many businesses have taken out debt in the last few years as a result of the pandemic and rising prices, and increasing interest rates will further increase the costs of this debt, potentially driving prices up further, as businesses are forced to pass on costs to survive. A better way to try and tackle rising prices would be to tackle the underlying supply-side issues driving up prices.

GVA and Regional Output The latest available figures from the ONS show that Greater Birmingham has contributed an estimated £55.01bn in gross value added (GVA) to the national economy in 2021, accounting for 2.7% of England’s total GVA. The city-region’s economy was hit hard in 2020, suffering a 5.2% decline from the previous year, as challenges and restrictions brought by the pandemic significantly impacted economic activity. This was a greater contraction than the total contraction seen by the UK (4.8%). Across the Greater Birmingham region East Staffordshire and Redditch were the local authorities which saw the largest contraction in their economies, both reducing by 9.9%

28 Bank of England. (2023) How do higher interest rates help to lower inflation? 29 Seelig, S. (1974) Rising Interest Rates and Cost Push Inflation

BIRMING HAM EC ON OMIC RE VIEW 2023

during the pandemic period. However, East Staffordshire saw one of the largest expansions in its economy in 2021, at 10.1%, just behind Tamworth, which saw an expansion of 12.1% in the same period. Gross Value Added (GVA)

Greater Birmingham and Solihull Birmingham Bromsgrove Cannock Chase East Staffordshire Lichfield Redditch Solihull Tamworth Wyre Forest UK

GVA 2019 GVA 2020 YoY Growth (£bn) (£bn) 2019-2020 £54.45 £51.59 -5.2% £28.19 £27.18 -3.6% £2.88 £2.80 -2.8% £2.18 £1.99 -8.9% £3.66 £3.30 -9.9% £2.44 £2.37 -2.8% £2.18 £1.96 -9.9% £9.76 £9.03 -7.5% £1.66 £1.57 -5.7% £1.51 £1.42 -5.9% £2,000.16 £1,903.58 -4.8%

GVA 2021 YoY Growth % Growth (£bn) 2020-21 2019-2021 £55.01 6.6% 1.0% £28.91 6.4% 2.6% £2.82 0.6% -2.2% £2.12 6.9% -2.6% £3.63 10.1% -0.8% £2.56 8.0% 4.9% £2.02 2.9% -7.4% £9.69 7.3% -0.7% £1.76 12.1% 5.7% £1.51 6.6% 0.3% £2,040.50 7.2% 2.0%

Source: ONS, Regional gross value added (balanced) by industry: ITL regions & city and enterprise regions Greater Birmingham was the second most impacted economy in 2020, when compared to the 8 core city regions. With Greater Birmingham seeing its economy shrink by -5.2%, only Newcastle (-6.2%) saw a larger contraction. Generally, the economies which saw the largest contraction in 2020 were the economies which struggled the most to recover in 2021. This includes the Greater Birmingham city region, as seen in the table below, which saw the second largest contraction comparative to other city regions in 2020, then the third smallest expansion in 2021. As the data is only available up to 2021, this does not take account of the economic impact of the Birmingham 2022 Commonwealth Games. GVA growth across the UK, Core city regions

Core Greater City GVA 2019 GVA 2020 YoY Growth regions and UK (£bn) (£bn) 2019-2020 Liverpool £34.43 £32.85 -4.6% Newcastle £42.11 £39.49 -6.2% Birmingham £54.45 £51.59 -5.2% UK £2,000.16 £1,903.58 -4.8% Leeds £57.87 £55.68 -3.8% Manchester £75.71 £72.92 -3.7% Sheffield £27.81 £27.02 -2.8% Bristol £36.80 £35.79 -2.7% Nottingham £50.54 £49.64 -1.8%

GVA 2021 YoY Growth % Growth (£bn) 2020-21 2019-2021 £32.63 -0.7% -5.2% £42.24 7.0% 0.3% £55.01 6.6% 1.0% £2,040.50 7.2% 2.0% £60.14 8.0% 3.9% £78.74 8.0% 4.0% £28.97 7.2% 4.2% £38.59 7.8% 4.9% £53.29 7.4% 5.4%

Source: ONS, Regional gross value added (balanced) by industry: local authorities by ITL1 region. Growth rates are based on chained volume measures to remove the effect of inflation. Data for core cities based on corresponding Local Enterprise Partnership region.

BIRMING HAM EC ON OMIC RE VIEW 2023

GVA by Sector The composition of the Greater Birmingham economy dramatically changed in 2020, as economic shocks led to substantial reductions in economic output. The impact also differed by sector, with some sectors being more impacted than others. The following figures are based on the most recent available regional data up to 2021. Gross Value Added (GVA) by sector

Sector Low Carbon & Environmental Technologies Life Sciences & Healthcare Digital & Creative Public Sector inc. Education Construction Retail Business, Professional & Financial Services Advanced Manufacturing Logistics & Transport Technologies Cultural Economy inc. Sports Total

2019 2020 YoY % change 2021 YoY % change % change (£bn) (£bn) 2019 to 2020 (£bn) 2020 to 2021 2019 to 2021 0.866 0.763 -11.9% 1.044 36.8% 20.6% 4.766 5.121 7.4% 5.315 3.8% 11.5% 2.892 3.082 6.6% 3.161 2.6% 9.3% 6.393 6.571 2.8% 6.895 4.9% 7.9% 4.384 4.057 -7.5% 4.523 11.5% 3.2% 6.061 5.68 -6.3% 6.146 8.2% 1.4% 17.497 17.351 -0.8% 17.742 2.3% 1.4% 6.602 5.666 -14.2% 6.25 10.3% -5.3% 2.297 1.822 -20.7% 1.895 4.0% -17.5% 2.691 1.488 -44.7% 2.042 37.2% -24.1% 54.449 51.601 -5.2% 55.013 6.6% 1.0%

Source: ONS, Regional gross value added (balanced) by industry: ITL regions & city and enterprise regions The Business, Professional & Financial Services sector (BPFS) remained the city-region’s largest sector by some margin as measured by GVA. During the pandemic, between 2019 and 2020 this sector shrank by 0.8%. However, it adapted relatively easily during the pandemic, as many workers could continue to work from home. Overall, the BPFS sector increased 1.4% between 2019 and 2021, adapting and recovering relatively well. However, it should be noted that between 2019 and 2021 the sector did grow across the UK by 2.4% in total. The Public Sector including education, grew to become the second largest sector in the city region in 2021, seeing growth of 2.8% between 2019 and 2020 and a further 4.9% between 2020 and 2021. This totalled an overall growth of 7.9% between 2019 and 2021. This sector adapted relatively easily to a remote working model, so was not as heavily impacted as other sectors in the region. Advanced Manufacturing has dropped to become the third largest sector in Greater Birmingham, now smaller than the public sector. The advanced manufacturing sector suffered greatly during the pandemic, largely as a result of the pandemic dampening international trade, with the sector shrinking by 14.2% during the pandemic. Whilst there was strong recovery in 2021, with 10.3% growth, overall, the Advanced Manufacturing sector shrank between 2019 and 2021 by 5.3%. The Retail Sector unsurprisingly, was heavily impacted by Covid restrictions, shrinking by 6.3% between 2019 and 2020. Consumers being unable to leave their homes and visit many retailers led to a reduction in the volume of purchases made in the UK 30. When economies started to reopen in 2021, the sector grew by 8.2%. Overall, the retail sector grew 1.4% between 2019 and 2021.

ONS, (2021). Impact of the coronavirus (COVID-19) pandemic on retail sales in 2020

BIRMING HAM EC ON OMIC RE VIEW 2023

Life Sciences & Healthcare saw the highest growth during the pandemic period at 7.4% between 2019 and 2020. The sector continued to grow by 2.8% between 2020 and 2021, resulting in an overall growth of 11.5% over the 2019-2021 period. This is likely due to increased reliance on this sector during the pandemic period. It should be noted that a number of structural issues were revealed during this period, which the sector will have to focus on in the future, including supply chain resilience and retention of talent 31. The Construction Sector shrank by 7.5% between 2019 and 2020, then grew by 11.5% in the following year, resulting in an overall growth of 3.2% between 2019 and 2021. Initially the sector shrank during the pandemic as a result of social distancing measures and the slowdown of commercial construction. However, experts stated that the strong recovery of this sector in 2021 was largely due to pent up demand and the end of the first phase of help to buy and the government’s stamp duty holiday 32. Therefore, private housing has largely driven recovery in this sector with commercial and public construction being much slower to recover, largely due to changes in working and shopping habits following the pandemic32. In 2020 the Digital and Creative Sector grew 6.6% from the year before, and in 2021 it grew again by 2.6% from the previous year, resulting in an overall growth of 9.3% between 2019 and 2021. This is due to pandemic leading to a surge in productivity-enhancing technologies to enable employees to work from home, including cloud, data analytics and cyber security, boosting the digital sector 33. The Cultural Economy was by far the most greatly impacted sector by the pandemic, shrinking by 44.7% in 2020 from 2019. This is unsurprising, given for large periods people could not gather in large groups due to social distancing measures, restricting the capacity and therefore output of the sector. The sector did though make significant recovery between 2020 and 2021, growing by 37.2%. Nevertheless, the cultural economy in Greater Birmingham remains 24.1% smaller than before the pandemic. The sector has struggled to recover as attendance has not returned to pre-pandemic levels, partly because of changes to how we spend our spare time postpandemic, and the cost-of-living crisis impacting discretionary spend 34. The Logistics and Transport Sector was the second hardest hit sector during the pandemic, reducing by 20.7%. This was followed by growth of 4% between 2020 and 2021, though overall this means a reduction in the sector of 17.5% between 2019 and 2021. The Charted Institute of Logistics and Transport (CILT) states that this sector is often impacted by economic downturns, due to reduced need for their services as clients see reductions in sales 35. Additionally, CILT also stated that Brexit was causing significant problems for businesses in the sector, due to a fall in exports to Europe35. The smallest sector in the Greater Birmingham area was the sector which saw the largest growth between prepandemic and post-pandemic. After declining by 11.9% between 2019 and 2020, the Low Carbon and Environmental Sector then grew by 36.8% from 2020 to 2021. Therefore, as of 2021, the sector is 20.6% larger than pre-pandemic (2019). This matches trends seen across the UK, with the Low Carbon and Environmental 31 McKinsey. (2022) Resilience in life sciences: Emerging stronger from the downturn

32 Construction Products Association. (2021) Construction bouncing back despite W-shaped recession and

recovery. 33 Valero et.al. (2021) COVID-19 spurred a wave of new technology adoption by UK businesses. London School of Economics. 34 The Audience Agency. (2023) New research reveals extent of the challenges facing the cultural sector. 35 The Charted Institute of Logistics and Transport. (2021) Covid-19 and Brexit have hit transportation and storage harder than any other sector BIRMING HAM EC ON OMIC RE VIEW 2023

sector one of the fastest growing sectors in 2021 36. ONS stated that whilst this was in part due to recovery from the pandemic it couldn’t all be put down to the re-opening of the economy36. The data also showed that the largest growth in this area has been in energy efficient products, meaning households and businesses were actively making energy efficient conscious decisions throughout 202136. Josh Ahmed, Managing Director, Eccleston and Hart Ltd “Alongside other industries, the UK Expanded Polystyrene (EPS) market has been one of the hardest hit by COVID-19 and subdued by the effects of the UK leaving the European Union. This was followed by a period of volatility in raw material (styrene) prices. However, according to a new market research report by Mordor Intelligence, titled "Europe Expanded Polystyrene (EPS) Market - (2023 – 2028),” the market is expected to register a compound annual growth rate (CAGR) of 2.5% between 2023 and 2028. Although this growth rate is for Europe, the same if not more is expected for the UK market. Similarly, the Global Expanded Polystyrene Market Size accounted for $18,194 Million in 2021 and is estimated to achieve a market size of $27,592 Million by 2030 growing at a CAGR of 4.9% from to 2030.

Increased demand from the packaging, construction and

insulation sector is expected to drive market growth in the medium term. Europe’s polystyrene market accounts for the third largest market share. The UK construction industry is a major consumer of EPS products and is expected to witness significant growth over the forecast period owing to the various characteristics of EPS, including great thermal insulation, low weight, chemical inertness, and resistance to bacteria and pests, among others. The UK regions packaging (industrial, commercial and consumer goods packaging) industry is also one of the major users of EPS with various applications such as food, cosmetic, electronics, medical as well as general consumer packaging. EPS is widely used for packaging applications due to its lightweight nature, shock absorption capabilities, and excellent cushioning properties. Although not a major consumer of EPS compared to the construction and packaging industry, the automotive industry is also predicted to witness considerable growth over the short and medium term, on account for various applications, including thermal insulation, sound insulation, and impact absorption, as well as fuel efficiency and making vehicles lighter. It is commonly used in the manufacturing of automotive parts, such as interior trim, door panels, instrument panels, and seat cushions. As EPS is extremely lightweight it helps to reduce fuel consumption also. Recycling of EPS as part UK’s circular economy initiatives are also presenting lucrative opportunities as a green environmentally friendly packaging material. In addition the introduction of the plastic packaging tax introduced in April 2022 is also driving innovation in the EPS industry. The tax is designed to encourage the use of more recycled plastic and applies to plastic packaging produced in, or imported into, the UK and that does not contain at least 30% recycled plastic. Reuse and recycle are the most commonly used words regarding sustainability and sound environmental policy, as EPS is both recyclable, inert and non-toxic to the environment as it does not contain CFCs or HCFCs in the manufacturing process and does not interfere with the ozone layer. On the back of this recovery and a better outlook in the EPS domestic market, Eccleston and Hart Ltd, a

36 ONS. (2023) Low carbon and renewable energy economy, UK: 2021

BIRMING HAM EC ON OMIC RE VIEW 2023

Naeem Arif, Director, United Carpets “It’s been a tough 5 years for a lot of businesses following on from the High Street Crisis, Brexit and more recently the ongoing cost of living crisis have all contributed to difficult trading conditions and as we approach the end of October it is important to stay focussed on both the challenges as well as the opportunities ahead. Being an Entrepreneur, it is important to be positive and ensure you look for opportunities. As we start coming out of this current dip, it is important to also to take calculated risks in order to ensure that whilst you don’t overstretch yourself, you are still looking to grow. It is not so long since the Commonwealth Games, which got a lot of people excited and this led to an increase in spending in some areas. This summer, the wet weather has washed out a lot of peoples enthusiasm, but I would suggest that means that some have not overspent in the summer and there maybe some disposal income available to them to spend. Despite the High Street Crisis, businesses on the High Street remain the heart and soul of many communities and they play a key role in the community morale. Seeing the Christmas lights up contribute to the celebration of the holiday season and leads to money being spent locally. When you spend locally, the money stays in the local economy, instead of going out of the city. In the bigger cities, town centre shops need to be more accessible for the public, some suffering from roadworks, complicated 1-way systems and reduced parking. Since COVID more people work from home, Whilst the challenges of climate change are a real concern, if our city centres continue to be difficult to access, shoppers will continue to be drawn to out of town locations, where there is free and easy parking to reduce the friction of the shopping experience. Retailers, Hospitality and Leisure businesses alike, all operating on the High Street need to maximise their sales over the next few months. They need to have strategy in place to deal with a number of challenges including; Stock Availability How do you have access to stock, without having to pay for it? Whilst Amazon changed customers expectations with their next day delivery promise, COVID has wreaked havoc on supply chains. Retailers don’t want to commit cash to stock that they may not sell, but at the same time, if they don’t have stock available, they won’t be able to fulfil customer requests at a critical time. For this reason, it is important to have suppliers or partners in place who can help you with this Standards Whilst the holiday season is upon us, it is important to ensure that you maintain your standards, for instance there will be many people rushing over to you after work, because they know you are open till 6pm and if you or your staff decide to nip off early tonight, it could be a big disappointment for your potential customer. It is not the time to cut corners, it is a time to ensure you exceed your standards and deliver a consistent brand promise. In addition, COVID has changed a lot of customer expectations, for instance the ability to click and collect imuch more common. Having a strong online presence is essential as many customers will research your products and your testimonials before they decide to buy from you. They expect this to be the norm now and if they cannot BIRMING HAM EC ON OMIC RE VIEW 2023

find information, including pictures and reviews about your opening hours, your contact number or your products online, they will quickly find someone else who dos give them this information. Sales Customers will be out to spend their money, so look out for upcoming dates of significance and get in front of your potential customers. Occasions like Halloween, Fireworks Night, Black Friday are all well known. In addition, in October there are also other dates like National Noodle Day, World Fungus Day also sporting events like the cricket world cup. Your customers maybe looking forward to these dates and you align with them. Service Everyone will tell you to deliver an amazing customer experience that will delight your customers. In reality, what does this mean? Often customers have simple questions that need to be answered well to delight them, such as ‘where is my order’ and this seems to be the point of failure. Considering its such a simple question, you cannot get the basics wrong. So for the next few months, if you want to delight your customers, don’t worry about the bells and whistles, make you sure to do the basics very well; delivery a service that is fast, friendly and fun. In closing, I would advise everyone, who has a business to take a positive approach to the next few months. Whilst things are difficult, your positive and friendly attitude will influence your team and together you will give your customers positivity, which will lead to you making more sales. People buy from people and sometimes it will be you, who will make the biggest difference to your business having a great golden quarter.” Andrew Goodacre, CEO, British Independent Retailers Association “The “Theyear year2023 2023has hasbrought broughtwith withititaaformidable formidablechallenge challengefor forthe theretail retailsector sector- -the thecost costofofliving livingcrisis. crisis. As consumer spending dwindles and confidence plummets to record lows, independent retailers find themselves navigating a tumultuous economic landscape. Theplummets surging inflation in food has significantly impacted As consumer spending dwindles and confidence to record lows,prices independent retailers find themselves discretionary spending, further intensifying the strain on businesses. To the independent retail community, this navigating a tumultuous economic landscape. The surging inflation in food prices has significantly impacted current economic climatefurther provesintensifying even more daunting the challenging days of the Covid pandemic. discretionary spending, the strainthan on businesses. To the independent retail community, this current economic climate proves even more daunting than the challenging days of the Covid pandemic. The pressing issue at hand is the soaring inflation on essential goods, particularly food, which has eroded consumers' ability to put funds purchases. this inflationary pressure is crucial to reviving The pressing issuetowards at handdiscretionary is the soaring inflationReducing on essential goods, particularly food, which has eroded consumer confidence and stimulating spending in the retail sector. consumers' ability to put funds towards discretionary purchases. Reducing this inflationary pressure is crucial to reviving consumer confidence and stimulating spending in the retail sector. The unique challenges faced during the Covid period pale in comparison to the complexities arising from the current predicament. While the pandemic sawthe shop closures, consumer demand upon offered arising some respite. The unique challenges faced during Covid period pale in comparison toreopening the complexities from the However, the current low consumer demand, exacerbated by unseasonal weather patterns, compounds the current predicament. While the pandemic saw shop closures, consumer demand upon reopening offered some difficulties faced by independent respite. However, the current lowretailers. consumer demand, exacerbated by unseasonal weather patterns, compounds the difficulties faced by independent retailers. Despite these difficult challenges, there is a glimmer of hope for local independent retailers. With home working or blended working now being seen asthere a norm, has proven advantageous, with localretailers. shopping gaining Despite these difficult challenges, is a this glimmer of hope for local independent With hometraction. working Footfall remains unpredictable, streets exhibit more resilience compared to shopping other locations, indicating a or blended working now being yet seenlocal as ahigh norm, this has proven advantageous, with local gaining preference for nearby shopping options. Another promising trend is the steady decline of online shopping. Consumers are showing more of a strong Another promising is the steady decline of online shopping. are showing more of aremain strongvalued. inclination inclination towardstrend purchasing in physical stores, highlighting thatConsumers in-person shopping experiences towards purchasing in physical stores, highlighting that communicate in-person shopping experiences remain valued. The pressure The pressure however is now on retailers to effectively their offerings, emphasising value and however is now on retailers to effectively communicate their offerings, emphasising value and quality to capture customer attention. unique that resonate with customers. BIRMING HAM EC ON OMIC REpropositions VIEW 2023

Amidst the turbulence, independent retailers who stand out in terms of value and quality remain sought-after by consumers. The middle ground is proving to be a challenging territory, prompting businesses to focus on creating unique propositions that resonate with customers. Despite these uncertainties, the resilience and adaptability of independent retailers continue to shine through. By responding to evolving consumer preferences and embracing the shift in shopping behaviour, independent retailers can pave the way towards a sustainable recovery. As we weather this cost of living crisis, the British Independent Retailers Association (Bira) remains steadfast in supporting its members. Advocating for favourable policies, providing valuable resources, and fostering collaboration within the retail community are among our top priorities. As we navigate these unprecedented times, we recognise the crucial role of independent retailers in the local economy. Together, we will emerge stronger, rejuvenating the retail landscape and ensuring a thriving future for independent businesses across the nation.” Raj Kandola, Director of External Affairs, Greater Birmingham Chambers of Commerce “As businesses across the region have grappled with the fallout from Brexit, the advent of Covid-19, rising inflation “As businesses across the region have grappled with the fallout from Brexit, the advent of Covid-19, rising inflation and soaring energy bills, the process of tracking regional productivity levels has taken on more significance as the and soaring energy bills, the process of tracking regional productivity levels has taken on more significance as West Midlands looks to bounce back from these unprecedented developments. Tracking Gross Value Added (GVA) the West Midlands looks to bounce back from these unprecedented developments. Tracking Gross Value Added involves measuring the contribution made to an economy by an individual producer, industry, sector or region and (GVA) involves measuring the contribution made to an economy by an individual producer, industry, sector or contributes to the calculation of gross domestic product (GDP). region and contributes to the calculation of gross domestic product (GDP). Over the last few years, a number of debates have taken place over the value of tracking GVA in its current guise, Over the last few years, a number of debates have taken place over the value of tracking GVA in its current guise, given the fact it doesn’t track skills, environmental impact or even personal well-being; however, it offers a solid base given the fact it doesn’t track skills, environmental impact or even personal well-being; however, it offers a solid to track the performance of the West Midlands and compare it to our regional counterparts. Historical data reveals base to track the performance of the West Midlands and compare it to our regional counterparts. Historical data the challenges we have faced as a region in relation to productivity. Prior the pandemic, GVA per head for the West reveals the challenges we have faced as a region in relation to productivity. Prior the pandemic, GVA per head for Midlands Combined Authority region (according to 2018/19 figures) was £23,903, below the UK average of £27,555 the West Midlands Combined Authority region (according to 2018/19 figures) was £23,903, below the UK average which in itself lead to an output gap of over £15.1bn. of £27,555 which in itself lead to an output gap of over £15.1bn. Given the structural make up of our regional economy, our region was particularly impacted by the twin headwinds of Given the structural make up of our regional economy, our region was particularly impacted by the twin Brexit and Covid-19 and that’s had a knock on impact on our GVA output recovery. Nevertheless, there are areas of headwinds of Brexit and Covid-19 and that’s had a knock on impact on our GVA output recovery. Nevertheless, strength that we need to build upon if we are to raise productivity levels. For example, the Business, Financial & there are areas of strength that we need to build upon if we are to raise productivity levels. For example, the Professional Services Sector remains the city’s largest sector as measured by GVA which probably reflect the manner Business, Financial & Professional Services Sector remains the city’s largest sector as measured by GVA which in which many of these firms were able to adapt to new working methods during the height of the pandemic. By probably reflect the manner in which many of these firms were able to adapt to new working methods during the contrast, the advanced manufacturing sector suffered a greater fall in output in terms of GVA (contracting 14.2% height of the pandemic. By contrast, the advanced manufacturing sector suffered a greater fall in output in terms between 2019 and 2020) but bounced back somewhat between 2020 and 2021, growing by 10.3%. It was also of GVA (contracting 14.2% between 2019 and 2020) but bounced back somewhat between 2020 and 2021, It’s also a sector that figures heavily in the West Midlands Combined Authority Plan for Growth which outlines a it the interesting to see that the Low Carbon and Environmental Sector grew by 36.8% between 2020 to 2021 making growing by 10.3%. It was also interesting to see that the Low Carbon and Environmental Sector grew by 36.8% strategy one sector to accelerate that saw the growth most to growth become prethe andfastest post pandemic. growing region outside of London by the end of the decade between 2020 that to 2021 making it the sectorMidlands that sawCombined the most growth prePlan andfor post pandemic. It’s also a sector figures heavily in one the West Authority Growth which outlines a strategy to which will require an additional £3.9bn of output above baseline forecasts in that same period. accelerate growth to become the fastest growing region outside of London by the end of the decade which will require an It’s also a£3.9bn sector of that figures heavily in theforecasts West Midlands Combined Authority Plan for Growth which outlines a additional output above baseline in that same period. Ultimately, if we are to raise GVA levels then we need to maximise every lever available to make the WMCA’s vision a strategy to accelerate growth to become the fastest growing region outside of London by the end of the decade reality. Clearly, we need to capitalize on the opportunities that the Birmingham Commonwealth Games brought to the which willifrequire of output above baseline forecasts in available that sametoperiod. Ultimately, we arean to additional raise GVA £3.9bn levels then we need to maximise every lever make the WMCA’s vision a reality. region by driving further Foreign Direct Investment into the city but also supporting those businesses that are keen to Clearly, we need to capitalize on the opportunities that the Birmingham Commonwealth Games brought to the region by expand their overseas reach. According BIRMING HAM EC ON OMIC RE VIEW 2023 to the ONS, UK businesses which declare international trade in goods are30 driving further Foreign Direct Investment into the city but also supporting those businesses that are keen to expand their around 70% more productive on average than those firms that focus purely on domestic markets.” overseas reach. According to the ONS, UK businesses which declare international trade in goods are around 70% more productive on average than those firms that focus purely on domestic markets.”

Ultimately, if we are to raise GVA levels then we need to maximise every lever available to make the WMCA’s

Productivity In 2021, workers across the Greater Birmingham area produced on average £33.98 of gross value added (GVA) per hour worked. Comparative to the other core city regions this places Greater Birmingham behind Bristol (£36.40), Manchester (£34.25) and Nottingham (£34.04). GVA per hour worked by city region

Source: ONS (2023), Subregional productivity: labour productivity indices by economic enterprise region However, productivity is weak in comparison to the UK average GVA per hour worked of £38.33 and all are significantly below London at £51.08 per hour worked. The disparity in the gap between the GVA per hour worked in London and the rest of the UK, including the Greater Birmingham region, highlights the need for levelling up and closing the productivity gap. This may seem insurmountable, especially given the current economic conditions in the UK and the prolonged productivity puzzle which has plagued the UK. However, with greater and faster technological developments (such as AI), productivity could start to climb - though these technologies need to be used to enhance the productivity of workers, not replace them. Before the pandemic (in 2019), Greater Birmingham had the second highest GVA per hour, though since the advent of the pandemic in the UK, in 2020 and 2021, Greater Manchester has had the second highest GVA per hour. This suggests that not only was Greater Birmingham more heavily impacted by the pandemic but, our city region has also struggled to recover next to comparable geographies. Greater Nottingham also surpassed Greater BIRMING HAM EC ON OMIC RE VIEW 2023

Birmingham in GVA per hour in 2021.

Business Activity Business activity in the West Midlands (ITL) region recovered throughout 2021 and 2022, following a dramatic decline during the pandemic, as seen in the graph below. The business activity index produced by NatWest, is a seasonally adjusted index that measures the month-onmonth change in the combined output of the region’s manufacturing and services sector 37. In the business index for the region fell from 52.6 in June to 51.3 in July 2023. Whilst the UK saw similar growth overall, out of the 12 regions measured the West Midlands was one of only six which saw growth in output, even if it was at a declining rate. This latest reading signalled a sixth consecutive rise in output for the region, but this is also its weakest growth in the index over the last 6 months. NatWest largely attributed growth in this month to the launch of new products and services, in partnership with demand resilience37. However, the expansion was dampened by signs of economic slowdown, client destocking and unfavourable weather37. Positively, West Midlands businesses were the most optimistic on the future business index of any region. West Midlands Business Activity Index

Source: Natwest, Regional PMI – Business Activity Index

Consumer Spending The latest available national data from the ONS shows that consumer spending in Q1 of 2023 is 2.3% below prepandemic levels (Q1 2019), following adjustments for inflation, as seen in the graph below. Consumers, therefore, are indeed spending less now than they had before the pandemic, though the reduction in spending has been decreasing in recent quarters.

UK total domestic consumer expenditure (£billions)

37 NatWest. (2023) NatWest UK regional PMI report for July 2023

BIRMING HAM EC ON OMIC RE VIEW 2023

Source: ONS, Consumer trends: chained volume measure, seasonally adjusted, (2023) By sector the greatest fall in consumer spending between Q1 2019 and Q1 2023, has been in transport (which saw a decline of 17.5%), followed by health (14.0%) and net tourism (11.1%), as seen in the table below. Whilst spending in most areas has decreased, some areas have seen an increase compared to pre-pandemic levels. Industries which have seen the largest increase in consumer spending include, communication (with a 13.4% increase),

education (10.5%) and restaurants and hotels (5.8%). UK total domestic consumer expenditure, by industry (£billions) Industry Net tourism Total domestic expenditure Food and drink Alcohol, tobacco and narcotics Clothing and footwear Housing Furnishings, household equipment and routine maintenance of the house Health Transport Communication Recreation and culture Education Restaurants and hotels Miscellaneous

2019 Q1

Percentage Change 2023 Q1 5.676 5.044 -11.1% 340.628 333.241 -2.2% 27.428 27.601 0.6% 11.887 11.332 -4.7% 17.345 17.279 -0.4% 87.937 90.008 2.4% 16.49 7.404 48.848 6.665 32.621 7.405 35.739 40.881

16.311 6.37 40.291 7.559 33.169 8.183 37.825 37.313

-1.1% -14.0% -17.5% 13.4% 1.7% 10.5% 5.8% -8.7%

Source: ONS, Consumer trends: chained volume measure, seasonally adjusted, (2023) Deloitte’s consumer confidence tracker has found that consumer confidence remains poor comparative to prepandemic levels, though confidence has increased in the last three quarters to Q2 2023, largely because of a reduction in inflation 38. Additionally, consumers feel more confident about their levels of disposable income following wage increase since April38. However, many consumers are still retaining strategies to manage the rise in the cost of living including, 35% reducing spend on clothing; 34% reducing spend on going out and leisure

38 Deloitte. (2023) The Deloitte Consumer Tracker Q2 2023

BIRMING HAM EC ON OMIC RE VIEW 2023

activities and 29% reducing the amount of food they purchase38.

International Trade Following falls in regional trade in second quarter of 2020, goods exports have recovered. Goods exports for the West Midlands (ITL) region are now 15.7% above pre-pandemic levels, as goods exports reached £8.6bn in Q1 2023 comparative to £7.4bn in Q1 2020. Additionally, excluding London and the South East, the West Midlands exports the largest value of goods in the England, accounting for 13% of total England exports. Imports recovered quicker, increasing 34.7% over the same period, from £8.1bn to £10.9bn. This has worsened the balance of trade for the region with the negative balance of trade increase 237% since Q1 2020. Therefore, whilst exports have recovered in the region, the recovery in imports greatly outweighs this increase, widening the current trade deficit for the region. Total trade in goods for West Midlands (ITL1) (£ billions)

Source: HMRC, UK trade in goods statistics first quarter 2023 By Standard Industrial Trade Classifications, trade in exports for the West Midlands (ITL) has returned or increased above pre-pandemic levels for all sections of the economy expect three, these being beverages and tobacco (12.5% below its pre-pandemic level), animal and vegetable oils (25% below) and other commodities (92.9% below). Sections where exports are most outperforming pre-pandemic levels include crude materials (39.9% above pre-pandemic trade levels), food, and live animals (28.9% above pre-pandemic export levels) and manufactured goods (21.8% above Q1 2020 levels).

Trade in goods for West Midlands (ITL1) (£ billions), by SITC section

BIRMING HAM EC ON OMIC RE VIEW 2023

Food and Live Animals Beverages and Tobacco Crude Materials Mineral Fuels Animal and Vegetable Oils Chemicals Manufactured Goods Machinery and Transport Miscellaneous Manufactures Other commodities nes

Total Exports Total Imports Percentage Percentage Change 2020 Q1 2023 Q1 Change in imports 2020 Q1 2023 Q1 in exports 0.159 0.205 28.9% 0.642 0.798 24.3% 0.016 0.014 -12.5% 0.049 0.066 34.7% 0.203 0.284 39.9% 0.145 0.193 33.1% 0.038 0.043 13.2% 0.144 0.206 43.1% 0.008 0.006 -25.0% 0.033 0.044 33.3% 0.34 0.377 10.9% 0.547 0.637 16.5% 0.731 0.89 21.8% 1.599 2.08 30.1% 5.248 6.002 14.4% 3.694 5.505 49.0% 0.656 0.755 15.1% 1.253 1.389 10.9% 0.014 0.001 -92.9% 0.002 0.001 -50.0%

Source: HMRC, UK trade in goods statistics first quarter 2023 In terms of imports, other commodities is the one section of the economy which has not seen levels return to prepandemic values, instead experiencing a 50% fall. Every other section has seen growth in imports comparative to pre-pandemic levels (Q1 2020). The largest increase in imports has been in machinery and transport, with imports being 49% higher than in Q1 2020. Mineral fuels have seen the second largest increase (43.1% above pre-pandemic trade), followed by beverages and tobacco ( 34.7% above Q1 2020 levels). Exports in goods to Latin America and Caribbean have seen the largest increase between Q1 2020 and Q1 2023 at 58.5%, closely followed by Asia and Oceania at 57.6%, then Middle East and North Africa at 54.1%. Exports to Eastern Europe decrease over this period by 37.4%, though this anticipated given the invasion of Ukraine and subsequent embargos on trade with Russia. The only other region where exports in goods has not recovered to pre-pandemic levels is North America, reducing by 10% between Q1 2020 and Q1 2023. This might be a result of the UK leaving Europe and currently not having a trade agreement in place with the US 39. Notably, exports have increased with the European Union over this period by 17%. Whilst it is positive that exports in goods to the EU have increased above their Q1 2020 level in Q1 2023, it is difficult to decipher the impact of Brexit, due to the external shocks of the pandemic and invasion of Ukraine. A survey of businesses by the British Chambers of Commerce, did find that 56% of firms were facing difficulties adapting to new trading rules for goods and 77% of firms stated Brexit was not helping them grow their business 40. The University of Sussex found that 23% of businesses were reporting increased costs because of leaving the EU 41.

39 House of Commons. (2023) Progress on UK free trade agreement negotiations 40 British Chambers of Commerce. (2022) Brexit Trade Deal Not Delivering

41 University of Sussex. (2023) UK businesses facing increased costs and supply chain issues in post-Brexit

system

BIRMING HAM EC ON OMIC RE VIEW 2023

Mandy Haque, International Director, Greater Birmingham Chambers of Commerce “International trade in 2023 in the West Midlands has continued to develop despite the challenges companies “International tradeMany in 2023 thechallenges West Midlands haspresent continued to develop the challenges companies continue to face. of in the are still especially thedespite complexities associated with Brexit continue to face. Many of the challenges are still present especially the complexities associated with Brexit although although businesses have seemingly found their new normal and adapted. The global supply chain is still in a businesses seemingly foundcosts their of new normaland anddemand adapted.on The global supplyischain is still in a vulnerable vulnerable have position; the soaring shipping transportation causing businesses to review position; the soaring costs of shipping and demand on transportation is causing businesses to review their processes their processes as well as making changes due to the continuing cost of living increases. We still feel the impact as as making changes due to as thethe continuing cost ofdisasters living increases. Weglobe still feel the impact of the geo-political of well the geo-political issues as well various natural across the that inevitably affect the ability issues as well as the various natural disasters across the globe that inevitably affect the ability to trade. International to trade. International trade certainly has it challenges, but also its opportunities. trade certainly has it challenges, but also its opportunities. This year saw the evolution of the Greater Birmingham Commonwealth Chamber of Commerce ion into the Global This year saw the evolution of theBirmingham Greater Birmingham Commonwealth Chamber Commerce ionopportunity into the Global Chamber of Commerce. During 2022 Commonwealth Games and of post Brexit, the to Chamber of Commerce. During Birmingham 2022 Commonwealth Games and post Brexit, the opportunity to explore explore Commonwealth markets was a real focus for us. We established some strong relationships with Commonwealth realCanada, focus for us. We established someand strong relationships Commonwealth markets marketswas sucha as Australia, India, Sri Lanka Ghana to name awith few,Commonwealth but I always felt markets such as Canada, Australia, India, Sri Lanka and Ghana to name a few, but I always felt there was born a gapand for us there was a gap for us to deliver worldwide activity and so in April of this year the Global Chamber was to worldwide activity and sotoinstrength April of attracting this year the Global Chamber wasrise born the division going from thedeliver division is going from strength a new audience, giving toand opportunities forismembers strength to globe. strength attracting a new giving to opportunities across the globe. Over this across the Over this year we audience, have hosted andrise visited delegations for andmembers teams from Embassies and High year we have hosted andthe visited delegations and teams fromVietnamese Embassies and High Commissions including the U.S. Commissions including U.S. Embassy, French Embassy, Embassy, Mexican Embassy, Ecuadorian Embassy, Embassy, Vietnamese Embassy, Mexican Ecuadorian Embassy, Kazakhstan Embassy, French Kazakhstan Embassy, Belgian Embassy, High Embassy, Commissions of Canada, Sri Lanka, India,Embassy, Mauritius, Belgian Embassy, High Commissions Canada, Sri Lanka, India, Mauritius, Australia;Our all to help Trade with supporting our Australia; all to help with supportingofour members international trade objectives. Global Conference members international tradehigh objectives. Global Trade held in February high quality content held in February delivered quality Our content and sawConference a keynote speech from the delivered Mexican Ambassador Her and saw a keynote speech from the Mexican Ambassador Her Excellency Josefa Gonzalez Blanco. Excellency Josefa Gonzalez Blanco. Some year with anan introduction to to plain paper Some improvements improvementsto toexport exportdocumentation documentationhave haveoccurred occurredover overthis this year with introduction plain paper printed certificates of origin, where there is no longer the need to print out the certificate of origin if your customer printed certificates of origin, where there is no longer the need to print out the certificate of origin if your customer will toto provide further documentation forfor European will accept acceptan anelectronic electronicversion, version,however howeverthere thereisisstill stillthe theneed need provide further documentation European shipments and the ATA Carnet document for temporary shipment of goods is still a useful tool to avoid unwanted shipments and the ATA Carnet document for temporary shipment of goods is still a useful tool to avoid unwanted duty duty on on goods goods being being exhibited exhibited overseas overseasor orfor for example exampletools toolsbeing beingtransported transportedto tomaintain maintainoverseas overseasequipment. equipment.In Greater Birmingham Chambers of Commerce we are we so fortunate to have a to team thataare extremely experienced In Greater Birmingham Chambers of Commerce are so fortunate have team that are extremelyin all forms of export processing documents for racing cars, concert equipment, film cameras or standard experienced in all documents forms of export documents processing documents for racing cars, concert equipment, film products, the team have been kept busy in 2023 and if this is anything to go by, it is a strong indication of trade cameras or standard products, the team have been kept busy in 2023 and if this is anything to go by, it is a strong increasing ourincreasing region. We have also seen an in interest companies to upskill their teams even indication from of trade from our region. Weincrease have also seen an for increase in interest for companies toand upskill without access funding, theaccess need for in international to international be fully knowledgeable their risks and their teams andto even without to staff funding, the need fortrade staff in trade to beof fully knowledgeable responsibilities is key to the success of any trading relationship. of their risks and responsibilities is key to the success of any trading relationship. With when trading ,Chambers can can playplay theirtheir part to support businesses in navigating the With so somuch muchatatstake stake when trading ,Chambers part to support businesses in navigating the complexities of international markets. The Greater Birmingham Chambers of Commerce can provide support as complexities of international markets. The Greater Birmingham Chambers of Commerce can provide support as aa full package in areas suchsuch as trade documentation, translation and interpreting, training the workforce as well provide full package in areas as trade documentation, translation and interpreting, training the workforce as as well as support signposting to those that in logistics development. international provide and support and signposting to need thosethat thathelp need that helpand in innovation logistics and innovation The development. The divisions at the Greater at Birmingham Chamber of Commerce focussed onare bi-lateral trade have strong international divisions the Greater Birmingham Chamberare of Commerce focussed on and bi-lateral trade and partnerships overseas and relationships facilitate trade opportunities. Greater Birmingham Global Chamber of have strong and partnerships overseasto relationships to facilitate tradeThe opportunities. The Greater Birmingham Commerce supports bi-lateral trade and investment with overseas marketswith andoverseas the Greater Birmingham Global Chamber of Commerce supports bi-lateral trade and investment markets and the Greater Transatlantic Chamber of Commerce is part of the British Business Network, one of Network, 22 chapters spanning Birmingham Transatlantic Chamber of Commerce is partAmerican of the British American Business one of 22 the UK and North America, available help support those transatlantic relationships. The relationships. year has been The a reflective, chapters spanning the UK and North to America, available to help support those transatlantic year challenging but exciting year in many respects for international trade and overseas engagement and whatever the has been a reflective, challenging but exciting year in many respects for international trade and overseas situation, know that the Chamber can support your business to navigate the trade challenges and opportunities ahead.” BIRMING HAM EC ON OMIC RE VIEW 2023

Foreign Direct Investment The latest available annual data finds that like most other regions the West Midlands (ITL) saw an increase in inward Foreign Direct Investment (FDI) between 2020 and 2021, with FDI in the region rising from £1.1bn to £3.4bn, as seen in the graph below. Whilst Wales saw the largest year-on-year increase in FDI (633.3%), the West Midlands saw the second largest increase of any UK region at 209.1%. This substantial increase of FDI in the region, in part this may be due to the reopening of the economy, but that would only account for some of the increase as the total far outstrips the median increase amongst other UK regions (59.6%). Foreign Direct Inward Investment, West Midlands ITL, £ billions

Source: ONS, Foreign direct investment, experimental UK subnational estimates: 2021, 2023 Manufacturing saw the highest investment in 2021 in the West Midlands Combined Authority (WMCA), with 41.8% of total inward FDI being in this industry. As seen in the table below, this is almost triple the investment made in the industry in the UK, with only 15.2% of total UK inward FDI being in this sector.

BIRMING HAM EC ON OMIC RE VIEW 2023

Inward Foreign Direct Investment by industry as a percentage (%) of total inward Foreign Direct Investment, West Midlands Combined Authority, 2021 Financial

Information

and

Insuranc

Communicatio

Manufacturin

and

quarrying

Mining

Profession

Wholesale,

Othe

al and

Transportatio

Support

n and storage

Greater Mancheste r

17.5

3.8

11.2

5.2

9.3

49.3

11.3

6.5

41.8

0.3

11.3

8.9

18.7

29.8

6.8

15.2

0.7

14.6

12.8

West Midlands United Kingdom

Source: ONS, Foreign direct investment, experimental UK subnational estimates: 2021, 2023 The sector which saw the second highest proportion of inward FDI was the wholesale, transportation, and storage sector, which was 18.7% of total inward FDI. Comparative only 12.8% of total UK FDI is in this sector, though for the Greater Manchester Combined Authority, the proportion of total investment in this sector is almost half (49.3%). The sector with the third highest proportion of investment is the financial and insurance sector at 11.3% in the WMCA. This is much lower than the proportion of inward FDI that is spent on this sector in the UK, with 29.8% of inward FDI being spent in this sector. It is expected that these industries would receive the most investment in the WMCA. As manufacturing is a longestablished sector in the region, with several clusters and hubs and high levels of international automotive R&D investment 42. As the WMCA is within the logistics golden triangle, this has made it an opportune spot for wholesale, transportation, and storage investment, particularly in recent years with the growth of online retail 43. Additionally, the financial and insurance sector is one of the fastest growing sectors in the WMCA, with large international Banks setting up new offices in the centre of Birmingham, driving FDI investment 44. The Department for Business and Trade has reported that in 2022/23the West Midlands was the UK’s top regional location for attracting Foreign Direct Investment (FDI) outside London and recorded the highest annual growth rate of all UK regions. 181 FDI projects landed in the region during the financial year – more projects than Scotland and Wales combined and overtaking the South East for the first time. This represents over 10% of the UK’s total FDI wins (1,654) – the largest share of all UK regions outside of the capital. With 8,252 jobs created by overseas investors during the same period – a 48% increase compared to 2021/22 – the West Midlands also bucked the national trend of a decline in FDI-related jobs. Much of this success will be as a result of the Birmingham 2022 Commonwealth Games and the associated Business and Tourism Programme delivered by the West Midlands Growth Company.

42 West Midlands Growth Company. (n.d.) AUTOMOTIVE

43 ONS. (2022) The rise of the UK warehouse and the “golden logistics triangle

44 Paradise. (2022) Goldman Sachs agrees permanent office location in Birmingham

BIRMING HAM EC ON OMIC RE VIEW 2023

Economic Risks There are several global, national, and regional economic risks, shocks, and uncertainties that Greater Birmingham continues to face. It is important to plan for these risks so that households and businesses can build plans for resilience and mitigation. Global •

Cost of living crisis- The largest current risk to economies according to the World Economic Forum46 is the cost of living crisis. If the there is a miscalibration in the monetary and fiscal policies used to tackle this it could lead to liquidity shocks, signally a more prolonged downturn and debt distress on a global scale. Continued stagflation would be severe, given unprecedented interaction with historically high public debt. The era of low interests has also ended, which will have ramifications for governments, businesses, and households. The likelihood is that the poorest will most acutely suffer the impacts associated with the crisis, worsening poverty, food and health insecurity, and political instability. Economic pressures will also erode gains made by low- and middle-income households, further embedding discontent, with calls growing for greater social protections that governments will likely be unable to afford due to high interest rates.

•

Natural disasters and extreme weather events - continued and increasing extreme weather events and natural disasters could significantly disrupt global economies and supply chains. Over the last year millions of acres of agricultural land has been lost to weather related disasters 45, this will significantly disrupt the food and drink production industry, as it reduces the supply of raw food goods available on the market. The damage of infrastructure could also lead to significant disruption as it restricts the movement of goods, creating bottlenecks and delays, increasing input costs, driving food insecurity 46. Continued extreme weather events could also lead to increased displacement as people try to escape high risk weather or climate disaster zones, increasing geopolitical tensions as mass climate change displacement overwhelms neighbouring countries 47. It is likely that as these events continue to increase, businesses will have to diversify their supply chains to ensure that they are resilient against disruption associated with climate change. National and local governments will have to continually update natural disaster and extreme weather emergency plans, to prepare and mitigate against the worst impacts of such disasters.

•

Geoeconomic tensions and confrontations - Economic warfare, and state interventions in markets, continues to grow between global powers, with economic powers increasingly being used offensively to restrict other economies, as well as defensively to boost self-sufficiency. For instance, the US and China 48 have increasingly been using economic powers in trade wars over the last few years, with tariffs regularly used either as a defence or retaliation. Escalating intensive geoeconomic weaponization will begin to demonstrate security vulnerabilities posed by trade, financial and technological interdependence between globally integrated economies, risking rising distrust and decoupling46.

National

45 US Embassy and Consulates. (2022) How climate change affects the food crisis 46 World Economic Forum. (2023) Global Risks Report 2023

47 UNHCR. (2021) Conflict, violence, climate change drove displacement higher in first half of 2021 48 CEPR. (2023) The ‘bystander effect’ of the US-China trade war

BIRMING HAM EC ON OMIC RE VIEW 2023

•

Cost of living crisis - The cost of living crisis in the is largely driven by inflation rising faster than wages, eroding standards of living for most. In the UK the rate of inflation remains much higher than in comparable economies 49. One contributing factor for UK inflation being higher has been its reliance on natural gas, the price of which rose 14-fold between 2021 and 2022. 85% of UK households have gas boilers, compared to less than half of EU households. Additionally, gas accounts for 40% of UK electricity, compared to 20% of EU electricity 50. This has left the UK far more exposed to shocks to the gas market. A second contributing factor is labour supply shortages in the UK labour market, which has led to a loss of output in specific markets such as food, thus driving up costs of production as employers compete for employees 51. Food inflation has been so high in the UK as it is one of the largest (3rd largest) net importers of food in the world 52. This means it has been particularly vulnerable to external shocks in the food and drink supply chains, such as Brexit, the invasion of Ukraine, extreme weather events limiting crops, and labour supply shortages in the agricultural industry. The cost-of-living crisis will further embed growing inequalities and erode living standards, leaving consumers poorer and reducing their purchasing power, risking reduction in both growth and productivity.

•

Interest rates - Interest rates are being used by the Bank of England to prevent continued rising inflation. The idea being that the higher the interest rate, the more expensive credit becomes and the greater the opportunity cost of spending instead of saving, reducing demand and as a result, reducing prices. However, with an undersupply of housing this has sent mortgages skyrocketing, as prices are at unprecedented highs and now interest rates are at levels last seen during the global financial crisis. This has led to some mortgage monthly payments more than doubling over the last year, with many unable to afford the increase, given the rise in cost in other areas. This has also impacted the rental market, with many landlords passing on additional costs to tenants. There is a risk that if interest rates continue to increase, large numbers of households and landlords could start to default on mortgages, leading to a housing market crash, similar to that seen during the financial crisis, which the UK has still not recovered from. However, this is unlikely as current employment levels are considerably higher than those in 20082009.

•

Growing Inequality - Households with lower incomes are being most impacted by both the pandemic and the cost-of-living crisis. Firstly, those on lower incomes were more likely during the pandemic to see falls in incomes, as their occupations were less likely to be transferable to home working and therefore, they were more likely to see reductions in shift hours. Additionally, the likelihood of at least one otherwiseworking adult needing to remain home to care for children and/or parents increased. Furthermore, inflation is highly regressive, particularly impacting poorer households which already spend a much greater proportion of their incomes to start with. When prices increase, even greater proportions of their incomes are eaten up, increasing gaps between both the richest and poorest households. As income inequality grows, risks around decreasing productivity, growing financial instability, debt and low growth increase.

49 BBC. (2023) Why is UK inflation higher than other countries? 50 Deloitte. (2023) Why is UK inflation so high?

51 Financial Times. (2023) UK faces more challenges than most countries with high inflation

52 Food and Agriculture Organisation of the United Nations. (2021) Trade of agricultural commodities

BIRMING HAM EC ON OMIC RE VIEW 2023

Regional •

Reductions in real wages - The National Institute of Economic and Social Research (NIESR) has found that the pandemic and cost of living crisis will lead to greater erosions in real wages in West Midlands than any other region 53. The NIESR found that real wages in the region will fall by 5%, between Q4 2019 and Q4 2024, with real wages expected to be 15.3% lower than the national average. GVA is also expected to remain below the Q4 2019 rate by Q4 202453. This will greatly impact consumer purchasing power, likely reducing both standards of living and growth, and increasing inequality and poverty in the region.

•

Brexit: Brexit is set to impact the Midlands on a greater level than any other UK region, due to its dependency on the advanced manufacturing sector. Brexit has resulted in a loss of comparative advantage for Midlands firms, reducing exports and growth for SMEs. Recovery from the pandemic and geopolitical tensions have prompted restructuring of some supply chains which might be delaying the impact of Brexit, however, should EU businesses find suitable alternatives to UK suppliers there could be an increasing decline in the advanced manufacturing sector. Countries like the US are introducing attractive policies such as the Inflation Reduction Act, which includes incentives to advanced manufacturing sub-sectors to open in the US. Support is needed for Midlands SMEs in these supply chains to mitigate a risk of ‘hollowing out’ if tier-1 firms move production to the EU or further afield. In particular, supporting SMEs to boost productivity through adoption of advanced technologies and digitisation will become increasingly important to reduce costs and remain competitive.

Mike Owens, Managing Director, Schumacher Packaging “Packaging is a rudimentary requirement of our economy. It preserves, protects and promotes product. However, the sector in which Schumacher Packaging operates (corrugated paper packaging), undoubtedly like many others, is experiencing unprecedented economic forces, which make business decisions extremely challenging “Packaging is a rudimentary requirement of our economy. It preserves, protects and promotes product. However, and risky. Where before have we seen high stocks and high prices, almost an economic impossibility, quickly the sector in which Schumacher Packaging operates (corrugated paper packaging), undoubtedly like many others, move to high stocks, lowering prices and increasing enforced downtime? This is not only a UK phenomenon but is experiencing unprecedented economic forces, which make business decisions extremely challenging and risky. one which is being repeated across major European paper & packaging producing countries. More general Where before have we seen high stocks and high prices, almost an economic impossibility, quickly move to high economic conditions, mostly man-made, have drastically reduced demand as consumers focus on the necessities stocks, lowering prices and increasing enforced downtime? This is not only a UK phenomenon but one which is of life and leave behind, albeit perhaps temporarily, the luxury and immediacy afforded by e-commerce and other being repeated across major European paper & packaging producing countries. More general economic conditions, just-in-time purchasing channels. Poor political decisions and opportunism, fuelled by world health issues, a mostly man-made, have drastically reduced demand as consumers focus on the necessities of life and leave behind, departure from the EU and localised wars have led to inflation levels alien to vast swathes of the UK population, albeit perhaps temporarily, the luxury and immediacy afforded by e-commerce and other just-in-time purchasing which can neither accept nor adapt in the short term. Huge gaps in specific skills and experience leave businesses channels. Poor political decisions and opportunism, fuelled by world health issues, a departure from the EU and paying inflated wages to attract talent. Energy prices became a lottery, with many businesses having been caught localised wars have led to inflation levels alien to vast swathes of the UK population, which can neither accept nor slap bang in the middle of “take it or leave it” period before prices began to ease. Where does that leave business adapt in the short term. Huge gaps in specific skills and experience leave businesses paying inflated wages to generally and, specifically the sector in which Schumacher operates? Waiting…. to see whether they can survive, attract talent. Energy prices became a lottery, with many businesses having been caught slap bang in the middle of whether the economy picks up and whether they can continue to invest to meet the challenges and expectations “take it or leave it” period before prices began to ease. Where does that leave business generally and, specifically of the 21st century, particularly sustainability targets. the sector in which Schumacher operates? Waiting…. to see whether they can survive, whether the economy picks up and whether they can continue to invest to meet the challenges and expectations of the 21st century, particularly One thing is for certain. Economies are cyclical and will stabilise, but at a higher level of cost than before in the sustainability targets. “false” world of low-cost borrowing and unlimited choice. Once we learn to live with this augmented level of “normality”, the well-run businesses, which survived the economic maelstrom, will thrive. Paper-based packaging One thing is for certain. Economies are cyclical and will stabilise, but at a higher level of cost than before in the is very well placed in this regard but consolidation, in all business sectors, will force reduced sources of supply. “false” world of low-cost borrowing and unlimited choice. Once we learn to live with this augmented level of “normality”, the well-run businesses, which survived the economic maelstrom, will thrive. Paper-based packaging is 53 National Institute of Economic and Social Research. (2023) UK Heading Towards Five Years of Lost Economic very well placed in this regard but consolidation, in all business sectors, will force reduced sources of supply. The Growth brutal consequences of a period of dis-functional economics.” BIRMING HAM EC ON OMIC RE VIEW 2023

Michal Gierat, Managing Director, WM International “WM International operates operates as prices ofof our services areare WM International as freight freight forwarding forwardingand andCustoms Customsclearance clearanceagents. agents.The The prices our services heavily toto face. The first postheavily impacted impactedby bythe theoperating operatingcosts coststhat thatroad roadhauliers, hauliers,shipping shippinglines linesororairlines airlineshave have face. The first postpandemic the situation in logistics even more challenging, since the customers’ pandemic economic economicbounce bounceback backmade made the situation in logistics even more challenging, since the customers’ demand demand exceeded exceeded the the transportation transportationcapacities capacitiesavailable availableworldwide. worldwide. Fuel biggest costs forfor transport companies. Transportation costcost has has a direct impact Fuel price priceand anddrivers' drivers'wages wagesare arethe the biggest costs transport companies. Transportation a direct on the products’ final price andprice the fuel and inflation are linked verylinked closely. The years 2021 and 2022 impact on the products’ final andprices the fuel prices andrate inflation rate are very closely. The years 2021 were very challenging for the logistics industry dueindustry to the significant cost, high demand and demand the shortage and 2022 were very challenging for the logistics due to thefuel significant fuel cost, high and of theHGV drivers. Since Autumn 2022, we have observed fuel prices havethat beenfuel stabilising, having reached almosthaving the preshortage of HGV drivers. Since Autumn 2022, that we have observed prices have been stabilising, pandemic levels. the Since this summer levels. however, they have started rising again. the started last couple of again. years, the fuellast reached almost pre-pandemic Since this summer however, they In have rising In the surcharge (FSC) the fluctuated from 3%(FSC) to 19%. In 2023 up to July 2023, hauliers' approximately Since couple of years, fuel surcharge fluctuated from 3% to 19%.most In 2023 up to FSC July was 2023, most hauliers'5%. FSC July, it hit 10% and it5%. is likely continue increasing. Time will if this increase has simply been if a this blip,increase a slight was approximately SincetoJuly, it hit 10% and it is likely toshow continue increasing. Time will show correction is another linked with the geopolitical tensions. has simplyor been a blip, acrisis slight correction or current is another crisis linked with the current geopolitical tensions. Not Not only only has has the theroad roadhaulage haulagebeen beenstruggling, struggling,the thecost costof ofshipping shippingcontainers containersfrom fromfar fareast eastAsia Asiaskyrocketed skyrocketedinin 2021. 2021. ItIt reached reached the the level levelwhere where––according accordingto tovarious varioussources sources- -the thecost costofoftransport transportexceeded exceededthe thevalue valueofofthe the commodities wewe have observed a slow but but steady decline in the commodities being beingtransported. transported.Since Sinceearly early2022, 2022, have observed a slow steady decline incost the of cost of container Our analysis suggests that in 2023 we we reached the the costcost level container shipments shipmentsand andthis thistrend trendcontinued continuedinin2023. 2023. Our analysis suggests that in 2023 reached of 2018. addition, in 2022 UKthe ports extra charges such assuch the Energy Adjustment Levy (EAL) level of In 2018. In addition, in the 2022 UK implemented ports implemented extra charges as the Energy Adjustment Levyand the Green Transition TheseLevy. charges have increased 2023 andinsubsequently become an become additional (EAL) andEnergy the Green EnergyLevy. Transition These charges haveinincreased 2023 and subsequently an cost to our cost customers. additional to our customers. Our Our main main observation observationin in2023 2023isisthat thatthe thelevel levelof oforders ordersfrom fromsuppliers suppliersand andcustomers customersisisdecreasing. decreasing.The Thehauliers hauliersnow have vehicles and spare available. For theFor lastthe couple years,ofityears, was the freight struggling now spare have spare vehicles and drivers spare drivers available. last of couple it was theforwarders freight forwarders to find hauliers available toavailable work and the situation changed. are receiving offers withoffers vehicle struggling to find hauliers tonow work and now thehas situation hasWe changed. We aremore receiving more with availability from all from over Europe, includingincluding the UK. the UK. vehicle availability all over Europe, We the European hauliers who used to operate between the UK We estimate estimatethat that20-30% 20-30%ofof the European hauliers who used to operate between theand UKthe andcontinent, the continent, redirected of the the possible possible reasons reasons for forthis thiscould couldbe bethe thenew newpost-Brexit post-Brexitregulations regulations redirected towards towards mainland mainland Europe. Europe. One One of that to the the Customs Customs requirements. requirements. Those Those European European hauliers hauliers who who prepared prepared themselves themselves for that resulted resulted in in more more hassle hassle due due to the changes and remained on the on market, increased their fleets, andfleets, filled up capacity gap. Interestingly, for Brexit the Brexit changes and remained the market, increased their andthe filled up the capacity gap. this gives the UK anUK opportunity toopportunity start considering operating more Europeanmore tractions. Interestingly, thishauliers gives the hauliers an to start considering operating European tractions. By By the the end end of of 2023 2023 as as initially initially planned, planned, or or more more likely likely in in 2024, 2024, HMRC HMRC is is going going to to move move from from CHIEF CHIEF to to CDS CDS system system on exports which maymay potentially create difficulties for some freight forwarders in terms of staff training. on exports which potentially create difficulties for some freight forwarders in terms of staff training. Some Some argue argue that that the the logistics logisticsindustry industrycould couldbe beconsidered consideredthe theacid acidtest testfor forthe therest restof ofthe theeconomy. economy.InInthe thepast, past,the decline in transportation demand was the beginning of the of recessions whereas increased demanddemand was an indication the decline in transportation demand was the beginning the recessions whereas increased was an of the startof ofthe economic indication start of growth. economic growth. At At WM WM International, International, we we suspect suspectthat thatthe thepossibility possibilityof ofeconomic economicslowdown slowdownisissignificant, significant,and andwe weare arefocusing focusingon on automation automation of of our our process processand and diversifying diversifyingour ourportfolio portfolioof ofhauliers hauliersand andshipping shippingcompanies companiesto tooptimize optimizecosts. cos

BIRMING HAM EC ON OMIC RE VIEW 2023

Weekly Road Fuel Prices

Source: ONS, 2023- Weekly road fuel prices Annual CPIH and CPI inflation rates continued to ease between June and July 2023

Source: ONS, 2023”

BIRMING HAM EC ON OMIC RE VIEW 2023

*Disclosure appendix

The following pages refer to the disclosure appendix and disclaimer from the CMB Economics contribution. This publication has been prepared by HSBC Bank plc (“HBEU”) which is part of the HSBC Group. It is intended for information purposes only and is not intended for further distribution whether through the press or via other means. Nothing in this publication constitutes or is to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell the securities or other investment products mentioned in it and/or to participate in any trading strategy. Information in this publication is general and should not be construed as investment advice or guidance as it has been prepared without taking account of the objectives, financial situation or needs of any particular investor. Investors should, accordingly, before acting on any information contained herein, consider the appropriateness of the information having regard to their objectives, financial situation and needs and should, if necessary, seek professional investment and/or tax advice. Certain investment products mentioned in this publication may not be eligible for sale in some countries or territories and may not be suitable for all types of investors. Investors should consult with their HSBC representative regarding the suitability of any investment products mentioned taking into account their specific investment objectives, financial situation and/or particular needs before making a commitment to purchase any investment products. The value of and the income produced by investment products mentioned in this publication may fluctuate so an investor may get back less than originally invested. Certain high-volatility investments can be subject to sudden and/or large falls in value that could equal or exceed the amount invested. Value and income from investment products may be adversely affected by exchange rates, interest rates, or other factors. Past performance of a particular investment product is not indicative of future results. When an investment is denominated in a currency other than the local currency of an investor, changes in the exchange rates may have an adverse effect on the value, price or income of that investment. Where there is no recognised market for an investment, it may be difficult for an investor to sell the investment or to obtain reliable information about its value or the extent of the risk associated with it. This publication may contain forward-looking statements which are, by their nature, subject to significant risks and uncertainties. Any such statements are projections and are used for illustration purpose only. Customers are reminded that there can be no assurance that economic conditions described herein will remain in the future. Actual results may differ materially from the forecasts and/or estimates. No assurance is given that expectations reflected in any forward-looking statements will prove to have been correct or come to fruition, and you are cautioned not to place undue reliance on such statements. No obligation IS undertaken to publicly update or revise any forward-looking statements contained in this publication or in any other related publication whether as a result of new information, future events or otherwise. This publication is distributed by HBEU, its affiliates and its associated entities (together, the “HBEU entities”) to their customers. No HBEU entity is responsible for any loss, damage or other consequence of any kind that may be incurred or suffered as a result of, arising from, or relating to any use or reliance on this publication. No HBEU entity gives any guarantee as to the accuracy, timeliness or completeness of this publication. Whether, or in what time frame, an update of any information contained herein will be published is not determined in advance. You should consult your own professional advisor if you have any questions regarding the content of this publication.

BIRMING HAM EC ON OMIC RE VIEW 2023

HBEU entities and their respective officers and/or employees may have interests in any products referred to in this publication by acting in various roles including as distributor, holder of principal positions, adviser or lender. HBEU entities and their respective officers and employees may receive fees, brokerage or commissions for acting in those capacities. In addition, HBEU entities and their respective officers and/or employees may buy or sell products as principal or agent and may effect transactions which are not consistent with the information set out in this publication.5

Additional disclosures 1. This publication is dated as at 28 September 2023. 2. All market data included in this publication is dated as at close 27 September 2023, unless a different date and/or a specific time of day is indicated in the publication. 3. HBEU has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its research business. HBEU’s analysts and its other staff who are involved in the preparation and dissemination of research operate and have a management reporting line independent of HBEU’s investment business. Information barrier procedures are in place between the investment banking, principal trading and research businesses to ensure that any confidential and/or price sensitive information is handled in an appropriate manner. 4. Recipients of this publication are not permitted to use, for reference, any data in this publication for the purpose of (i) determining the interest payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the price at which a financial instrument may be bought, sold, traded or redeemed, or the value

Disclaimer Africa: 1 In South Africa, this publication is distributed through HBEU’s registered branch in South Africa being HSBC Bank plc Johannesburg Branch, Registration Number 2003/004613/10 (Financial Services Provider Number: 43940) of 1 Mutual Place, 107 Rivonia Road, Sandton, 2196. Americas: 1 In Bermuda, this publication is distributed by HSBC Bank Bermuda Limited of 37 Front Street, Hamilton, Bermuda, which is licensed to conduct Banking and Investment Business by the Bermuda Monetary Authority. 2 In the United States, this document is distributed by HSBC Securities (USA) Inc. ("HSI") to its customers. HSI is a member of the HSBC Group, the NYSE and FINRA. 3 In Canada, this material is distributed by HSBC Bank Canada and its affiliates. Asia Pacific: 1 In Australia, this publication has been distributed by HSBC Bank Australia Limited (ABN 48 006434 162, AFSL No. 232595) only, for the general information of its clients. Any reference in this publication to other HSBC Group entities shall not be taken to mean that such entities has a presence in or are licensed in Australia, or that such entities are offering to do business and/or enter into transactions with persons located in Australia. 2 In Bangladesh, this publication is distributed by The Hongkong and Shanghai Banking Corporation Limited (“HBAP”), Bangladesh branch. 3 In mainland China, this publication is distributed by HSBC Bank (China) Company Limited (“HBCN”) to its customers. 4 In Hong Kong, this publication is distributed by HBAP to its customers for general reference and information purposes only. 5 In India, this publication is distributed by HBAP, India branch, to its customers for general reference and information purposes only.

BIRMING HAM EC ON OMIC RE VIEW 2023

6 In New Zealand, this publication is distributed by HBAP, incorporated in the Hong Kong SAR, acting through its New Zealand branch. 7 In Singapore, this publication is distributed by HBAP, Singapore branch (“HBAP, Singapore branch”) to institutional investors or other persons specified in Sections 274 and 304 of the Securities and Futures Act (Chapter 289) (“SFA”) and accredited investors and other persons in accordance with the conditions specified in Sections 275 and 305 of the SFA. For recipients which are not institutional investors, accredited investors or expert investors as defined in the SFA, this is distributed pursuant to Regulation 32C of the Financial Advisers Regulations (“FAR”). HBAP, Singapore branch, accepts legal responsibility for the contents of the publication pursuant to Regulation 32C(1)(d) of the FAR. This publication is not a prospectus as defined in the SFA. HBAP, Singapore branch, is regulated by the Monetary Authority of Singapore. Recipients should contact an HBAP, Singapore branch representative in respect of any matters arising from or in connection with this publication and refer to the contact details at www.business.hsbc.com.sg. 8 In Sri Lanka, this publication is distributed by HBAP, Sri Lanka branch to its customers. Europe: 1 For clients of HSBC Continental Europe and HSBC Continental Europe branches, this publication is distributed by HSBC Continental Europe. HSBC Continental Europe is an « Etablissement de crédit et prestataire de services d’investissement» authorized by the « Autorité de Contrôle Prudentiel et de Résolution » (ACPR) and the European Central Bank (ECB). It is regulated by the « Autorité des Marchés Financiers » (AMF), the ACPR and the ECB. 2 In Malta, this publication is distributed by HBEU and is being made accessible to customers of HSBC Bank Malta p.l.c. (“HBMT”). HBMT is registered in Malta with company number C-3177 and is licenced to conduct investment business by the Malta Financial Services Authority. 3 In Switzerland this publication is distributed by HBEU to its customers. 4 In the UK and CIIOM, this publication is distributed by HBEU to its customers and by HSBC Bank UK plc (“HBUK”) to its customers. HBEU is registered in England and Wales (company number: 14259), registered office: 8 Canada Square, London, E14 5HQ, UK. HBUK is registered in England and Wales (company number: 09928412), registered office: 1 Centenary Square, Birmingham B1 1HQ, UK. HBEU is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 114216). HBUK is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 765112). Middle East: 1 In Algeria, Bahrain, Kuwait, Qatar, the United Arab Emirates (the “UAE”) and the Dubai International Financial Centre (the “DIFC”), this publication is distributed by HSBC Bank Middle East Limited (“HBME”) to its customers. HBME is registered in the DIFC with company registration number 2199 and its registered office at Level 1, Building No. 8, Gate Village, DIFC, PO Box 66, Dubai, DIFC and is lead regulated by the Dubai Financial Services Authority. HBME operates in Algeria through its Algeria branch at Algeria Business Center, Pins Maritimes, El Mohammadia, 16212 Algiers, Algeria (commercial licence number: 07 C 0974997), which is regulated by the Central Bank of Algeria (Banque d’Algérie) and lead regulated by the DFSA. HBME operates in Bahrain through its branch at PO Box 57, Building 2505, Road 2832, Seef 428, Manama, Kingdom of Bahrain (commercial registration number 330-1), which is regulated by the Central Bank of Bahrain and lead regulated by the DFSA. HBME operates in Kuwait through its branch at Kharafi Tower, Qibla Area, Hamad Al-Saqr Street, PO Box 1683, Safat 13017, Kuwait (Ministry of Commerce and Industry branch licence number SP2005/4), which is regulated by the Central Bank of Kuwait, the Capital Markets Authority for licenced Securities Activities and lead regulated by the DFSA. HBME operates in Qatar through its branch at PO Box 57, Doha, Qatar (trade licence number 6374), which is regulated by the Qatar Central Bank and lead regulated by the DFSA. HBME operates in Dubai through its branch at HSBC Tower, Downtown, PO Box 66, Dubai, UAE (Chamber of Commerce and Industry branch licence number 617987), which is regulated by the Central Bank of the UAE and lead regulated by the DFSA. 2 In Egypt, this publication is distributed by HSBC Bank Egypt SAE to its customers. HSBC Bank SAE is registered in Egypt (commercial registration number: 218992) with registered office: 306 Cornish El Niel, HSBC Bank Egypt SAE, Maadi, Cairo, Egypt. Regulated by the Central Bank of Egypt. 3 In Turkey, this publication is distributed by HSBC Bank A.S. to its customers.

BIRMING HAM EC ON OMIC RE VIEW 2023

HSBC Bank A.S. is registered in Turkey (commercial register number 268376) with registered office: Esentepe Mah. Büyükdere Cad. No. 128, Şişli 34394, Istanbul, Turkey. Regulated by the Banking Regulatory and Supervisory Agency. 4 In Oman, this publication is distributed by HSBC Bank Oman SAOG to its customers. HSBC Bank Oman SAOG is registered in Oman (commercial registration number: 1/08084/9) with registered office: Head Office Building, PO Box 1727, Seeb, PC 111, Sultanate of Oman. Regulated by the Central Bank of Oman and the Capital Market Authority of Oman. 5 In the Kingdom of Saudi Arabia, this publication is distributed by The Saudi British Bank to its customers. The Saudi British Bank is registered in the Kingdom of Saudi Arabia (commercial registration number: 1010025779), registered office: Head Office, PO Box 9084, Riyadh 11413, Kingdom of Saudi Arabia. Regulated by the Saudi Arabian Monetary Authority. © Copyright 2023. HSBC Bank plc, ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, whether electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of HSBC Bank plc.

BIRMING HAM EC ON OMIC RE VIEW 2023

EMI LY STUBBS

Senior Policy and Projects Manager Greater Birmingham Chambers of Commerce E.Stubbs@birmingham-chamber.com

ALICE PUGH

Policy and Data Analyst City-REDI, University of Birmingham A.Pugh@bham.ac.uk