Midlands is losing £20bn in lost productivity every year

The Midlands has one of the lowest levels of productivity in the UK, leading to a potential loss of up to £20 billion to the region each year, a new report shows.

Productivity in the Midlands was 20 per cent below the South East and 7.5 per cent below the East of England. Only the North East, Yorkshire and Humber, Wales, and Northern Ireland were less productive.

And parts of the region – including Birmingham, Stoke-on-Trent, and Derby – are at risk of falling even further behind as productivity is growing more slowly than the UK average (see chart below).

The findings are published in a new paper, The Midlands Productivity Challenge, by research group The Productivity Institute.

Nigel Driffield, Professor of International Business and Deputy Pro Vice Chancellor at Warwick Business School and author of the report, said: “The Midlands lies at the heart of the UK.

“Historically it has been known for manufacturing and it still boasts a number of global brands including Jaguar Land Rover, Rolls Royce, and Bombardier.

“All the indicators point to the fact that the region’s productivity should be better than it is. But too many opportunities to increase productivity have been missed in past decades."

The Midlands forms a significant part of the UK economy with 10.7 million people (similar to Sweden), 5.1 million jobs across 435,000 active businesses and an economic output of £258 billion in 2019.

However, the hourly output of £31.27 in the West Midlands and £30.44 in the East Midlands was well below the UK average of £35.41.

Bridging that gap would generate an extra £20 billion for the Midlands economy each year.

The Productivity Institute is a UK-wide research project to pinpoint the causes of stagnation in the economy and focus on laying the foundations for a new era of sustained and inclusive productivity growth that will improve standards of living across the country.

Its new report highlights a number of key challenges the Midlands economy faces, including too many poor-quality jobs, insufficient skilled workers, and a lack of investment in Research and Development (R&D).

Professor Driffield said: “There have been some encouraging signs of progress. For example, the Midlands has performed relatively well on export growth over the past decade.

“However, this success is driven by a few sectors, such as advanced manufacturing.

“With the exception of Birmingham, the region’s cities are small by global standards and are not well connected with each other. The Midlands urgently needs to develop a more cohesive strategy and collective identity if the region is to fulfil its potential over the coming years.”

For the 'The Midlands’ Productivity Challenge: Exploring the issues' report click here. For an executive summary of the report click here.

Nigel Driffield is Professor of International Business and teaches Law and the International Business Environment on the Undergraduate programme.

Follow Nigel Driffield on Twitter @nigel_driffield.

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