The West Midlands and Its Suitability for Business Relocation - Assignment Example

THE WEST MIDLANDS AND ITS SUITABILITY FOR BUSINESS RELOCATION The WEST MIDLANDS Comprised of seven progressive districts -- Birmingham, Coventry, Dudley, Sandwell, Solihull, Waisal, and Wolverhampton -- the West Midlands has undergone numerous significant transformations over the last thirty years. Recession and global competition in the 1970s and early 1980s brought a re-assessment of the region's position and the shift of its economic foundations. With an area of 13,000 square kilometers, a population of 5.26 million (as of 2004) and GDP of 65 billion, the region is now ranked as the fifth most productive of the nine English regions, with an economy robustly driven by innovation, knowledge and service. The region has long been established as the leading European zone for attracting private investment. In fact, at present it is UK's most successful region for attracting foreign direct investment, and is among the top five in Europe. The West Midlands is the address of nearly 2,000 overseas companies from 34 different nations, employing roughly 9% of the region's workforce - nearly a quarter of a million people. Birmingham itself can boast of almost 300 overseas companies, which employ over 36,000 people. International and famous companies based in the West Midlands include Peugeot, Ford, BMW, Fujitsu, Oracle, Gap, Denso, IBM, NEC and Johnson Controls. Current Economic Scenario A little over the last ten years, the West Midlands experienced real economic growth with GDP increasing by around 29%, an additional 240,000 people in employment, a fall in unemployment rates from 12.1% to below 8% (2000), economic activity rate at par with the rest of the country, an employment rate of around 74% (1998-1999 to 2003), higher than the national rate at the start of the three year period (1998-99) and a higher percentage of employees in high technology sectors than the national average in 2000 (Mitra, 2001). Key Regional Economic Indicators Despite noticeable indicators of development and progress, the West Midlands maintains its status of an under-achieving region. It has under-performed in almost all major areas judging by the economic indicators, if overall performance in the UK is used as a standard. Gross Domestic Product (GDP) per head in 1999 was 6% below the national average in spite of an increase of nearly 2% from 1998. On the Index of Local Deprivation, the West Midlands has two districts in the top 10 and 6 in the top 50 most deprived areas. In 1997, likewise, the West Midlands had the second lowest manufacturing productivity levels. Gross Value Added per GDP per head has stayed around 6% below the national average throughout the 1990s. Since 1990, unemployment rates have remained above the national average. Finally, the number of VAT- registered businesses has fallen faster than the national average. Compared to EU regions similar to the West Midlands (using the GVA metric), the latter is at par with most other regions and slightly below Bourgogne (France). SMEs in the West Midlands Economy With statistical trends elsewhere, small and medium sized enterprises (SMEs) constitute the largest share of all enterprises in the West Midlands. The region is composed of small firms, which would imply that small business activity is characteristic of the region's business and economic scenario. The sectoral spread of the firms portray the profile of the region with its mix of traditional industrial ands agricultural activities, combined with business and financial services. Reflecting overall national patterns, and indeed that of the West Midlands region, no one sub-region has more than two sectors with greater than 20% of the business sites in those sectors. Potential Sources of Support Across the region, Advantage West Midlands is setting up a variety of strategies and business support programmes aimed at motivating and promoting wealth creation and the diversification of the region's economy. Working in alliance with other organisations, the objective is to provide the business support required by SMEs, middle market businesses and large corporations so that they can develop their full potential. For manufacturers, there are two principal methods of business support; one is the Specialist Manufacturing Advice and Assistance Service which provides support in improving any and all aspects of manufacturing operations, processes, and production or materials technologies. The second one is the General Business Support for Manufacturers Service, specifically the Business Links group, which offers general non-technical manufacturing business support, advice and information to all business sectors covering areas such as sales and marketing, international trade, finance and grants, employment, IT and e-commerce and any other business related matters. Both of these support groups provide manufacturers with not just direct assistance but will also give suggestions and assist them towards other key business support schemes that includes: Accelerate - established to modernise the automotive supply chain, this programme offers a number of opportunities to West Midlands companies involved in the automotive sector, including development and capital grants, supply chain involvement programmes, management and workforce development, technology transfer centres and supply chain networks. Diversification - the said programme assist West Midlands entrepreneurs who are looking forward to diversify and generate new products, services, markets or new market sectors. Cluster Development - focusing on 13 priority clusters for the West Midlands, these have been chosen on the basis of their current strength in the region and their potential to create jobs and future economic growth. These include Automotive, Rail, Aerospace, Building Technologies, Food and Drink, Tourism and Leisure, High-Value-Added Consumer Products, Manufacturing Development, Specialist Business and Professional Services, ICT, Environmental Technologies, Screen Image and Sound, and Medical Technologies. Each of these clusters has developed a three year Business Plan for 2005-2008 which sets a vision and a clear strategy for their respective clusters, together with a programme and a set of specific and realistic actions for implementation. Every plan encourages businesses to collaborate and exploit strategic opportunities; it sets out projects and initiatives which will deliver the necessary changes and also aims to influence other regional organisations to direct resources to the same areas. These cluster plans are initiated and driven by the private sector and are demand - led. High Technology Corridors - this method is one of the means of diversifying the region's business base and making it more resilient to changes in the global economy. Three corridors have been identified in the West Midlands region (Central Technology Belt covering the A34 corridor, Wolverhampton to Telford High Technology Corridor, and the Coventry, Solihull and Warwick triangle), each having a concentration of academic and research institutions, commercial property opportunities and transport infrastructure. The combination of assets means that the corridors have the potential to attract high technology and high-value-added businesses to locate to the West Midlands. This will justify the expansion of world class support infrastructure and in turn attract more technology-led businesses to invest, start-up and grow. Recommended Place and Rationale of Choice (Birmingham) Birmingham is at the heart of UK's transport network and makes it one of the country's most accessible cities. Global links via Birmingham International Airport mean that the city is directly connected to more than 100 destinations on five continents. This has been essential to Birmingham's emergence as the conference capital of Europe and in its success as a commercial centre. Birmingham is still a nationally vital manufacturing centre, with major employers including Cadbury Schwepps in confectionery, and Jaguar, MG Rover and LDV in the automotive sector. In 2002, manufacturing accounted for 16.8% of the city's employment compared to 13.4% in Britain. The city endeavors to diversify and re-invent its manufacturing base through the development of the A38 Hi-technology Corridor, which will link the research expertise of its universities to the development of emerging industries that will power the global economy of the future. Since the 1980s, unemployment in Birmingham has shrunk significantly, but is still higher than the national average because of the legacy of low qualification levels in some deprived areas of the city. Recent employment growth has been in highly qualified occupations and so the continuing challenge for Birmingham is to improve the qualification levels of residents, so that the entire city's communities benefit from the forecast growth in jobs over the next decade. Economic Indicators of Birmingham Principal reasons why Birmingham is a good choice for business relocation Economic Diversity Birmingham has successfully diversified and expanded its services sector, which has caused an upward trajectory in its total employment for the last ten years. Unfortunately, the city has been less successful in diversifying its manufacturing sector into fast growth product markets. This has been a major factor in Birmingham's inability to match national rates of economic and employment growth in the past. A Skilled Workforce The 2001 Population Census revealed that 38.6% of Birmingham residents aged between 16 and 64 did not possess any known qualification. This amounts to 234,000 unqualified people. Of these 56% are workless, which indicates the scale of the drag on the Birmingham economy caused by this skills gap. The good news for the future is that the educational attainment of young people entering the labour force in Birmingham has been improving rapidly. Connectivity This refers to the extent of and ease of communications. In improving connections globally it should be borne in mind that Birmingham Airport is currently the 35th busiest passenger airport in Europe. Strategic Capacity Compared to many European cities, Birmingham has limited strategic capacity in the field of economic development. It has not been given the lead role within its own As the chart illustrates, Birmingham is fortunate to have a large critical mass of these business-to-business enterprises. boundaries, so it has to negotiate programmes with central government departments, the Learning & Skills Council, Business Link and the regional development agency (Advantage West Midlands). However, a positive step in recent years has been the creation of the Birmingham Strategic Partnership. Innovation Successful development of the A38 Hi-technology Corridor would improve Birmingham's innovative performance. (Expenditure on Research and Development by Region and Province) Source: Office for National Statistics, 2001 Quality of Life Birmingham has put great effort into improving the quality of the public environment with an extension of the range in leisure, shopping and other cultural amenities. It has encouraged the building of homes in the City Centre to allow young professionals to be residents and add to the vitality of Birmingham's the cultural life. These positive trends will continue into the future. It should be noted that Birmingham is really only in the early stages of an "economic revival" process that may spread over decades. The successful implementation of the long-term development plans for the city will be accompanied with an increase in Birmingham's role as a European economic centre. Economic Forecasts for Birmingham and West Midlands References / Readings Mitra, J. (2001). "Technology, information, Innovation and Learning Transfer for a Knowledge Creating Region - Project Progress Report." Enterprise Research and Development Centre, UCE Business School, Birmingham, UK. Birmingham Economic Information Centre, www.birminghameconomy.org.uk Office for National Statistics. (2005). Annual business inquiry: Gross value added by SIC division and government office region 1998-2002 West Midlands Regional Observatory (2005). Manufacturing Skills Profile West Midlands Regional Observatory (2005). Construction Skills Profile GoSkills Sector Skills Council (2004). Market Assessment West Midlands Regional Observatory (2005). Professional & Financial Services Skills Profile Office for National Statistics (2003). Annual Business Inquiry West Midlands Regional Observatory (2005) Retail & Distribution Skills Profile West Midlands Regional Observatory, 2005. Real lives real issues: A state of the region report update Curran J. (2000). "What is small business policy in the UK for Evaluation and assessment of small business policies." International Small Business Journal, 18, 3, pp. 36-50. Curran, J. & Blackburn, R. A. (1994). Small firms and local networks: The death of the local economy London: Chapman http://www.mas-wm.org.uk/ http://www.businesslink.gov.uk/ http://www.accelerate.uk.net/ Read More