A great truism of British politics is that things rarely turn out to be as bad as most people think they will be.
So-called experts who make money by predicting trends spent most of 2010 issuing dire warnings about a total collapse in the housing market and a double-dip recession pushing unemployment up to four million.
Thankfully, neither outcome looks likely now although the weakened state of the West Midlands economy must not be under-estimated.
While the impact of Government spending cuts will be severely felt across the public sector over the next four years, with the loss of thousands of jobs, it is reasonably safe to assume that warnings of the end of local government as we know it are more than a little exaggerated. Yes, the cuts will hurt, but reducing costs by about seven per cent a year is pretty much in line with the kind of financial constraints the private sector has been working under for some time.
It should be foolish to suggest that this country is out of its debt horror yet, but it is clear that firm steps have been taken by the coalition Government to balance the books as quickly as possible, rather too quickly for the liking of some.
Whether the dash to cut spending actually hampers the recover, as the Labour Party suggests it will do, remains to be seen. It is interesting however that the financial markets are beginning to talk about an equities-driven recovery, with money starting to pile into the stock market.
The final quarterly economic survey for 2010 by Birmingham Chamber of Commerce contains a fascinating mixture of good and bad news. On the plus side, ‘soft’ industries are leading the city’s economic fight-back including media and marketing, the service sector, retail, wholesaling, tourism and financial services. On the down side, manufacturing continues to struggle with sales and orders down.
The Chamber sees this as an example of new industries becoming the “economic champions” for Birmingham, which is correct as far as it goes. Call us old fashioned, but we worry about the sustainability of an economy that relies more and more on a service sector boom and less and less on creating wealth by making things.
Read in conjunction with research by the West Midlands Observatory, the Chamber’s report makes gloomier reading. It is well documented that a serious skills shortage is hampering this region’s recovery, with a lack of available labour in precisely the fast-growing IT, medical, business and professional services sectors said to be leading the economic revival.
Tens of thousands of jobs have disappeared from manufacturing since 1995, but nowhere near an equivalent number have been created elsewhere. Millions of pounds of Government and council investment in improving workforce skills appears to have had little in the way of a positive impact.
One of the Government’s major challenges for 2011, if it is serious about spreading prosperity to the regions, is to put some flesh on the bones of Local Enterprise Partnerships by giving these bodies budgets and powers to drive forward economic regeneration.
At the moment, the Birmingham-Solihull LEP is in danger of resembling the one thing that the business sector does not want – a toothless talking shop. Business Secretary Vince Cable has been urged to give LEPs some teeth, but the silence on his part is deafening. Dr Cable must respond quickly, if the LEP’s private sector partners are to be kept on board.