The West Midlands has more unskilled workers than anywhere else in England, the worst record for business innovation and an economy which underperforms by #10 billion a year – according to a Government body's blunt assessment.

The depressing analysis comes from regional development agency Advantage West Midlands, which spends #300 million a year attempting to create jobs and boost competitiveness.

AWM officials, who are conducting a three-year review of the regional economic strategy, say that fewer firms engage in innovative activity in the West Midlands than anywhere else in the country and that the number of business start-ups is below the UK average.

John Edwards, AWM chief executive, believes that the region's "deeply ingrained competitive instincts" is contributing to the poor performance.

He said the failure to work together as a team was holding the region back. Mr Edwards added: "I sometimes think that our competitive instincts are so deeply ingrained that almost despite ourselves, we cannot resist those competitive pressures of city against city, rural against urban, university against university, business against business.

"The last thing I want to see is for this competition to stop. It shows the strength of desire and the passion to succeed of our people. But sometimes teamworking can achieve more.

"Playing beggar my neighbour sometimes means we lose out to the real competition in the global economy."

Briefing papers produced by AWM suggest that significant skills gaps in key West Midlands service sectors are forecast to grow over the next decade. Manufacturing jobs are disappearing, a lower than average proportion of residents are qualified to degree level and the working age population is projected to shrink over the next decade – with demand for employment eventually outstripping supply.

Female and ethnic minority entrepreneurs are under-represented, while about 15 per cent of people in the region live in housing that is unfit or in disrepair.

Every person in the region could be up to #2,000 a year better off if the economy performed in line with the national average, according to AWM.

Mr Edwards wants the new economic strategy to put the West Midlands on a par with the best performing English regions.

He said: "We are not improving fast enough to bridge the gap between the West Midlands and the UK average. We have to, together, deliver change.

"When we do come together we can deliver that change.

"Those of us impatient with the pace of reform need to spend less time debating how to divide the regional cake differently, and put more effort into making the most of every penny we already have. By working as a team," Mr Edwards added.

* The latest stage of the economic strategy public consultation comes to Birmingham this Thursday. More than 120 people are coming to the event at Birmingham University to debate the key issues with an expert panel.