The Midlands has been the engine room of the UK for centuries: from metal working and coal mines through to manufacturing and cutting-edge culture. Its location, natural resources and skilled workforce have resulted in a dynamic and vibrant economy.
Comprising the East Midlands and West Midlands, the region still has the highest concentration of manufacturers in the UK, with several historic and influential cities such as Birmingham, Coventry, Leicester and Nottingham at its heart.
Economic history
Birmingham established itself at the centre of the UK’s industrial heartland in the 18th century. Local coal and iron ore reserves enabled the metal industry to flourish, with the developing canal network acting as the catalyst for distribution of raw materials and finished goods. Once known as the city of a thousand trades, in the 20th century Birmingham became a hub for the automotive, mechanical and electrical engineering sectors. Manufacturing began to decline from the 1970s as the city developed a burgeoning service and cultural economy.
Parts of the West Midlands are known as the Black Country due to the working of thick coal seams and all the smoke produced from the thousands of ironworks during the Industrial Revolution. Factories producing train stock in Derby played a key role in railways sweeping the nation, Leicester boasted a booming textile industry and world-famous bicycles are still made in Nottingham.
Current Economy
The Midlands (East and West combined) accounts for 13% of total UK GDP with the focus now on a new, green revolution with a drive towards digital innovation. The West Midlands is leading the way for autonomous vehicles and 5G whilst the food, aeronautical and automotive manufacturing sectors continue to grow in the East Midlands.
Birmingham has enjoyed one of the country’s fastest economic recoveries from the pandemic according to the Financial Times, and has ambitious plans for further growth. Metro Mayor for the West Midlands Andy Street says it’s the leveraging of pre-existing economic clusters – such as financial services or health and med-tech – that will help the West Midlands regain its position as the fastest-growing region outside of London.
In the manufacturing sector, there’s evidence that companies are also optimistic about the future. According to Make UK and PwC’s Executive Survey 2024, the majority of Britain’s manufacturers (52.7%) are now viewing the UK as a more competitive place to locate their activities – up 21 percentage points from last year. And they’re planning to back this belief with investment, expansion and increased use of new digital technologies.
Furthermore, the East Midlands is poised to vote for its first-ever regional mayor in May, creating a new Combined County Authority that will have the remit to earmark a share of £4 billion of funding to invest in jobs and economic development.
Economic outlook
There’s evidence of a growth mindset in the Midland’s SME community, according to new research from Capify.
Despite well documented headwinds in the form of stubborn inflation, access to skilled labour and cash flow challenges, over 70% of respondents based in the Midlands cited expansion as their main ambition for 2024
Capify’s Q4 2023 Business Confidence Survey canvassed the opinions of SME owners across the region and found almost half (45%) of respondents expected growth of over 10% compared with 2023. Similarly, less than one in 10 SME owners reported their Q4 turnover had reduced compared with the previous quarter
This confidence is mirrored in other independent research. Almost three quarters of Black Country businesses believe their turnover will improve in the next 12 months despite the economic challenges they face, according to the Q4 2023 economic survey by the Black Country Chamber of Commerce. Likewise, the East Midlands Chamber reports that 56% of respondents in its Q4 survey also expect turnover to improve. However, it also points out that over a quarter (27%) expect profitability to fall through 2024. Indeed, Grant Thornton’s Business Outlook Tracker, which monitors mid-market business sentiment nationwide, shows that 18% of respondents were pessimistic about revenue growth – the highest level recorded in three years.
Capify’s research also showed that over a third of the businesses surveyed reported sales “well behind target” in Q4 2023 – with over 70% saying that rising costs and inflation have kept them awake at night.
“Our Business Confidence Survey really highlights the challenges that SMEs are facing as they work harder than ever to grow and innovate in tough economic times,” said John Rozenbroek, COO/CFO at Capify. “And it’s not just macro-economic factors at play. Over half of our respondents told us they’re owed over £100,000 in unpaid invoices. The Midlands is at the heart of the UK economy but the SMEs underpinning that success cannot be expected to shoulder all the risk without support.”
You can find out more about how Capify can help your business make the most of the growth opportunities in 2024 and see how much you might be eligible to borrow by clicking here. Alternatively, you can speak to one of our advisors on 0800 151 0980.
