In the 1960s, the UK had what some of the press referred to as a “Birmingham problem”. The city was too big, it was creating too many jobs, too many people lived there, and too many more people wanted to live there.
“The five counties in and around Birmingham lie at the strategic heart of manufacturing Britain,” said the now-defunct Statist magazine. They have the “fastest rate of population growth and the highest ratio of working population to total population in the UK . . . they help to underpin the whole nation’s economy by their output of capital goods, their direct exports and their supplies of products and work to other regions.”
Average wages were higher in Birmingham than in London. This sounds impressive, but to the government of the day, the intense concentration of commerce and wealth was considered to be a very bad thing.
It caused housing problems (a study in the early 1960s suggested that more than 500,000 people needed to be “decanted” from the region to prevent overcrowding); it meant the area was always “chronically short of labour”; and it created endless rows about slum clearances, housing policy and the value of Birmingham’s proposed greenbelt. So instead of nurturing Birmingham’s brilliance, the UK’s increasingly centralised state made it share: between 1945 and 1963 “some 200 industrial firms or projects had been steered out of the region” to “parts of Britain with labour to spare”. They took 100,000 jobs with them.
What was really needed, or so a departmental study group for the West Midlands suggested, was a way to build new towns away from Birmingham and to “persuade industry to conform and provide a sufficient number of jobs in these outlying areas”. In the meantime, wrote JE Dolby, general manager of Northampton Town and County, in 1964, “new industry is not encouraged”.
This was a policy that Birmingham’s leaders would come to regret. The once-great city fell into a nasty decline in the 1970s as the unions grew rather too powerful, industries shifted to other locations, and the car industry imploded. Two hundred thousand jobs were lost and unemployment rose from effectively zero to close to 20%.
In a couple of decades Birmingham had turned from being the strategic heart of a fast-growing Britain to being an unfashionable, unloved and largely ignored symbol of its industrial failure.
The good news is that the story doesn’t end there – things are changing again in Birmingham. HSBC announced a few months ago that it is to move its head office for its retail and business lending operation, and 1,000 of its staff, from London to Birmingham. Deutsche Bank has also expanded its operations in Birmingham: it now has 1,500 people based there, in both front- and back-office capacities.
A global survey of 300 cities by Jones Lang LaSalle put Birmingham at number 53 for foreign direct investment. PwC ranks it as the sixth-best city in Europe for investment — ahead of London.
A survey at the start of this year showed 46% of West Midlands firms reporting rises in output, and 34% reporting rising orders. That may explain why the city is showing the highest growth in manufacturing and technology jobs in the UK outside London.
As George Osborne noted in his Budget in March, a job is created in the Midlands every ten minutes. It might go some way to explaining why Birmingham was the top regional city for people in their 30s leaving London in 2014 – more chose Birmingham than chose Bristol.
So what’s bringing Birmingham back? One reason is that the extreme cost of living in London has reminded everyone just how close Birmingham is to the capital (100 miles) and how much cheaper it is to set up shop outside London. Jan Thompson, of commercial estate agent Jones Lang LaSalle, notes that setting up in Birmingham will have cost Deutsche only 55-60% of what it would have cost in London, while the bank’s head in Birmingham talks of the ease of transport between the cities and of the “lively and exciting” lifestyles Birmingham would offer their staff.
Birmingham also has one of the youngest, most highly qualified and most diverse workforces in the UK, and a development policy that seeks to work with rather than against business, says Thompson.
The universities are working together to put a “strong sales pitch” to students and employers; and since 2010, Birmingham’s 20-year Big City Plan has produced a pretty good infrastructure programme.
The airport has been extended and direct flights to China (the only ones outside London) began in July last year. The Midland Metro is being expanded. New Street station is to get a vast new atrium. And if HS2 goes ahead — note that its headquarters is located in Birmingham — you will be able to travel from London to Birmingham in 49 minutes. That, for reference, will make the journey 15 minutes faster than the trip from London to Winchester.
Pippa Malmgren, author of Signals: The Breakdown of the Social Contract and the Rise of Geopolitics, reckons the Midlands is the most exciting place in the UK at the moment, for the same reason she reckons the Midwest is the most exciting place in the US. Firms are “reshoring”, bringing their manufacturing home to take advantage of falling prices, high-quality labour, new manufacturing processes, easy logistics and, in the US at least, cheap energy.
All investors, says Malmgren, should be watching these areas “very closely”. When you think Midwest or Midlands, you no longer think “manufacturing and innovation” — but you should.
She points me to a report from Bank of America Merrill Lynch last year, which states: “New manufacturing plants are popping up all over the US, but the Midwest is the place to be.” The bank cites 70 firms that have reshored there, and a mere 39 that have headed to the west.
I thought of that a few weeks ago at a conference in London for small British businesses: almost everyone I met, setting up a new business in the UK, manufactures in the UK too. One example is a tiny firm called Kmossed, which makes rather gorgeous silk scarves. I assumed they’d be manufacturing in China or in Italy. But no – the scarves are digitally printed in the Midlands, because “the price is right and the quality is amazing.”
Thompson thinks the reshoring story might be a little “over-egged”. I’m not so sure. A survey in 2013 showed that almost a third of senior decision makers from the British manufacturing industry planned “to source more components from UK companies over the next five years”, and a few hours with the Birmingham Post business pages will soon convince you that reshoring is real.
Once convinced, what do you do? Bar setting up your own manufacturing firm to take advantage of all the benefits, it is probably worth looking at the property market. All those London escapees will be looking too, and Thompson tells me that Chinese buyers are also plentiful: as far as many of them are concerned, anywhere an hour’s train ride from London is effectively a suburb of the UK capital, so on that reckoning, Birmingham itself is something of a bargain.
It’s worth remembering that one of the reasons London is so expensive is that investors from less financially and politically stable places than ours use it as a safety deposit box for their money. But not everyone wanting to protect their wealth is filthy rich: for moderately affluent foreign buyers, whose ranks are swelling fast around the world, Britain’s second city offers the same property rights at a rather lower price.
Albert Bore, leader of Birmingham city council, says he is “determined not to repeat” the mistakes London has made — allowing “rampant house price growth” to force an “exodus of young people” from the city. But even with his hefty development plans, estate agent Knight Frank reckons there will be a shortage of supply over the next five years, something that isn’t really being reflected in the market. Prices bottomed in London more than six years ago and are up more than 50% since. Those in Birmingham bottomed around the same time but have risen only 10% since (an average of £13,000 versus an average of £144,000 in London).
Where to look? I suspect the red-brick warehouses being converted to supercool housing in the Jewellery Quarter might be the answer: £390,000 gets you a wonderful three-bedroom, warehouse-style town house. Move on a bit and £925,000 gets you a huge Grade II-listed Georgian town house (the type Deutsche folk will fancy) a mile from New Street Station. And the very best houses I can find in and around the city top out at less than £2m (think 7,000 square feet, eight bedrooms and an orangery). That’s the cost of a tiny four-bed terrace in Fulham. No wonder everyone’s moving in. JE Dolby would be horrified.
- This article was first published in the Financial Times