From productivity to prosperity: Inclusive growth for the West Midlands

Lead Research Organisation: University of Warwick
Department Name: Warwick Business School

Abstract

We will bring together academics working across disciplines to focus on the cross-cutting themes of skills, management, investment, regional supply chains, innovation and enterprise, to address the main issues around productivity and the productivity gap. Four experienced academics, two at Warwick (Driffield in WBS and Godsell in WMG), two at Birmingham (Collinson and Green, both in City-REDI) will lead on the four main themes. Both Driffield and Collinson are Deputy Pro-Vice Chancellors leading on regional engagement for their universities and both have been deans of business schools. The theme leaders, together with faculty experts in their respective departments have extensive experience of research partnerships with external stakeholders in the co-production of policy and practice-relevant research. All of the lead faculty are expert advisors on the WMCA 'Productivity and Skills Commission' and this provides an ideal channel for engaged research.

We have a number of partners from both the private and public sector, including Midlands Engine, West Midlands Combined Authority (WMCA), 5 LEPs, private sector firms including Jaguar Land Rover and Aston Martin. The firms mentioned are very skill intensive, with high levels of capital investment and global links to wider value chains through inward investment and exporting, but many of their suppliers are less so. We also have as partners the CBI (building on their recent productivity work), the Chambers of Commerce, TUC and Unite. WMCA have agreed a £150K contribution on top of ESRC contribution from WMCA. The University of Birmingham will contribute £60k matched funding through City-REDI to link this project to on-going work with the WMCA on a place-based industrial strategy for the region.

The impact plan is detailed elsewhere in the application, but involves both deep engagement and bespoke events. We have also discussed this with the new lead for the Productivity Innovation Network, who is confident that our work is both distinct and adds value to their work.

Planned Impact

We have an offer of £150,000 from the West Midlands Combined Authority to jointly fund some of our work .

It should be noted however, that while our impact plan is extensive, we are not seeking ESRC support for this, as it will be funded by Warwick and Birmingham respectively to the tune of some £120K, with £60K from each institution.

At the heart of our bid is the apparent productivity gap between UK regions and our focus is the West Midlands as a reference point for other UK and international regions. As such the main beneficiaries with be UK policy makers at both a local and national level. We will also work closely with private sector partners, including individual firms and sector representatives, to identify specific constraints on productivity growth at the micro-level.
At the time of writing the West Midlands Combined authority is embarking on a Productivity and Skills Commission. Professor Driffield is the lead academic and one of the 4 core members of the board, chaired by Dr Andy Palmer, CEO of Aston Martin. Professors Driffield and Collinson (who are also Deputy PVCs for regional engagement for their respective universities) also have lead roles within the WMCA on developing policies around productivity, inward investment and skills. They jointly advise policymakers at the Midlands Engine level and at the more local GBSLEP level.
Collinson is Director of City-REDI, and this theme will build on recent work, commissioned by the West Midlands Combined Authority (WMCA) which developed the Dynamic Economic Impact Model (DEIM) in a joint project with KPMG. Working with the Productivity and Skills Commission, selected 'flagship' firms and local SMEs City-REDI is now researching industry and firm-level factors that underlie the lower levels of productivity and GVA in the region.
As our WMCA example illustrates, many bodies from BEIS, down through Midlands Engine, Northern Powerhouse, combined authorities and LEPs are currently wrestling with the problem of low productivity. As such, they are keen to engage with our network, and to plus our research findings into their emerging strategies. We are involved in the development and delivery of these strategies now, and this network will greatly amplify our work. Several partners have attested that they are willing to make a financial contribution to this network, and well as contributions in kind, to be discussed if we reach the final phase.
All of these local organisations will be involved in the co-production of knowledge, including the private sector. Our experience in working with users in many settings suggests however, that communication with policy makers and practitioners is much more effective if done face to face, through briefings and presentations (supported up by 1 page summaries) rather than through the circulation of written documents. We will therefore use all of our networks, alongside the other ESRC centres and initiatives, and through BEIS, Innovate UK etc to take advantage of all opportunities. Details of our wider engagement plan is provided in the more extensive impact document.
 
Description A large scale online survey was conducted on 'Mapping the current manufacturing capability in the Midlands region' in Dec 2021 as a part of the project

A large set of supply chain/financial data was collected from Bloomberg to develop the economic measure of supply chain productivity

Findings are :
The effect of having a lep and having one which targets a particular sector has been effective in attracting FDI in that sector.
The capacity of a LEP to attract additional FDI (over and above what would have happened without its investment promotion strategy) is larger where the LEP is actively targeting 'new' sectors i.e. sectors where the area has not 'historically' received above-average investments flows
Inward investment in a LEP region is greater if neighbouring sectiors are not targeting the same sectors.
The fourth paper seeks to explore the nature of the relationship between gains from FDI, FDI motive (building on the theory paper) and the nature of home instituitions.

Supply Chain Productivity Research Highlights
• Prior studies were conducted at different levels (country/sector/firm) to identify the root cause to low productivity, and the recent findings highlight that the misalignment between the country- and firm- level measure significantly inhibits the productivity improvement. Taking a supply chain perspective in improving productivity is key to address the alignment gap.
• Building on the early work on supply chain management, supply chain productivity is defined as 'delivering customer value at the lowest possible cost as a result of maximizing flows and right sizing buffers'.
• It was found that existing operational measures on supply chain productivity (performance) mainly focus on a portion of supply chain (i.e. performance of focal firm/supplier/customer in terms of cost, time and quality). Therefore, a set of operational metrics for measuring supply chain productivity has been developed taking an end-to-end perspective.
• Antecedents of achieving high supply chain productivity were explored through literature review, which the findings highlight that firm capabilities include supply chain integration and planning are key factors.
Exploitation Route A cross-sector (manufacturing, retail, hospitality & professional services) survey was conducted to explore the linkage between supply chain productivity and identified antecedents.
• Preliminary findings of the survey indicated that:
1. Professional services exhibits a different pattern to other sectors in terms of supply chain integration/productivity.
2. The level of supply chain integration was found to be high in manufacturing, retail and hospitality.
3. The level of supply chain productivity was found to be generally low across all sectors.
4. SC productivity can be improved through better effectiveness & efficiency within each single entity in the chain
5. Supply chain planning (practice, capability and supporting technologies) need to be improved to improve supply chain productivity.

Inward Investment

We would also highlight that alongside this project we have done two substantive pieces of work for midlands engine on supply chain productivity https://www.midlandsengine.org/new-supply-chain-research-headlines-latest-observatory-quarterly-economic-briefing/
In addition Driffield was invited to join the Board of the Coventry and Warwickshire LEP, as "economic advisor" and the advisory board of the midlands engine observatory. Both of these are directly related to the outputs for this project.
On the back of the analysis of the west midlands, in inward investment and spillovers, we were approached to do a similar piece of analysis for Northern Ireland. This can be found here: https://www.economy-ni.gov.uk/publications/spillovers-inward-investment-comparison-northern-ireland-rest-uk
More recently, this has in turn led to him being invited to advise on cross border collaboration on maximising spilloers in Ireland, and to advise the Scottish givernmnet on maximising gains from FDI.
Finally Driffield has recently advised the central business district of Birmingham in terms of the post pandemic strategy.
Sectors Other

 
Description Although the nature of our engagement with local stakeholders has changed - from for example discussing drivers of productivity or prosperity, or exploring supply chain productivity, to discussions concerning economic recovery and resilience. In addition to the detailed events that are outlined on the submissions page, Driffield and Godsell have had weekly, or even more frequent meetings on these issues with stakeholders ranging from midlands engine to our local LEPs. In addition Driffield has been an advisor to a BEIS select committee enquiry, and has given evidence to a DiT enquiry on inward investment.
Impact Types Societal,Economic

 
Description Acting as a special advisor to BEIS select committee
Geographic Reach National 
Policy Influence Type Participation in a advisory committee
URL https://committees.parliament.uk/committee/365/business-energy-and-industrial-strategy-committee/new...
 
Description Coventry and warwickshire LEP
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Membership of a guideline committee
Impact The reset strategy was the regions response to covid. A significant contribution was helping policy makers understand the links between sectors - those that "pull" the economy and those that support them
 
Description Future of the central Business District - Birmingham
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Membership of a guideline committee
Impact better understanding of economic development policy and practice by the private sector.
URL https://colmorebusinessdistrict.com/2021/10/colmore-bid-outlines-vision-for-future-business-district...
 
Description Investment, Finance, and Productivity Mapping Workshop
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Influenced training of practitioners or researchers
 
Description Leveraging supply chains to create competitive advantage for the Midlands region:
Geographic Reach National 
Policy Influence Type Influenced training of practitioners or researchers
Impact Better understanding of supply chain resilience in the region
URL https://supplychainresiliencehub.com/wp-content/uploads/2021/07/P3999-Opportunities-and-Challenges-B...
 
Description Midlands Engine Quarterly Briefing
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Influenced training of practitioners or researchers
Impact Briefing to stakeholders on three projects
 
Description Midlands Engine Research parnership
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Membership of a guideline committee
Impact better understanding of the evidence base for the region
URL https://www.midlandsengine.org/sector/global/
 
Description Midlands Engine economic observatory board
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Membership of a guideline committee
Impact Better understanding on what drives inward investment and the links to productivity
URL https://www.midlandsengine.org/observatory/
 
Description Presentation of findings at "sustainable coventry"
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Influenced training of practitioners or researchers
URL https://warwick.ac.uk/research/priorities/sustainable-coventry-warwickshire/october-symposium/
 
Description Regional Growth Opportunities: Building Productivity and Resilience Through Supply Chains
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Influenced training of practitioners or researchers
URL https://blog.bham.ac.uk/cityredi/regional-growth-opportunities-building-productivity-resilience-thro...
 
Description Regional productivity Forum
Geographic Reach National 
Policy Influence Type Influenced training of practitioners or researchers
Impact Geographically, the Midlands lies at the heart of the UK, and has a population of 10.7m people, 435,000 active businesses, 5.1m jobs and an annual economic output of more than £258bn (2019), it forms a significant part of the national economy. Aggregate productivity for West Midlands and East Midlands has been consistently 0 to 15% below the UK average, though the productivity growth performance of the West Midlands has slightly improved relative to that the East Midlands. Historically the Midlands has been known for manufacturing, and still boasts a number of global brands including Toyota and Jaguar Land Rover in automotive, Alliance Medical in medtech, Mondelez in confectionery, Experian in business services, Bombardier and its predecessors in rail engineering, QinetiQ in defence, RollsRoyce in aerospace, and HSBC in fintech with its new UK HQ in central Birmingham. The challenge now is to translate the Midlands' manufacturing heritage into leading positions building on opportunities presented by industrial digitisation, and electric and autonomous vehicles and electrification. The main cities being Birmingham, Coventry and Wolverhampton in the West, and Nottingham, Derby and Leicester in the East. Birmingham and Leicester in particular have relatively young and diverse populations compared with the UK average, and all are very diverse. Higher level qualifications are increasing faster amongst the workforce than the national rate. The West Midlands is the fastest growing UK region for goods exports. FDI projects have almost tripled since 2011/12. If one considers the essential drivers of productivity, such as agglomeration, innovation, connectivity, firm start-ups, and experience effects, these point to the fact that the region's productivity should be better than it is. In order to fully close the productivity gap (i.e. match the UK productivity levels by 2030), the Midlands' productivity performance would need to increase at a rate of more than 2% per year, meaning the region would need to return to (and exceed) productivity growth rates previously seen in the 1980s and 1990s.
URL https://www.productivity.ac.uk/wp-content/uploads/2021/09/TPI-Exec-Summary-Report-Midlands-FINAL-140...
 
Description Reshoring West Midlands
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Contribution to new or Improved professional practice
Impact The mayor wanted to better understand the prospects for reshoring so Prof Godsell and i summarised our research
 
Description Shared Island: 'Cross-border trade in services' and 'Enhancing the attractiveness of the island of Ireland to high-value foreign direct investment'
Geographic Reach Europe 
Policy Influence Type Gave evidence to a government review
Impact Collaboration between NI and RoI on inward investment
URL https://www.esri.ie/events/shared-island-cross-border-trade-in-services-and-enhancing-the-attractive...
 
Description Steering group for OUTWARD FOREIGN DIRECT INVESTMENT: POLICIES TO SUPPORT FIRM INVESTMENT AND MAXIMIZE HOME COUNTRY SUSTAINABLE DEVELOPMENT
Geographic Reach Multiple continents/international 
Policy Influence Type Membership of a guideline committee
Impact In recent years, companies from developing economies have increasingly invested abroad, seeking business opportunities outside their home countries. This is a recent trend, as until the turn of the century firms from developed economies dominated global cross-border direct investment. Because developing economies are the source of these investments, understanding the impact of such outward foreign direct investment (OFDI) on the home economies where these firms are headquartered is of great importance. OFDI can contribute to sustainable developmental outcomes, by generating home country effects which promote trade, employment, upgrading, growth and other aspects of economic development in source economies. Yet, the precise nature and characteristics of OFDI home country effects remain little understood. Moreover, even less is known about the most effective policies and measures governments can introduce to leverage OFDI for sustainable development. As a result, investment policymakers in developing countries have both a limited knowledge about the links between OFDI and home country sustainable development outcomes and remain hesitant to introduce policies to harness OFDI for sustainable development.
URL https://www3.weforum.org/docs/WEF_Outward_FDI_Insight_Report_2022.pdf
 
Description West Midlands Growth company task and finish group on regions value proposition for inward investors
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Membership of a guideline committee
Impact Improvements to the way that the region communicates its vale proposition to potential investors
 
Description evidence to DIT select committee enquiry into inward investment
Geographic Reach National 
Policy Influence Type Participation in a national consultation
Impact Evidence to select committee - published
URL https://committees.parliament.uk/work/903/inward-foreign-direct-investment/publications/written-evid...
 
Description membership of Coventry and Warwickshire Local Enterprise partnership board
Geographic Reach Local/Municipal/Regional 
Policy Influence Type Membership of a guideline committee
Impact The region has continued to do very well on inward investment
URL https://www.businessinnovationmag.co.uk/coventry-warwickshire-among-fastest-growing-lep-regions-for-...
 
Description presentation on productivity and levelling up, APPG enterprise
Geographic Reach National 
Policy Influence Type Participation in a advisory committee
Impact Clearly this relies on the offices of the APPG
 
Description Made Smarter Network+
Amount £3,887,200 (GBP)
Funding ID ES/W007231/1 
Organisation Economic and Social Research Council 
Sector Public
Country United Kingdom
Start 11/2021 
End 12/2024
 
Description The Productivity Institute
Amount £26,621,454 (GBP)
Funding ID ES/V002740/1 
Organisation Economic and Social Research Council 
Sector Public
Country United Kingdom
Start 08/2020 
End 08/2025
 
Description UKRI Interdisciplinary Centre for CircularMetal
Amount £4,437,440 (GBP)
Funding ID EP/V011804/1 
Organisation Engineering and Physical Sciences Research Council (EPSRC) 
Sector Public
Country United Kingdom
Start 01/2021 
End 12/2024
 
Description Collaboration with West Midlands Growth Company 
Organisation West Midlands Growth Company
Country United Kingdom 
Sector Charity/Non Profit 
PI Contribution Analysis of inward investment flows into the region and help with strategy formulation
Collaborator Contribution Provision of data and facilitating private sector contacts
Impact Internal documents for their use in terms of understanding FDI flows
Start Year 2021
 
Description in-depth case studies with Tata Steel and Moveero 
Organisation Tata Steel Europe
Country United Kingdom 
Sector Private 
PI Contribution to look at the improvement of supply chain productivity and sustainability in the real industry context
Collaborator Contribution Review of evidence
Impact commercially sensitive
Start Year 2021
 
Description Current State of Supply Chain Productivity: A Cross-Sector Study Wanrong Zhang, Jan Godsell GRP Event on 11th Jan 2021 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact How can you build a bedrock excellence for productivity? What leadership practices could firms develop to accelerate their journey to Supply Chain Productivity?

In our first webinar of the 2021 series, Professor Jan Godsell, Professor Nigel Driffield and Clive Reynolds will provide reflections on value creation at firm level, what firms could do improve High Performance Working and Productivity and what this means for policy makers.
Year(s) Of Engagement Activity 2020
URL https://warwick.ac.uk/research/priorities/productivity/webinars/productivityuk
 
Description Hosted 'Improving Supply Chain Resilience and Productivity in the Midlands region' Virtual workshops x2 in March 2021 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact workshops ion supply chain productivity - communicating findings to private sector and facilitating shared experience
Year(s) Of Engagement Activity 2021
 
Description Meeting to discuss inward investment strategy with Warwickshire Council 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach Regional
Primary Audience Policymakers/politicians
Results and Impact Driffield has been invited to help Warwickshire to develop a strategic economic plan and inward investment strategy. A meeting took place in February 2020 to sketch out initial thoughts, with more to follow.
Year(s) Of Engagement Activity 2020
 
Description Perspectives on Supply Chain Productivity  
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Industry/Business
Results and Impact Industry has long recognised that, it is supply chains, not firms, that compete, but has struggled to turn this vision into reality. Symptoms include unfilled customer orders, excess inventories, and suppliers (particular SMEs) that struggle to deal with the erratic demands of those further up the chain. This undermines not only the productivity of individual firms, but the productivity of the industrial supply chains they form. This event will showcase the notion of supply chain productivity from multiple perspectives and how this can be improved through better integrated end-to-end supply chain.
Year(s) Of Engagement Activity 2020
URL https://warwick.ac.uk/fac/sci/wmg/research/scip/networking/1july/
 
Description Presentation of initial findings on inward investment 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Policymakers/politicians
Results and Impact Presentation at joint ERC / PIN event at the shard, london
Year(s) Of Engagement Activity 2019
 
Description Supply Chain Productivity Workshop - Advanced Manufacturing On December 16th, 10:00 - 15:30, Arden House. 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Workshop with supply chain practitioners and leaders locally of industrial strategy. To sense test what we mean by supply chain productivity, and to stimulate debate
Year(s) Of Engagement Activity 2019
 
Description Supply Chain Resilience Report Launch Webinar: A joint event with Pinsent & Mason on 23rd Feb 2021 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Industry/Business
Results and Impact A joint event with Pinsent & Mason on 23rd Feb 2021
Year(s) Of Engagement Activity 2020
 
Description Supply Chain Resilience: 3 practical things you can do  
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact The Global Economic Crisis, 2011 Tohoku earthquake and tsunami, Brexit and COVID-19 are examples of significant shocks that have tested the resilience of supply chains. These risks to the supply chain, were only a disruption for the organisations that could not mitigate against the risk. Mitigation strategies require contingency. Contingency comes at a cost, whether it be spare capacity, dual-sourcing or inventory. Unfortunately the siloed, procurement led cost-reduction strategies of the last 20 years have removed many of these buffers, leaving our supply chains exposed, and with limited resilience.

Whilst much is written about the need to improve supply chain resilience, there is little practical guidance. This webinar will address that gap. Reflecting on the results of a survey of 200+ UK manufacturing firms, the current state and future potential will be discussed. This will be followed by 3 practical things that you organisation can do, drawing on experience from Crimson and Co, Tata Consumer Products and Pinsent Masons.

(Pop-out table)
11:00 am Welcome Dave Rawlins
11.05 am
Current state and future potential

Jan Godsell, WMG, Frances Zhang and Ximan Li
11:25 am
3 practical things you can do

- Risk Management mindset
- Buffer Management
- Contract Management


Jonathan Gibson
John Burdett
Clare Francis/Cerys Wyn-Davies

12:10 Panel discussion Jan Godsell, WMG
12:25 Closing comments TBC
12:30 Close
Year(s) Of Engagement Activity 2020
URL https://warwick.ac.uk/fac/sci/wmg/research/scip/networking/9sept/