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Birmingham is growing again. After a deeper recession than almost any other British city, it is bouncing back more strongly too.

The UK’s second-largest city is also changing. Billions in property investment and the prospect of High Speed rail has recast a manufacturing powerhouse into a hub for professional services and retail with jobs growth fastest in the remodelled city centre.

Birmingham is doing very well at the moment,” says Sir Albert Bore, the Labour leader of the city council. He rolls off a list of statistics: growth double the national average in 2013, unemployment still falling, exports rising, inward investment up. “It is growing across a number of sectors. You are going to see continued growth in financial and professional services,” he adds.

The city’s gross value added (GVA) — its contribution to economic growth — rose 4.2 per cent in 2013, rising £1bn to hit £24.1bn. Real GVA grew by 4.2 per cent, well above the national rate of 1.6 per cent. But at £22,033 per head, it remains below the national average of £23,755. That is because only 62 per cent of the working age population is employed.

The 2008-09 recession saw GVA contract by 5 per cent and Jaguar Land Rover, the only volume carmaker in the city, said it would close one of its two factories. That would have continued decades of industrial decline. The city lost about 160,000 jobs between 1951-1991.

It left a legacy of low skills and large areas reliant on benefits.

At 21 per cent, Birmingham has a greater proportion of working age residents with no qualifications than the average for England of 15 per cent. Andy Street, chairman of the Greater Birmingham & Solihull Local Enterprise Partnership (LEP), the private sector-led body in charge of economic development, says: “We have to give people without jobs the skills so they are equipped to take them. There are more vacancies than there are unemployed people”.

However, he believes the boundaries of Birmingham are “artificial”. Once towns such as Solihull, Tamworth and Bromsgrove are taken into account, it bears comparison with the national average.

Nevertheless, he says the region needs to close the productivity gap with the UK as a whole. GVA per hour worked in Birmingham is £27.90, below the UK figure of £30.10. “Is growth sustainable? We believe it is. The growth has come across a broad range of sectors.”

Alexandra Jones, chief executive of Centre for Cities, a think-tank, says: “There are signs that Birmingham’s economy has turned a corner in recent years, driven by its city centre. Private sector jobs have risen 17 per cent since 1998, and there has been steady growth in knowledge-intensive sectors such as law and IT.”

The city is increasingly on the radar of international companies.

The LEP area attracted more foreign direct investment than any other partnership in the UK — with 73 investments creating nearly 4,800 jobs. Extraenergy, a German power supplier, is a recent investor. It has 500,000 customers and is moving its 400 staff to bigger offices.

Ben Jones, its chief executive, says it made a “dispassionate” assessment of where to locate and Birmingham came top. “It has great transport infrastructure, is geographically well located, costs are 55 per cent lower than London and the labour pool is excellent.”

However, John Houlden of EY, the professional services firm, says there is more to do. “The city needs to give a clearer message about where it is now and where it is going. We don’t have a coherent narrative and the history of the city is a bit of baggage.”

The advanced manufacturing industry remains the bedrock of the economy, employing more than 180,000 people. But there is a thriving digital industry, based around Digbeth and the jewellery quarter. Asos, the online clothes retailer, has opened a software development centre.

Inward investment helps. But the city also needs to create and develop its own businesses. That is starting to happen. There were 18,500 start-ups in 2014, the largest total in the UK outside London.

Council-owned Finance Birmingham has £90m to invest in SMEs throughout the Greater Birmingham area. It invested £25m last year.

Inspired Thinking Group is a home­grown success. Based at Fort Dunlop, the vast former tyre factory that has become a symbol of the city’s changing economy, ITG specialises in “below the line” marketing activity such as point of sale, digital and direct marketing.

Its clients include Heineken, the Dutch brewer, and J Sainsbury, the supermarket chain. Turnover has reached £60m and Bridgepoint Development Capital paid £28m for a majority stake last year in one of the city’s largest private equity deals of recent years.

On the minus side, congestion costs the West Midlands £1bn a year, according to the Greater Birmingham chamber of commerce. High speed rail should help, while the LEP wants control of the privately owned M6 toll road, which is little used because of its high prices. The city also wants to spend £250m to extend its tram network.

Copyright The Financial Times Limited 2017. All rights reserved.
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