Midlands manufacturing drives regional economic growth

Mayor Richard Parker outlines reindustrialisation strategy

Parker stated, "Manufacturing built the West Midlands, and it will play a critical role in our future prosperity too".

Parker added, "But we’re not taking anything for granted: my focus is on making sure that more of those businesses can start, grow and scale in the West Midlands".

The Reindustrialisation Blueprint aims to back innovation, support investment, and provide the infrastructure firms need to succeed.

Barclays highlights regional industrial strengths

The opportunity lies in building on these strengths to help businesses access the investment, expertise, and markets required to grow and create jobs in the region.

Engineering and manufacturing sector shows M&A resilience

The engineering and manufacturing sector in the Midlands completed 38 mergers and acquisitions in the nine months ending September 2026, according to Azets. Approximately one-third of buyers in these transactions came from overseas, primarily from the US and Europe.

Alper Dervish and Gary Hyem are partners at Azets. Dervish stated that Swedish groups were the most active foreign buyers, and strategic trade acquirers represented 80 percent of all buyers in the sector.

Hyem reported that the firm’s Corporate Finance Advisory team in the Midlands completes a deal every two working days, with two-thirds being sell-side and one-third buy-side transactions.

AI adoption offers potential for productivity gains

Productivity growth across advanced economies has halved since the mid-2000s, falling from approximately 2 percent per year to about 1 percent. The Productivity Institute reports that applying existing artificial intelligence tools within strong industries, including advanced manufacturing, offers the quickest win for the UK.

While 89 percent of organizations use AI in some capacity, most employees use it for only one to two hours per week. Only one in four organizations has adapted their work processes to maximize AI benefits.

Fewer than half, or 46 percent, of organizations have progressed beyond pilot projects. Only 6 percent of firms report that 5 percent or more of their profits come from AI. Professor Bart van Ark, Senior Fellow at The Productivity Institute, said, "AI’s productivity potential becomes real when faster tasks lead to better performance across the business".

Productivity gains diminish as they scale from individual tasks to whole jobs, teams, organizations, and the wider economy. Customer-support staff using AI assistants resolve 14 percent more queries per hour, with the most significant improvements seen in less experienced staff. Professionals using AI complete writing and analysis tasks 40 percent faster and to a higher standard.

Differences in management practices, alongside workforce and company characteristics, account for approximately 80 percent of the gap in generative AI usage between US and European workers.

The report outlines seven enablers for realizing AI ambitions. These include setting clear goals, training staff, and redesigning workflows for business leaders. The report also suggests establishing clear sector-specific rules and better local support for government.

Regional business links and investment zones

Birmingham and Dudley share 4,600 subsidiary and trading-address links, a connection rate 6.6 times higher than expected. The regional Investment Zone includes the Birmingham Knowledge Quarter, a battery technology and green manufacturing site in Coventry and Warwick, and the Wolverhampton Green Innovation Corridor.

Leamington Spa recorded annual growth of approximately 7 percent in equity deals. Nationally, the number of high-growth companies that completed one equity round is projected to rise from about 7,900 in 2025 to about 13,900 by 2035.

Parliamentary committee reviews industrial strategy and China relations

Advanced manufacturing is one of eight priority growth areas in the UK Industrial Strategy. Historical competition from Chinese manufactured goods negatively impacted the industrial Midlands and north-west England.

The House of Commons committee reported that the government has a two-month window to respond to its recommendations. The current administration began re-engaging with China without finalizing a China audit or publishing a formal strategy.

The committee characterized recent decision-making as reactive and inconsistent, citing the unexplained proscription of Ming Yang wind turbines and the emergency takeover of British Steel from Chinese owners. Businesses are struggling to make long-term investment decisions because the current case-by-case policy lacks transparency, speed, and predictability.

Some British businesses expressed concern that the government's policy regarding China is being created "on the fly". The committee recommends the government establish a "risk-managed growth" framework that integrates threat assessments and cost-benefit analyses.

The committee proposes that the Government define a "red zone" of specific capabilities that must remain sovereign or be developed with allies, making them off-limits to Chinese trade and investment. The committee also advised the government to strengthen trade remedies, reform procurement processes, and prepare potential tariffs for instances where China refuses to address unfair competition.

Proposed measures include protecting sensitive data by better resourcing research security, regulating data traffic in connected vehicles, banning high-risk technology from critical national infrastructure, and increasing powers to review foreign ownership of strategic assets. The committee recommended creating a standing organizational structure to improve policy coordination between the UK's nations and local administrations.

It also advised transforming the Diplomatic Advisory Hub into a "one-stop shop" to provide clearer guidance to small and medium-sized enterprises regarding the Chinese market. The committee is currently consulting with experts to develop a new methodology for economic engagement decisions that integrates threat assessments and cost-benefit analyses.

The public is 10 percentage points more likely to support the government criticizing China over human rights issues, even if such actions negatively impact trade relations. The government's refusal to define clear zones for economic relations has left businesses unsure about what actions are allowed. The committee advised the government to implement an integrated decision-making architecture that utilizes a coherent analytical methodology across departmental boundaries.