The West Midlands economy has rebounded to exceed pre-pandemic levels for the first time since Covid-19, according to the recently published West Midlands State of the Region 2026 report by the West Midlands Combined Authority (WMCA).
While the region’s economic output, business confidence, and attraction of private investment show encouraging signs of recovery, the report warns that significant challenges such as widening inequalities, poor health, child poverty, and housing insecurity threaten to exclude many residents from benefiting from this growth.
Economic output has surpassed pre-pandemic benchmarks, driven largely by Birmingham, which accounts for much of the regional uplift. The number of high-growth firms increased by 11.7% over the past year, with the West Midlands continuing to be a leading area in England for private-sector research and development and foreign investment.
READ MORE: Solihull planners reject proposal to convert family home into children’s care facility
READ MORE: DWP Changes Benefit Rules Amid Rising Number of Children in Workless Households
Despite these positive indicators, productivity remains a concern, with gross value added (GVA) per hour worked declining by 2.4% in 2023 and GVA per job falling by 3%. The report highlights uneven geographic growth, with some parts of the Black Country and other communities experiencing limited improvements in living standards.
Key industrial sectors such as advanced engineering and health and medical technology have shown rapid expansion, recording increases in output and productivity. Conversely, sectors like smart energy systems and exports have seen declines, underscoring the region’s economic volatility.
A pressing issue is economic inactivity due to long-term illness, which has risen markedly since the pandemic and remains above national averages. Poor health not only reduces the available workforce but also places additional strain on household incomes and public services. Healthy life expectancy is declining; women in the region are estimated to spend around 24 years in poor health compared to 19 years for men. The report argues that addressing health disparities should be integrated into the region’s economic strategy.
Educational inequalities persist, with outcomes below national averages at various stages, notably at GCSE level. Disadvantaged pupils, children with special educational needs and disabilities, and some ethnic minority groups face significant attainment gaps. Apprenticeship starts are 31% lower than a decade ago, although this decline appears to be stabilising. Youth unemployment remains a concern, with some areas experiencing rates above 20%, linked to factors such as skills mismatches, mental health issues, caring responsibilities, housing instability, and limited entry-level job opportunities.
Housing affordability is another critical factor affecting inequality. Median house prices vary across the region, from around £200,000 in Sandwell to £329,000 in Solihull, with affordability worsening generally. Rent constitutes a substantial portion of income-averaging 29.6% regionally and rising to 36% in Solihull. Ethnic minority households tend to spend more on housing costs than their White British counterparts. The report emphasises that housing pressures can hinder access to employment if affordable housing near economic hubs is lacking, making transportation connectivity a vital consideration.
Infrastructure developments are progressing, with metro extensions, new railway stations, bus service improvements, and active travel schemes moving from planning into delivery. The region displays strong digital connectivity, with 94% coverage of gigabit broadband and leadership in 5G access across England. Major projects such as the UK Central Gateway, Birmingham investment zones, and regeneration in the Black Country have the potential to create tens of thousands of jobs and homes.
The West Midlands’ youthful and ethnically diverse population is recognised as a considerable asset, providing a robust future workforce and talent pool. However, the report stresses that this potential can only be realised by addressing the region’s educational, health and employment inequalities.
The overall assessment is cautiously optimistic. The foundations for growth have been strengthened through returning investment, expanding businesses, and high-value sector performance. Nonetheless, the report cautions that success will be measured not only by economic expansion but by how equitably its benefits are distributed.
Moving forward, the West Midlands must convert economic momentum into improved living standards across all communities, particularly targeting those currently facing the greatest disadvantages, to ensure inclusive and sustainable regional development.